Hospitality versus Retail: price increases....

After two years of being heavily affected by the pandemic, it felt as though our industry (food service in travel locations) had found a light at the end of the dark voyage. Markets are increasingly opening up, and people around the world are able to celebrate good times and connect with loved ones while dining out in restaurants. 

At the same time, restaurant owners and staff who have been craving to return to hospitality are joyously welcoming back their guests, making sure they have a good time whilst enjoying great food. 

However today I wonder; are we as an industry facing the 'next crisis'?

Earlier an article in the FD, the 'Dutch Financial Times', on the misuse of inflation for profit struck a chord with me. Over the last months numerous supply partners have announced unprecedented price increases, well over and above CPI. Our approach is open and fair, and while we are open to discuss changes in market conditions, we have to be realistic to where we are as a market and take steps to avoid, as Jumbo’s Ton van Veen said so well, ‘an acceleration of inflation’. 

My observation is that too many large suppliers are taking the opportunity to find lost profits in price increases, inflating their prices over and above reason. Increases of 15% or more are not unusual anymore, rather becoming the norm. And working across 19 countries, I’ve seen that here in The Netherlands its even a bit more extreme; we’ve seen announcements of up to +100%. 

For context, our industry is only just starting up again. We are not even thinking of compensating for all the losses made over the last two years yet, as demand is still not where it was used to be. As an industry learning to walk again, how can we possibly accept such disproportionate increases?

Food service is different to our friends in food retail. While we often deal with the same or similar suppliers, the food service industry isn’t as organised as food retail, the scale of which has led to significantly lower prices of raw materials in retail than in our more fragmented food service industry. Retail has flourished over the pandemic, with sales breaking record after record, benefiting suppliers and retailers alike. 

The article in the FD illustrates the strength of retail’s position, and so I ask, what can we learn from them? Should we – food service industry – be more organized, and should we also be more brave and take similar steps as food retail does? Can we expect open conversations on price increases and make tough choices to find alternatives where there is inflexibility?

I value partnerships, and while I like to think we reach more if we as an industry work together in the supply chain, I also think that a lot of us simply can’t afford to pay the proposed extraordinary increases as we’re just getting started again. Let’s not lose sight of where we are; at the beginning of recovery. We need to investigate price increases, negotiate, and be prepared to change in order to avoid an acceleration into inflation.

I’m curious how others in the food service act upon these challenges…

Bastiaan van Asten
Vice President Commercial at HMSHost International