We are in for a roller coaster of inflation: Manulife chief economist
The owner of Burger King and Popeyes sees prices for key ingredients like beef, mayonnaise and bacon soaring amid higher demand and supply constraints, according to an internal report.
Restaurant Brands International Inc. “can see significant inflation across all regions on protein and oils” compared with historical five-year averages, according to a company report on commodities, dated May 17, that was viewed by Bloomberg News.
“Price inflation across the protein market complex has far exceeded even our most bullish forecasts,” the company said in the report.
The company, which also owns the Tim Hortons chain, said that while dining out is returning to pre-COVID business levels, grocery sales are staying high as well. That’s pressuring supply chains at the same time that an extremely tight labor market, including a truck driver shortage, drives up transportation expenses.
“The world is facing increasing commodity costs for a number of reasons -- and we are thoughtfully managing those like we always do,” Restaurant Brands said in an email. “We have a number of strategies to mitigate cost increases and as a practice, we don’t talk about those for competitive reasons.”
The Toronto-based company also said it takes a “long-term view” when managing and developing buying strategies to smooth out commodity fluctuations.
Across the industry, restaurants are raising prices amid inflationary pressures, with Chipotle Mexican Grill Inc. recently announcing it increased prices across its menu last week. The climb isn’t isolated to restaurants -- consumer goods makers have cited many of the same dynamics at play in their own recent round of price hikes.
Mayonnaise is among the ingredients that is rising in price due to higher costs for soybean oil, a key input. Restaurant Brands employs hedges to help avoid market fluctuations, but noted that the availability of processed oil is becoming a “big risk.” It replenished its mayonnaise at a higher hedge price in order to ensure supply for about five months.
In North America, the upward trend of beef prices is expected to continue during the second half of 2021. Restaurants Brands, which is nearly all franchised, projects an 8 per cent increase in finished beef goods for the second half of this year versus the first half for store owners. At the same time, pork prices have risen amid strong demand from China, higher restaurant dining and an increase in feed costs.