The Pace of Change…

By Peter Thor, President, Bellissimo Foods

A common belief is “the pace of change is getting faster and faster”, and no area is changing faster than communication. The sheer amount of data available and the speed with which it is communicated is simply staggering. This affects every part of our lives and frankly can become paralyzing. It is more important than ever to turn the “firehose” of data coming at you into a stream of useful information. This communication revolution has even had a profound dampening effect on the boom and bust cycles in the food industry. World food trade has enabled rapid international reaction to regional shortages, and export markets often offer relief from supply-demand imbalance. Timely reports of inventory, storage, growing conditions and weather events have enabled rapid response.

Consumers too are embracing communication technology to plan and complete purchases. Market share penetration by a few QSR restaurant chains is testament to the effectiveness of mobile advertising and ordering technology. Ordering digitally via text messages and mobile apps are becoming the norm rather than the exception. Contrary to some expectations, it is also interesting to note that the mobile ordering platforms have also increased the average order size due to quick and easy add-on choices. Pick-up and delivery options are more popular than ever, and importantly may counter retailer threats like Amazon deliveries of ready to eat meals from Whole Foods Markets. Finding ways to offer “convenience” to your customers will take on renewed importance in 2018.

Food inflation has also received attention as some economists have pointed to the fact that prices for food away from home have increased faster than grocery store prices, resulting in slower growth in restaurant sales.

The ingredient cost outlook for 2018 for our pizza industry looks promising at least for the first half of the year. The block cheese market has settled lower and relatively steady since the first of the year. The CME block market cost has dropped roughly 20 cents/# lower over the past ninety days, and 10 cents/# lower than the same period year ago.

Last year, both pork and beef prices raised sharply in the New Year and created both confusion and cost pressure within our industry. 2018 promises to be more “normal” if there is such a thing anymore. Pork prices are now relatively low, and expectations are for only moderate increases through the year. Beef prices exploded in 2017 through the summer, retreating during the last quarter. Beef 50’s are currently about 25 cents/# higher than during the same period last year, but forecasts only moderate increases into summer staying well below peak costs of year ago.

Chicken production and consumption is expected to continue to grow. Chickens are relatively fast and grain efficient to produce. Chicken output is poised to expand in 2018. Cost changes are a bit mixed. Whole chickens, breasts, and thighs are in good supply with prices expected to remain equal to last year. Wing and tender prices which increased aggressively last year are moderately lower. Wholesale wing prices are about 20 cents/# lower for small wings and 25 cents/# lower for jumbo. Forecast prices through mid-year increase slightly but retain a positive cost advantage compared to 2017. Chicken prices and costs are most sensitive to grain costs. Grain commodity prices are mostly steady but are subject to world weather changes and other factors including the spreading drought in N. America. Grain prices affect not only flour but also all protein ingredients.

Politics and regulations are also impacting our industry’s cost structure in 2018. In the restaurant, rising wage and health care costs are a primary concern as it is for manufacturers and distributors. Less visible is the rapidly escalating cost of freight, particularly trucking. This is due to new regulations on driver hours and other regulations. While increasing the cost for larger operations, many small operators have simply quit, creating supply-demand gaps for trucking. Freight rates are up double digits and more which will necessarily impact operating costs for all.

Our objectives as an industry for 2018 and beyond must be to both (1) counter the rising price spread between retail and foodservice, and (2) reimagine ways to offer “convenience” to our customers and create value in the foodservice experience. At Bellissimo Foods, we are thankful for the special and unique character of the pizza industry. Challenges they are, and quality remains the area you can best differentiate yourselves. Discuss your options with Delco Foods, and they can knowledgeably help guide you. Good luck to all!

Adding something special to specialty foods for more than 60 years.