As of June 2022, the UK inflation rate has risen to 9.1%, the highest rate in 40 years amid the soaring cost of food and record prices for petrol and diesel.
As our economy tries to recover from the effect of covid, the war in Russia, and the changes in the supply chain - we are seeing the costs of everything rise, most significantly food, petrol, and electricity prices - which are essential for everyone.
Food and drink inflation is only set to continue as producer prices, which lead consumer prices, surged by 6.2% on the year. Further up the supply chain, food manufacturers faced more expensive ingredients in February, paying 6.8% more than a year ago for food ingredients produced in the UK and 8.9% more for those imported - and things are predicted to get worse as the year goes on.
So, with prices rising, and people having less disposable income, how are these food & drink businesses, that may not be ‘essential’, coping?
Denis Sali who works at Ossie's Fish Bar in Canterbury and says there has been a decline in customers ever since the cost of living crisis really started to take hold. Denis says their most common menu item is "cod and chips" or "haddock and chips" - a British classic tourists will always come to eat.
He says that every week, the cost of these crucial menu items are increasing - the cost of a pallet of cod has risen from £205 to £210 - and he predicts it will go up even further.
Since he started working for the business on The King's Mile six years ago, the price of a unit of fish has nearly tripled. "We can't raise our prices every time a new shipment costs more," said Denis. "Otherwise our regular customers will suffer."
But Denis admits they could once again end up having to hike their own prices to make ends meet - or face making serious cuts to the business. Because of this Ossie's Fish Bar now only offers takeaway collection, as they don't want customers to pay the rising costs that come with online delivery.
Another fish bare in the local area agreed with the huge increase in prices across their industry.
"The only way I can stay in business if I were to push my prices up, which I have. I had to put up a price from £7.80 to £9.80 and I'll probably have to put them up again
"Lockdown was a hard time anyway, but even now we are seeing the tourists coming back, it is still difficult. We really noticed it when the Russian war started."
City Fish Bar originally imported their fish from Russia as it is the best place to import thigh quality product in bulk - but things have changed. Peter said: "With local fish, there isn't much around if I'm honest with you. But any fish that is coming from Europe has had a massive price increase."
"It isn't just the fish, even the prices of other products has doubled," said Peter.
With everything rising in price, it is clear to see why businesses are struggling to maintain a reasonable deal for their consumers. Costs for City Fish Bar are much more than just the product - and the drastic price increases only reflect that - and it isn’t just fish bars seeing the negative effects. Majority of food and drink businesses who import produce, have large buildings, and have offer multiple services are faced with the impact of the cost of living crisis.
So, how can we solve this problem?
Raise your prices the right way
Raising your prices to match the money that is going out of your business seems like the obvious answer to surviving inflation - and it is - but it is important your do this the right way.
Your customers are the beating heart of your business and ensuring you have plenty of them will help keep you afloat - so be sure to consider their situations and whether they will be able to stick around if you raise prices too high.
Avoid turning off customers with dramatic across-the-board price increases. Instead, raise prices slowly in modest increments and only on the products that impact your margins the most.
Use creative ways to communicate how your product and services can benefit your customers, to help them understand your value-even at a raised rate-so they can justify spending their money.
Evaluate your operations
Now is the best time to go back to the drawing board to identify your core products or services - focusing on those that provide the best ROI. Cut out any products or services that aren't being used, or arent popular. and consider if there are ways your team can tighten up processes and increase efficiency - or whether it is smarter to remove this option.
For example, if there is a meal on your menu that costs you to import, and isnt a good seller - it would be the best idea to remove from the menu and evaluate whether this has a positive effect on your ROI.
Time is money, so the more efficient you can become, the more money you can save on operational costs. If you find that you have staff members that don't have a full plate-but you aren't willing to undergo layoffs (which should be avoided at all costs)--take lulls as an opportunity to upskill your staff. Set them up to train in areas of weakness and determine how they can best serve your company - to help create better ROI.
Discussing how to survive this economic downturn the Food & Drink Federation says, “While current inflation is mainly due to causes global in nature, the UK Government can support the food and drink manufacturing sector by removing cost and complexity in upcoming regulation and establishing a National Food Security Council to enable the industry to respond rapidly to the impact of supply chain disruption, as well as protecting our nation’s food resilience and security.”