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Solutions for foodservice distributors to stay on top of inflation

Blog > Solutions for foodservice distributors to stay on top of inflation

While on premise restaurant sales in the US are returning to similar levels of 2019, albeit with lower traffic volumes, continual rising operating and food supply costs and supply chain constraints combined with labor shortages continue to pose challenges for restaurants that impact distributors. Here we’ll look at how restaurants are approaching these challenges and offsetting rising expenses, and the purpose-built solutions for foodservice distributors that distributors can leverage to keep sales and profits up.

Tactics restaurants use create vendor ups and downs

Inflation and rising cost of living means consumers are trading down restaurant and dish types in search of cheaper alternatives. Restaurants told Rewards Network that they expect 20 percent of diners to seek more value/cut spending from their dining expenditures.

Of the thousands of restaurants surveyed by the Rewards Network, ninety-one percent said they have raised their prices since the pandemic. While they report that the majority of their customers have understood and have not complained, they remain fearful of losing customers through further menu price hikes.

Many restaurants now view menu price rises as a last resort and seek to save money in other ways first, many of which impact orders to their distributors. Here are some common tactics restaurants use:

1

Swapping out ingredients for lower cost, or higher margin, ones such as provolone for cheddar, chicken wings to chicken tenders, or frozen seafood instead of fresh. Or shifting to high profit items such as drinks, and low operating cost items such as sides and appetizers. This changes what they order through vendors
2

Cutting back on order sizes as they cut portion sizes and reduce waste. This may reduce or slow orders with vendors
3

Reducing menu size and offers. Thirty-one percent of operators report they have trimmed their menus, with menus industry-wide 10 to 20 percent smaller per restaurant3.This often includes cross utilizing some ingredients across multiple dishes, resulting in higher vendor orders for some items and lower sales for others, or reduced order sizes placed with vendors
4

Managing inventory and ordering through multiple smaller deliveries per week, resulting in more deliveries from vendors but a smaller per-order ticket
5

Menu analysis, sometimes using a POS system, to identify the most popular and cost effective dishes and items, resulting in emphasis of highly popular and profitable items and removal of less popular and lower profit dishes and ingredients. This may reduce orders with vendors of less commonly used ingredients and niche items
6

Encouraging staff to promote the highest-profit dishes and items. Vendors may see a run on higher-profit (to restaurant) items
7

Using value-added products, such as pre-cut and pre-breaded and seasoned proteins, to reduce labor time due to labor shortages. This may reduce orders of some ‘raw’ ingredients
8

Possibly switching vendors themselves to lower cost operators

All of this gain and loss activity creates uncertainty and complexity for distributors to manage, let alone optimize sales and order sizes.

Getting on the front foot with solutions for foodservice distributors

In the same way, as restaurants may be using their POS systems to analyze their menus, distributors need to do the same using their order management systems (OMS). Customer sales histories can be analyzed to identify individual restaurant customer ordering patterns – what tactics they are using, for which things – in order to predict future orders and identify upsell and cross sell opportunities such as frequently co-ordered items; ‘this goes with that’.

Salespeople need to be furnished with the right information to take and place orders quickly, including adjusting order sizes and types if customers swap out SKUs. Based on reviewing ingredients and items that are popular in certain venue types and locations, salespeople can make menu and ingredient optimization suggestions to restaurants in order to proactively manage the process.

And if you have SKUs that have frequent changes in price, a good OMS can allow for real conditions and let you react quickly in real time whilst minimizing the pain to the people buying your products. When linked with ERP, an OMS can calculate and set pricing, including capturing costs such as freight rates and fuel charges. Whilst you might not be able to control price fluctuations, combined with your trends data you can provide restaurants with advance notice of planned ingredient price rises.

Ultimately, if you have historical sales and order data you can spot a trend early, so you can proactively suggest items before customers ask you to change them.

Using your own data and analytics, you can stay on top of the inflation game and stop chasing your tail. The foodservice industry might be tough at the moment and for the foreseeable future, but with the right data and ordering systems in place foodservice distributors can not only survive but thrive.

For more information on foodservice order management systems, browse our foodservice distribution software solutions that are purpose built for the food and beverage industry, here.

Or request a demo from a supply chain expert and see in real time, how our solutions can solve your unique challenges and boost your sales and profits.

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