Escalating costs for grain, dairy push local pizza parlors to financial limit
February 17, 2008
Steamboat Springs — Soda Creek Pizza owner Steve Hitchcock has done everything he can think of to battle rising wholesale food prices.
He prices comparatively between the two major food suppliers – Sysco Corporation and U.S. Foodservice – to make sure his costs stay as low as possible. He’s looked at replacement products, but didn’t find anything his restaurant could use. He instituted an employee-training program to make sure supplies were being used as prudently as possible.
“Good news was that we weren’t wasting any products,” Hitchcock said.
The bad news was that the training and other efforts didn’t save Soda Creek Pizza any money.
“Any time that you manufacture a product of any kind, if the things you buy as a manufacturer are going up in price, that increase goes straight off the bottom line if you don’t do something about it,” Hitchcock said. “You could certainly look for cheaper, less expensive products. You can try to become more efficient and effective. But at a certain point, the price increase becomes so much that you have to pass that on.”
In 2007, food prices in the United States rose 5 percent – the largest increase since 1990. From December 2006 to December 2007, the Bureau of Labor Statistics’ Consumer Price Index shows increases of 25 percent for a pound of flour; 11 percent for a pound of cheddar cheese; and 31 percent for a pound of field-grown tomatoes.
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Those are the primary ingredients for pizza parlor pie-flingers. Local business owners are finding the escalating wholesale prices difficult to combat.
“We’ve seen anywhere from 65 percent on some things to, I’d say, an average of somewhere between 18 to 20 percent” on everything, Slopeside Grill owner Chris Corna said.
One of the hardest-hitting and most surprising increases has been in the price of flour, Corna said. In some markets, the hikes are staggering: the Chicago Board of Trade reported the price of a bushel of wheat was 95 percent higher in the first week of January 2008 than in the same week the previous year.
Brooklynn’s Pizzeria owner Brad White said when you factor in ever-increasing costs of living in Steamboat, upping menu prices is inevitable if the business is going to stay profitable.
“In a perfect world (food prices) wouldn’t go up at all, but things are more expensive these days than they ever have been,” White said. He noted that while food prices inevitably fluctuate, dairy and flour prices are only going up.
Part of that increase has to do with alternative energy subsidies for corn, which is used to feed dairy cattle and make ethanol. Those subsidies have prompted some growers to produce less wheat. Decreasing domestic supplies and increasing overseas demand are exacerbating the cost problem.
“It’s an interestingly complex system, but the bottom line local impact is that a small local business is paying 50, 60, 70 percent more for its raw materials,” Hitchcock said.