Blog

HomeUncategorizedRestaurant IndustryHow are you mitigating rising beef costs?

How are you mitigating rising beef costs?

I read this article from NRN, Restaurants find ways to mitigate beef costs (see article below), and here the bullets that I thought were most interesting:

  • Overall foodservice sales of beef in the U.S. in terms of volume fell slightly in 2014, to 7.9 billion pounds, compared with 8.7 billion pounds in 2013 – (800 million lbs is a slight decrease?)
  • Americans ordered 3 percent more hamburgers in restaurants in 2014 than in 2013, according to The NPD Group
  • Cheaper Cuts:
    • The chuck eye roast — a less expensive substitute for prime rib — is the fastest growing cut, rising by 6 million pounds in 2014 compared with 2013
    • Followed by Delmonico steak, or chuck eye steak, a less expensive substitute for a rib eye, whose sales rose by 5 million pounds in 2014
  • To help mitigate those costs, Dove suggests changing portion sizes and offering different types of protein.  “Instead of an 8-ounce sirloin, run a 6-ounce sirloin combined with a shrimp or lobster deal.
  • Kevin Good, senior analyst at CattleFax, said ranchers are working to rebuild herds that were reduced in the aftermath of multiple years of drought that drove up feed prices. Although more cattle should mean lower beef prices, it takes up to three years from gestation for cattle to reach market weight. That means prices of many cuts aren’t likely to fall significantly until 2016 or 2017.

250X250 SI Ebook Download w Border 250X250 LI

Fri, 2015-03-06 10:38

Beef is expensive and expected to remain so for the next year, but Americans still love it. They’re eating more hamburgers than ever and buying more premium steak. At the same time, restaurants and purchasing cooperatives are using an array of strategies to mitigate costs and get the most out of their beef.

The Centennial, Colo.-based National Cattlemen’s Beef Association reported in January that overall foodservice sales of beef in the U.S. in terms of volume fell slightly in 2014, to 7.9 billion pounds, compared with 8.7 billion pounds in 2013.

Hamburger sales remained robust: Americans ordered 3 percent more hamburgers in restaurants in 2014 than in 2013, according to The NPD Group.

Kevin Good, senior analyst at CattleFax, said ranchers are working to rebuild herds that were reduced in the aftermath of multiple years of drought that drove up feed prices. Although more cattle should mean lower beef prices, it takes up to three years from gestation for cattle to reach market weight. That means prices of many cuts aren’t likely to fall significantly until 2016 or 2017.

“You can potentially expect a little bit of relief in the second half [of 2015], but it won’t be much,” Good said.

Retail operations might see customers trading to less expensive proteins, such as pork or chicken, or from premium cuts of beef to less expensive ones, which Good said might help lower premium steak prices a little bit. However, he said he expected demand of high-end cuts in foodservice to remain robust. “That’s tied more to the stock market and corporate expense accounts,” he said.

At the high end, steakhouses are committing to even higher-end cuts of beef, as well as local steaks.

Steakhouses such as RPM Steak in Chicago and Charlie Palmer Steak’s New York City and Las Vegas locations are offering A5-grade Wagyu beef from Japan — the highest grade available.

“It’s surprising how much it actually gets ordered,” said Matt Zappoli, executive chef of Charlie Palmer Steak New York, where an 8-ounce strip costs $162.

Zappoli and other steakhouse chefs are also sourcing local steak. Houston steakhouse 60 Degrees Mastercrafted focuses on steaks from a Texas herd of Akaushi cattle, while Zappoli is sourcing naturally raised 30-day, dry-aged rib eye from a supplier that procures it mostly from New York, New Jersey and Pennsylvania.

“It’s part of what they call a local harvest program,” Zappoli said.

He also offers two different varieties of American Wagyu and a USDA Prime rib eye and New York strip.

Outside of premium, expense-account-driven venues, less expensive cuts are experiencing robust growth. The National Cattlemen’s Beef Association, citing its 2015 Technomic Usage and Volumetric Assessment of Beef in Foodservice, reports that America’s beef roast, also called the chuck eye roast — a less expensive substitute for prime rib — is the fastest growing cut, rising by 6 million pounds in 2014 compared with 2013. That was followed by Delmonico steak, or chuck eye steak, a less expensive substitute for a rib eye, whose sales rose by 5 million pounds in 2014. Although premium porterhouse is the third fastest-growing cut, rising by around 4 million pounds, it is followed by two other less premium cuts — flank or skirt steak and the ranch cut, which is a lean cut from the shoulder clod.

The popularity of such cuts might not just be due to rising prices, but to demographic shifts, said Andy D’Amico, partner and founding chef of the three-unit 5 Napkin Burger chain, based in New York City, and of 5 Napkin Grill in Miami. The latter has an expanded entrée section, including more steaks, and the skirt steak is a big seller.

“In Miami, where there’s more of a Cuban clientele, they really love skirt steak, and we sell a lot of it. “

By contrast, “New York understands hanger steak,” another flavorful, less expensive cut, and D’Amico just added it to the 5 Napkin Burger locations in New York, in a pepper sauce.

Mitigate costs during purchasing process

(Continued from page 1)

Dave Woolley, chef of restaurant consulting firm Food & Drink Resources, said he sees large and small chains continuing to push steak items.

“I think a lot of them are going into different parts of the sirloin,” he said, noting that the subprimal sirloin cut is a large piece of meat that can weigh a couple hundred pounds.

“You can call different things ‘sirloin’ on the menu that aren’t traditional sirloin,” he said, such as the tri-tip, a cut at the very bottom of the subprimal that’s popular in the western U.S. and growing in popularity elsewhere, Woolley said, “especially in the last year and change, it’s as mainstream as possible.

“Americans’ hankering for beef, the drive for it, is not going away,” he added, so restaurants are figuring out how to provide it and still turn a profit.

DeWayne Dove, vice president of risk management for the purchasing cooperative SpenDifference, said he sees both restaurants and retailers trading down to less expensive cuts, which is driving up prices of those less premium parts of the cattle.

“We have seen retailers moving from rib eyes or strips to top sirloin,” he said, which means top sirloin is now trading at record levels. He indicated top sirloin rose by 15 percent this year compared with record highs of 2014.

To help mitigate those costs, Dove suggests changing portion sizes and offering different types of protein.

“Instead of an 8-ounce sirloin, run a 6-ounce sirloin combined with a shrimp or lobster deal. … Those strategies are going to have to be in place not just this year, but pretty much through all of 2016,” he said.

Dove is figuring out ways to bring prices down at every part of the purchasing process.

“We’ll line up every component [raw materials, yield, labor, overhead, packaging and freight]. We’ll put five, six, seven suppliers side by side and figure out why one’s higher than the other,” he said.

“It’s important to understand how to dive into those opportunities, because the raw material market is working against you,” he said. “You’ve got to pull every penny out of every part of it that you can.”

Although some independent restaurants buy entire carcasses and process them in-house in an attempt to cut costs, Dove says that the journeymen meat cutters at a supplier are likely to be more skilled and get higher yields than cooks in a restaurant. However, he said, restaurants might consider purchasing whole primals and subprimals and having the supplier cut them for them.

“We work a lot on utilizing the entire subprimal,” he said, using the best parts for steak and the trim for kebabs or hamburgers.

He said suppliers are open to those solutions.

“To clean up that whole carcass and find other homes for it is very labor-intensive, so it’s definitely a door that’s always wide open” as far as suppliers are concerned, Dove said.

He also suggested buying flash-frozen meat when prices are at their lowest and having your supplier thaw them in advance of the high-cost season at the end of the year.

He pointed out that the faster meat is thawed, the more volume is lost, but good meat suppliers will have the meat undergo a thawing process that lasts between three weeks and four weeks.

Contact Bret Thorn at bret.thorn@penton.com.
Follow him on Twitter: @foodwriterdiary

Written by

I've been in the restaurant industry for most of my adult life. I have a BSBA from University of Denver Hotel Restaurant school and an MBA from the same. When I wasn't working in restaurants I was either doing stand-up comedy, for 10 years, or large enterprise software consulting. I'm currently the Managing Director of OpsAnalitica and our Inspector platform was originally conceived when I worked for one of the largest sandwich franchisors in the country. You can reach out to me through LinkedIn.

Call Now Button