Operators will see continuing price fluctuations
Uncertainty is likely to be the only certainty for operators when it comes to planning for the costs of buying hot drinks and soft drinks during 2019.
Even with the impact of Brexit on cross-border movement of goods still unclear, we’ve seen a global increase in what the UN calls “extreme” weather events, which can have a direct impact on the price of commodities such as coffee, tea, cocoa and orange juice.
Cocoa prices rose by about 10% on the global markets in the year to November, while coffee prices dipped slightly and tea was down sharply. Operators should expect similar fluctuations in the year ahead, and look to maintain margin across the hot drinks menu as a whole. The New Year is a good time to look at different suppliers and see if there are any better deals out there – and to be as ready as you can be if volatility returns to the commodities market.
A global fall in the price of sugar has been offset in the UK by the introduction of the sugar tax, although with customers generally looking for healthier soft drink options, most operators have adapted their range successfully.
‘Linger’ time is definitely on the increase as customers increasingly use cafés and casual dining sites for meetings and to fire up their laptops. We’re seeing many businesses invest in more comfortable seating and upmarket décor to keep these customers engaged, as well as move to a more premium food and drink offer, using freshly made ingredients rather than off-the-shelf products.
This is particularly true for the core coffee-and-cake offer, which is often the most popular customer choice. Many operators have expanded the range of cakes and pastries they offer to accompany a cup of coffee, as well as moving to a more premium offer.
The challenge for businesses as costs increase is keeping this popular option at an attractive price point – the barrier in terms of what customers are willing to pay is usually around £5. One solution may be to accept a slight loss of margin on a coffee-and-cake deal, but to highlight premium and trade-up options to encourage customers to spend a little more.
Many operators are also switching to higher quality coffee beans to appeal to customers who have a better appreciation than ever of how a good coffee should look and taste. With sustainability also increasingly high on customers list of priorities, operators not investing in drinks that are ethically sourced are likely to be at a disadvantage.
All this raises costs, at a time when competition for customer spend is fiercer than ever. Our advice to operators is focus on good purchasing habits; no supplier should take your business for granted, and there are almost always areas where savings can be made without compromising on quality for customers.
- Lynx Purchasing works with more than 2,200 hospitality and catering operators to match them with the best suppliers and get the best possible prices on food and drink, as well as a whole range of essential products and services.