Experts on the effects of rising prices and inflation in the food business

The country’s economy battles with inflation, and food prices have skyrocketed. For instance, edible oils and wheat, along with other food essentials, have seen price spikes that are already burning a hole in customers’ wallets.

“Earlier, food inflation was influenced by many factors such as rising rural wages, higher minimum support prices, and a narrowing output gap. Moreover, low demand, low global prices, the muted effects of higher minimum support prices (MSP), low global prices, and unfavorable monsoon conditions, including droughts and other weather conditions were driving factors in the past.

“Currently, Geopolitical reasons, Covid Impact, short supply chains, the Russia Ukraine War, labour costs, and the rise in oil prices have contributed to the inflation,” says entrepreneur and Chef Sachin Sahgal, Co-Founder of Meatington.

The food industry, like all other industries, saw slowdowns both during and after the pandemic. And now, the war between Ukraine and Russia has caused an enormous increase in oil prices, the price of gasoline and diesel, as well as an increase in the price of cooking oils like sunflower oil, soybean oil, palm oil, rapeseed oil, are the main causes of inflation. Other factors driving inflation include supply chain disruptions.

“Inflation has been high in past two years which majorly affected common people in India. The onset of the summer heat wave also contributed to the rise in food prices. Food inflation has been driven by high vegetable prices. Not just vegetables, even high edible oil prices have led to higher food inflation.

“India imports nearly 60 per cent of its edible oil and with supply disruptions continuing due to the Russia-Ukraine war, the prices have surged. The fluctuation in petrol and diesel prices has led to increased transportation costs and impact on the prices of cereals, vegetables, milk, and meat prices shooting. Manufacturing businesses, households, and the hospitality industry will be hit as costs to buy and produce food will be much higher. People of lower income groups will be badly hit as prices of wheat are rising,” says Celebrity Chef Vicky Ratnani.

Due to price increases, people are finding it difficult to eat out or order takeout. As we wonder what will happen, what of restaurants and cloud kitchens in the future?

According to Entrepreneur Chef Sachin Sahgal, the practice of eating out and ordering takeout will endure as long as various programs are implemented.

“Almost any food production has increased in price, including meat, poultry, fish, and eggs. As a result, restaurateurs and food business owners have been forced to bear a heavy burden. Consumers have also been affected and can see the impact. However, eating out and dining out scenarios will not change much for consumers and their eating patterns and behaviour will moreover remain the same.

Their lifestyle has become accustomed to all this, and it has become a necessity for them. Chefs, restaurants, and food joints are also ensuring that consumers will not feel the pinch of inflation in food prices directly by launching innovative schemes, discounts, dips, and extra meals to encourage them to eat out. Despite the inflation, the hotel industry has implemented menu rationalisation, modified product compositions, and introduced packages, discounts, and loyalty programs to encourage consumers to eat out.”

Eishita Deoskar, a partner at Kynd Cafe and Bar by Colossal Hospitality, business owners have been negatively impacted by food inflation, forcing some of them to close their doors while they deal with the COVID-19 pandemic’s consequences, “The food industry is severely impacted by inflation, which also directly affects food prices. The type, quantity, and quality of food served at establishments, as well as how much owners are willing to spend, are impacted by the cost increase. While some inflation is necessary for the economy to expand and stay healthy, it is difficult to ignore the effects of excessive inflation.

“Additionally, the price of ingredients and menu items rises in tandem with the cost of living. A variety of factors can have an impact on food supply, which in turn affects prices. It is critical to compare the increase in prices and the increase in median income to food costs.

“During and after the COVID-19 pandemic, the supply chain experienced numerous disruptions, making it difficult for us to obtain the necessary supplies. Many food service businesses were forced to shut down for an extended period of time or permanently as a result of these disruptions while still recovering from the COVID-19 pandemic’s effects, businesses needed to be creative and innovative in order to deal with the situation without closing down.”

Gaurav Kanwar, the owner of the Harajuku Tokyo Cafe, on the other hand, identifies specific ways in which the restaurant industry’s profit margins have also been impacted by inflation. He claims that it has been difficult for everyone to cope with rising inflation and manage to spend.

As a result, it was decided to raise staff compensation to help them make ends meet, “As restaurant owners, we are trying to tackle the steep increase in costs as best we can, by increasing the prices of our menu very moderately and renegotiating supply contracts. We have been able to ensure that the effect of inflation has been marginal for our customers, hence not affecting our online or onsite orders and sales that much. However, it has affected the profit margins of the restaurant industry even more than ever. Coping up and managing expenses with rising inflation, in general, has been tough for everyone, Therefore we took the decision of revising the salaries of our employees to help them sustain.”

“Owners of food businesses can adopt a multi-pronged approach. In addition to integrating changes internally regarding their working and systems, they need to offer innovative offers and packages to consumers to keep them happy. As far as food inventory and food preparation are concerned, they need to go in a sustainable direction.

“Further, they must be vigilant for cost-cutting, pre-plan the entire food-making process, justify customers’ spending, and increase profits. Currently, the hospitality industry is embracing the trend of ready-to-cook snacks and meals and frozen food, which saves a lot of time, food preparation, and waste. Restaurants should, however, ensure that their ready-to-cook snacks contain no preservatives and are packaged with the latest technological advancements, so their customers can enjoy healthy meals.

“Also, they can take advantage of seasonal produce and give it a healthy twist, running loyalty programs for regulars. This way, hotels will retain customers and customers will also know where to find tasty, fresh food at a good price. A restaurant should be able to control its inventory, optimize its menu items, and gain visibility into the restaurant’s inventory. Remove items from the menu that aren’t selling. By doing so, you will eliminate unnecessary food and labor costs. Next, try to replace high-cost ingredients with more affordable ones. Take a strategic approach to supply chain management by streamlining it and investing in technology to enhance productivity,” suggests Entrepreneur Chef Sachin Sahgal.

-IANS