You will know, from your weekly shop, that food prices are soaring and there is no chance of this stopping any time soon. A perfect storm of Brexit, Covid and the war in Ukraine has contributed to this ever worsening situation. How is this impacting our school meals and what we can do to work together to manage the situation and minimise the impact?
What are the factors impacting rising prices and recruitment shortages?
The twin impacts of Brexit and Covid have led to staff shortages which have disproportionately affected the catering and hospitality industries. 80% of staff working in this sector were furloughed and following the pandemic have turned to different industries which are more lucrative or, in the case of 300,000 European hospitality workers, returned to their home countries. Restrictions on immigration and tougher rules mean that people are not entering the country to fill vacant positions resulting in a labour shortage of 188,000 in hospitality with front of house and chefs worst hit.
Brexit has contributed to food inflation given that there are more checks on food and additional paperwork. Clearly the war in Ukraine has had a significant impact resulting in food shortages and driving up the costs. For a number of years the minimum wage has increased above inflation. In 2014/15 it was set at £6.50 and in 22/23 it has risen to £9.50; an increase of just under 46%. The corresponding increase for funding for Universal Infant Free School Meals has been 4.7%.
What is the impact on the Food Industry?
Bidfood, one of the UK’s largest food wholesalers, has published a report called Navigator which highlights the industry wide impact. The first thing to note is that we are in a very volatile, unprecedented economic landscape. A term that we will see increasingly over the next year in terms of food provision is DISPLACEMENT. In practical terms, this means:
- Owing to the reduction of supply from Ukraine and Russia of such staples as wheat it will put pressure on alternative countries that are not normally big producers.
- New buyers will look to switch to other producers but there are issues. For example, India could pick up the slack given that imports of sunflower oil from Ukraine are vastly reduced. However, India has embargoed exports to protect their own resources.
- Inflation in one product type is triggering inflation in other products or categories which are being used a substitutes or swaps. For example, the increased cost of chicken breast has impacted the cost of chicken thighs and the increased cost of sunflower oil has impacted the cost of palm oil.
- Key commodities such as dairy, oil, wheat and chicken are also used as ingredients. Increased costs in packaging, fuel and labour will impact their supply chain and the cost.
Drivers Of Food Inflation
Food production and the shortage of fertilizers are further underlying reasons impacting on rising prices. While the increase in the cost of animal feed is having an impact, the sanctions against Russia and Belarus and subsequent retaliation have restricted the availability of fertilizers – 15% of global fertilizers come from this area and have driven the price up by 30%.
The cost of freight, fuel and administration are also driving up costs. Freight costs were already high before the war in Ukraine due to the pandemic and further impacted by the Suez Canal blockage last year – and the situation has worsened.
In June 2022 diesel rose to just under £2 a litre exacerbated by limits on importing fuel from Russia. Currency trends and costs for achieving ongoing sustainability targets are also affecting prices.
As an example in the last 9 months up to June 2022, the follow staples have increased by huge amounts:
- Butter is up 29%, cheddar cheese up by 25% and eggs up by 21%.
- Chicken thighs are up 43%. However, if you are buying them with the bone removed the increase is 80% because you need more labour to remove the bone. In addition, minced beef is up 31% and pork up 12%.
- The cost of cod fish fingers is up 60% and salmon is up 72% driven by issues in Russia. Most of the white fish we purchase comes from Russia and as people move to salmon the price of salmon has been pushed up.
How Can Caterers & Schools Who Cater In-House Limit The Impact?
Caterers are working hard to lessen the impact but, clearly, the cause for these rises is not in their control. Despite this there are ways we can minimise the fallout.
Menu Engineering. Basically, this means making low cost but quality substitutes to, for example, roast dinners on Wednesday and fish filets on Fridays.
Producers will normally hold prices for months for wholesalers and suppliers. However, owing to volatility in the markets they are holding prices for as little as 1 week. Traditionally your caterer will set a menu for a whole term. The speed at which costs are changing means that swaps may have to be made mid-term. Key to making these changes happen smoothly will be communication with parents to keep them up to date with any changes.
We are always looking to drive labour efficiencies given that labour is the largest cost. When speaking to your catering contractor you should expect them to produce 12 to 14 meals per labour hour (this is stipulated as a Key Indicator in the School Food Plan).
While they cannot swap mid contract, your contractor should also be benchmarking their supply chains to ensure that they are getting best value and they should make you aware of this. If they do not then ask them!
Recruitment is a challenge and contractors should be doing everything they can to retain staff. Replacing staff incurs recruitment costs and can cause a pay review when replacing like for like posts. Companies should be looking to invest in training, welfare, staff motivation and additional benefits. Schools can also help by integrating the teams into the school and school community – this can make a real difference.
What Can Schools Do?
Look at your vacancies! If a role has been vacant for a period of time, ask yourself if you really need it or if there is the possibility of making a short term saving.
Look at your School Food Plan! Do your menu and portions comply with it? It might be worth your while to have this audited by an external professional. School Food Plan
Check the contracts that you have with your caterer! This will help in any reviews you have with your suppliers and discussions about fixed prices and price increases. Now more than ever the relationship you have is a partnership and each side need to understand the pressures you are under to come to a compromise.
Be realistic about tariff reviews! We are all paying more for the cost of living. The Consumer Price Index is currently tracking at 9%/10%, therefore, a tariff review above 3% is not an unreasonable request to parents.
Free school meals budget is up to £2.41. By allocating the full amount to your food budget, you need to look how will this minimise the tariff increase that parents of KS2 students would have to pay.
You should expect your catering contractor to do everything they can to lessen the impact and you should be asking the difficult questions. Vitally, more than ever before, this is a partnership and we need to be talking to each other as there are challenging conversations that we need to have. The more people can work together the more we can do to lessen the impact of the price increases on schools and on the children.
Vernon Cox is Director Business Development at Harrison Catering.