Washington Restaurant Market Watch: Beef costs rise, restaurants cope

Washington Restaurant Market Watch: Beef costs rise, restaurants cope https://wahospitality.org/wp-content/uploads/2012/04/beef273.jpg

By Paul Schlienz

Beef prices are the highest they’ve been in decades due to years of drought that devastated cattle herds. Restaurants are now struggling to cope with these costs.

“Something’s going to have to change here, because it’s affecting us,” Adrian Handsborough, owner and founder of Virgies BBQ, in Houston, told the Houston Chronicle. “For the last six months, profit margin on beef ‘s been next to nothing.”

Beef costs are so high that some restaurants are cutting back on beef and emphasizing other meats.

“We’re just looking for alternatives,” Herb Taylor, co-owner of Rays BBQ Shack, in Houston, told the Chronicle. “Ribs… we’ll start going with turkey now, we sell chicken, fish and shrimp. It kind of makes us more creative until the beef prices level out.”

Don’t plan on beef prices going down anytime soon.

“You can potentially expect a little bit of relief in the second half [of 2015], but it won’t be much,” Kevin Good, senior analyst at CattleFax, told Nation’s Restaurant News.

According to Good, ranchers are rebuilding their herds that were devastated after the multiple years of drought that pushed up feed costs. While more cattle will likely equal lower beef costs, cattle take up to three years after gestation to reach market weight. As a result, it won’t be until 2016 or 2017 when prices begin to fall in a major way.

Despite these inflated costs, there is still much demand for beef.

“We really haven’t seen demand for pork pick up as much as some people thought, and demand for beef has held together [better than expected],” Joe Vaclavik, president of Chicago brokerage Standard Grain Inc., told the Wall Street Journal.

The National Cattlemen’s Beef Association, based in Colorado, reported in January that overall U.S. sales of beef in foodservice fell slightly in 2014, to 7.9 billion pounds, compared with 8.7 billion pounds in 2013.

Some beef sales have even increased during this period.

Three percent more hamburgers were ordered in U.S. restaurants in 2014 than in 2013, according to The NPD Group.

Restaurants can mitigate beef costs by changing portion sizes and offering different types of protein, according to DeWayne Dove, vice president of risk management for the purchasing cooperative SpenDifference.

“Instead of an 8-ounce sirloin, run a 6-ounce sirloin combined with a shrimp or lobster deal,” Dove told Nation’s Restaurant News. “Those strategies are going to have to be in place not just this year, but pretty much through all of 2016.”

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