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High costs of beef, shrimp hurting bottom line for restaurants, catering halls

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Chef and co-owner Chris Siversen holds dishes of beef and shrimp at Maritime Parc in Jersey City.
Chef and co-owner Chris Siversen holds dishes of beef and shrimp at Maritime Parc in Jersey City. - ()

The holiday season used to be the time that would make or break the year for restaurants. This year — due to a stunning rise in the prices of two main food items — more and more restaurants will be just trying to break even.

A rise in the wholesale price of beef and shrimp is having a huge impact in the industry. Restaurant owners across the state are scrambling for ways to make up the difference, knowing there's one thing they can't afford to do: Raise prices.

So says Chris Siversen, the chef/co-owner of the Maritime Parc restaurant in Jersey City.

Siversen has been coping with rising wholesale prices for beef and shrimp all year, but instead of raising prices, he'll continue absorbing the higher costs.

"You basically have to eat it," Siversen said. "With the state of the overall economy, it is very hard to raise prices. Customers nowadays are very conscious of price points and the value of what they are getting."

The problem has been building for a few years.

The world shrimp supply has been constrained since the appearance in 2009 of a virus that kills farm-raised Asian shrimp, according to John Barone, president of the commodities analysis firm Market Vision in Fairfield. He said wholesale prices are up between 30 percent and 60 percent this year, depending on the size and variety of shrimp.

Beef production has slowed during the same period, with prices reflecting several dry years on the pastures of the western plains, especially Texas and Oklahoma, Barone said. Ranchers who couldn't pasture their cattle sent them early to slaughter and exited the business.

"We are now at a 50-year low in the national cattle herd," Barone said. "Less cattle means less beef, which means higher prices."

Barone cited U.S.D.A statistics that average beef tenderloin prices are up 50 percent since 2010.

Such an increase is noticed by all.

Allan Janoff sees it at the Crystal Plaza banquet hall he owns in Livingston.

Janoff said a banquet hall doesn't have the flexibility of a restaurant: His clients book events a year or more in advance. For him, raising prices isn't an option.

"So you know what? The profit margins just can't be the same; that's all there is to it," Janoff said. "I'm not going to give up the quality of product that we're consistent with. We're in this for the long run."

So is Andrew Steinberg, a senior vice president of business operations for the Morristown-based Villa Enterprises, whose 360 restaurants include the flagship Villa Fresh Italian Kitchen chain, the full service Office Beer Bar & Grill restaurants and several other cuisine concepts including Asian, Mexican and salads.

Steinberg said Villa is trying to manage the increase by buying in volume.

"We have committed to buying half truckloads or (full) truckloads of product," he said.

Steinberg said Villa benefits from the economies of scale, which enable the supplier "to hold or in some instances to decrease the price. We have more money on the shelf, so to speak, but we're also not getting that price increase."

It doesn't work that way at smaller restaurants.

The price problem is slightly more complex at the Edison-based Mehtani Restaurant Group, which operates six Indian and pan-Asian eateries.

Managing Director Shaun Mehtani said he has no plans to raise menu prices right now, despite the soaring price of shrimp, in part because he's not sure if it would even solve the problem.

"We don't want to pass the price increase on to our customers because if we do, they might not go for shrimp," he said.

The shrimp problem is especially tough at Mehtani's restaurants, which include Ming II in Morristown and Moghul in Edison, because they use the largest, most expensive shrimp.

"A lot of our dishes are baked or grilled, and when you grill shrimp they shrink, so we have to use the largest shrimp possible," he said.

Cutting back on the number of shrimp in a dish isn't the answer, either.

"Our customers will not be full, and they won't be happy," he said.

Siverson, of Maritime Parc, said the only solution he's found is cutting the supply.

He's careful to buy only as much beef tenderloin as he needs, even if he occasionally sells out of filet mignon on a busy Saturday night.

"I don't want to buy too much and then have 20 steaks left over at the end of the weekend that I didn't sell," he said.

Aside from that, restaurant owners may just have to rely on the cyclical nature of food costs for a final solution. After all, it was just a few years ago when pizza places were battling with a sudden rise in cheese costs.

That's the way Assad Khoury, a co-owner of Kuzina by Sofia, a Greek restaurant in Cherry Hill, sees it.

Khoury said the rise in shrimp and beef prices affects his bottom line, but he's not planning to raise prices anytime soon.

Of course, Khoury does have one advantage: Lamb is more popular in Greek restaurants, and so far, he said, "lamb prices have been steady."

E-mail to: beth@njbiz.com
On Twitter: @bethfitzgerald8

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Beth Fitzgerald

Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.

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