The food services sector is once again in the doldrums. The price increases of food products are more than we can handle, and the end consumer will have to contribute. Otherwise, it looks bad for the whole food sector. An open letter about respect, responsibility and partnership.
The newspapers have been full of bad news about the food industry, among other things, for some time now. As a sector we have just barely survived the corona crisis and now there is this horrific war in Ukraine that affects us all, in our hearts and in our wallets.
There is a lot coming towards us in the coming period and, hopefully, that includes an awareness that fundamental changes are needed in our food industries.
The impact is already there
Our kitchens, our supply and our operations are impacted. This is no longer a scenario, but a concrete fact! Some products will be in short supply. The food industry will be forced by shortages and crazy price increases to limit production.
Fevia already indicates that it is no longer profitable for many companies to produce food, if they cannot pass on the price increases. 40% of Fevia members will reduce or even stop their production in the coming weeks. The stranglehold of their customers could be the deathblow for many suppliers.
If you look at our food services sector (catering for companies, schools, care institutions, etc.), it is equally locked in. Food service customers negotiate to the bone and demand rock-solid guarantees. After all, it has been a buyers' market for years.
For example, a customer may stipulate today that he wants chicken on the menu on a given Tuesday three months from now. That will be difficult, because in the current circumstances, we cannot guarantee that the chicken will be available, and certainly not at the price that was negotiated. There must be another way.
I fully agree with Fevia CEO Bart Buysse who openly pleads for more realism and responsibility.
We are partners, not suppliers
After Corona, everyone knew that the foodservice market would never be the same again. The events of the past few weeks and the prospects for the future only make that conclusion more acute.
Besides shortages, the huge price increases are also a huge problem in our sector. During the corona crisis, we did everything we could to keep price pressure down for our customers. We pulled out all the stops to continue to provide service and quality, even when customers, due to circumstances, were no longer able to meet their contractual conditions in terms of volumes, number of passages, etc. We took a lot of hurt, as a company, to be able to provide that support.
But you do that because you believe in a partnership in which everyone wins, or at least suffers as little as possible, in the given circumstances.
The little room for manoeuvre we had during Corona is no longer there. It has been eaten up by more expensive ingredients, energy, logistics and so on.
The food industry is now faced with price increases it can no longer absorb and therefore has to pass on to customers like us. And we, too, have to follow suit in order to cope with our rising costs.
Plus 26% on basic products
In the past weeks, the overall prices of our basic ingredients have risen by an average of 26% (see graph). If we look at all our purchases together, we arrive at an average increase of 12%.
This is a cost we will have to pass on to our customers one way or another. After the madness of Corona, piling up structural losses again is something that no business in the food service, food or catering sector can cope with.
It has to be done differently
The circumstances are harsh, but this open letter is not just about the painful findings of today, but also about the future. If, as consumers, we still want a diverse, high-quality and rich food supply in the future, we will all have to do things fundamentally differently.
Specifically for our sector, we look to the various governments. They can, for example, ensure that tenders for public services become more flexible. Our chefs now often have to do a lot of mental arithmetic to know what they can cook and when, with what ingredients and at what price. That kills the creativity and experience that is expected of us. Moreover, it does not allow us to respond to the food supply on the market, so that we often have to buy in a fragmented and/or more expensive way.
It is true that negotiations on prices and rules of the game are tough. But price-conscious, tasty, high-quality and healthy cooking can be left to us. We are very good at that.
Many of our customers have rather special requirements. Special for the outside world, but unfortunately not for us any more. For example, we are asked to submit menu cycles for the next 3 or 6 months for approval. Deviations are not an option. Or customers demand that the buffet in their restaurant be full until closing time. In terms of food waste, that can count for something. And now, more than ever, is not the time to start wasting food.
Feel free to leave those worries with us. We make sure that every guest can eat well at any time. We cook well, locally, organically, with attention to the environment and sustainability, and much more. Not because it is in the tender, but because it is in our DNA.
The customer who expects us to conjure up a real restaurant experience must also allow us to be a restaurateur. And not the umpteenth supplier, alongside the one for air conditioning and the one for cleaning products, who has to be put under pressure to get the lowest price.
A call for change
More than ever since the last world war, people are starting to realise the value of food and food products. And more than ever before, people will realise the added value of restaurateurs, caterers and the food industry.
As partners, helping people to lead a healthier lifestyle during their busy lives. As employers, too, offering many less educated people opportunities that are very scarce elsewhere in the job market.
Hopefully, that realisation will come before companies in the catering, food or food service sectors start to disappear. Because in that scenario, there are no winners.
In any case, in the coming days and weeks, we will be sitting down with our customers. To see how we are going to shape the future, and to ensure that the pain is spread proportionally.
I am also making a warm appeal to my customers, my fellow caterers, my suppliers and everyone else with a warm heart for food, hospitality and the catering industry.
If the continuing price increases are indeed as punishing as is now being predicted, then we will all benefit from putting our heads together and devising a new approach. One in which everyone once again wins!
CEO Compass Group Belgium