Yo #1 The Good News
Restaurants, coffee shops, takeaways and fast food outlets (to mention just a few food businesses) have had their business models severely challenged over the last few years as food prices have soared into never before seen high cost areas. Adjusting pricing, re-issuing menus, updating websites and dining-out sites is impossible to do on a weekly basis and so many restaurants will absorb the increases up to a point. In simplistic terms the only way to keep profitable is to increase your sales or lower your costs: but there is always a point at which increases have to be actively acknowledged and either/ or:
- passed on to the consumer
- existing dishes re-engineered to cost less to produce, namely smaller portions or cheaper ingredients
- newer dishes being brought onto the menu that are cheaper to produce
Stats SA, reported Consumer Price Inflation dropping from 6.8% in April to 6.3% in May and although this is higher than the South African Reserve Bank had planned for, it is the lowest reading since April 2022. It is thought that this decrease indicates a distinct downward change in direction and that we can expect further price decreases through the rest of 2023. The reasons are mentioned as:
- Recognition of the strain on consumer budgets
- Relative recovery of the Rand
- Passing of lower producer prices back to the retail consumer
Yo #2 The Not So Good News
This small reprieve may be short-lived, though, as there is one key risk area ahead: the world is about to enter an El Niño period. Historically this weather pattern brings drier conditions in the southern hemisphere and economists have stated that they are expecting a strong El Nino which could possibly have a negative effect on food production. Therefore we can expect food prices in 2024 to be on an upward trajectory once again. Ouch!
Laura Brown