In recent years, the cost of cooking oil in the UK has risen significantly, causing concern for restaurants of all sizes. For many eateries, cooking oil is a cornerstone ingredient, essential for frying, sautéing, and preparing countless dishes. However, with prices of key oils like sunflower oil surging by as much as 23% in 2023 due to supply chain challenges, restaurant budgets are feeling the strain. This blog will examine the reasons behind these price increases, their impact on restaurants, and actionable strategies to mitigate the challenges.
Why Cooking Oil Prices are Rising
The surge in cooking oil prices is driven by several global and local factors.
- Global Supply Chain Issues: The COVID-19 pandemic disrupted global supply chains, with ongoing delays in shipping leading to increased costs.
- Climate Change and Crop Shortages: Adverse weather events, such as droughts and floods, have reduced the yield of crops like sunflower and palm oil. For example, Ukraine, a major exporter of sunflower oil, saw exports drop significantly due to geopolitical tensions.
- Inflation: Rising inflation rates have pushed up production and transportation costs. In 2023, the UK reported inflation in the food and beverage sector at nearly 11%, affecting essentials like cooking oil.
- Brexit Impact: The UK’s departure from the EU has introduced tariffs and additional customs charges on imported oils, further increasing prices for UK businesses.
- Demand from Other Industries: Vegetable oils are also being used increasingly in the biofuel sector, creating competition and driving prices higher.
- These combined factors have led to a steep increase in cooking oil prices, which has become a significant challenge for the foodservice industry.
The Impact on Restaurant Budgets
Rising cooking oil prices have far-reaching effects on restaurant operations.
1. Increased Costs: Restaurants are spending more to source the same quantity of oil. A small café, for example, that used to spend £500 monthly on cooking oil may now find this cost rising to £650 or more.
2. Profit Margin Reduction: Increased operational costs often eat into profit margins. For a restaurant operating with a thin margin of 10-15%, such cost hikes can severely impact financial stability.
3. Menu Pricing Challenges: Restaurants face the difficult choice of either increasing menu prices or absorbing the cost. Both options carry risks – raising prices might deter customers, while absorbing costs can lead to losses.
4. Small Businesses at a Disadvantage: Large chains like McDonald’s can negotiate bulk deals with suppliers, but smaller, independent restaurants often lack this leverage, making them more vulnerable to price increases.
5. Indirect Effects: Higher oil prices can lead to cost-cutting in other areas, such as staff wages or marketing budgets, potentially affecting service quality and customer retention.
Strategies to Manage Rising Cooking Oil Costs
Despite the challenges, there are ways to adapt to the rising cost of cooking oil and protect your restaurant’s bottom line.
1. Efficient Usage
a. Implement better oil management practices to reduce waste.
b. Use oil filtration systems, which can extend the life of your oil by removing impurities.
c. Train staff to monitor frying temperatures and avoid overusing oil. A real-world example is from a London-based fish and chips shop, which saved over £300 monthly by investing in a filtration system.
2.Explore Alternative Options
a. Consider switching to more affordable oil types or sourcing locally produced oils.
b. Experiment with different recipes that require less oil or use oil substitutes like butter or margarine for certain dishes.
3. Adjust Your Menu
a. Add low-oil dishes to the menu, such as baked or grilled items. Highlight these options as healthy alternatives to fried food.
b. Reduce menu complexity by focusing on dishes that require minimal oil.
4. Bulk Purchasing
a. Partner with a trusted food wholesaler that offers competitive rates for bulk purchases.
b. Lock in prices by negotiating contracts for a set supply period. This strategy is often employed by larger chains to avoid price volatility.
5. Sustainability Practices
a. Recycle used oil through certified waste oil recycling services. This not only reduces costs but also supports sustainable practices. Many businesses, such as hotels, have successfully offset costs by selling used oil to biofuel companies.
The Role of Your Wholesaler in Supporting Restaurants
A reliable wholesaler can make a significant difference in managing rising costs. Here’s how they can help:
- Competitive Pricing: Trusted wholesalers often offer lower prices than retail suppliers, especially for bulk purchases.
- Timely Delivery: Avoid disruptions by ensuring you have a consistent supply of cooking oil.
- Product Variety: Access a range of oils, including vegetable oil, sunflower oil, and palm oil, to suit your needs.
- Market Insights: Some wholesalers provide regular updates on pricing trends, helping you make informed decisions.
For example, many wholesalers introduce a loyalty programme offering discounts to long-term restaurant partners, helping them save on essential supplies.
Practical Tips for Working with Wholesalers
To get the most out of your relationship with a food wholesaler:
Stay Updated on Industry Trends
Keep an eye on new product launches, promotions, and market trends shared by your wholesaler to remain competitive and diversify your offerings.
Build a Strong Partnership
Communicate your needs clearly and regularly. Share feedback on products and services to help your supplier meet your expectations.
Negotiate Contracts
Lock in prices and terms to reduce the impact of market fluctuations. Revisit these agreements periodically to ensure they still meet your business goals.
Take Advantage of Rewards
Look out for loyalty rewards, bulk discounts, or seasonal promotions offered by your supplier to save costs over time.
Plan Bulk Purchases Carefully
Use apps or software for inventory management to track bulk purchases and ensure optimal stock levels without overstocking.
Leverage Shared Supplier Networks
Collaborate with nearby businesses to use shared supplier networks. This can significantly reduce shipping costs and improve delivery efficiency.
Read More: Tips for Keeping your Restaurant Staff Motivated
Conclusion
The rising prices of cooking oil in the UK are a challenge for restaurants, but proactive management can help mitigate the impact. By practising efficient oil usage, exploring alternatives, and partnering with a reliable food wholesaler, restaurants can maintain profitability without compromising quality.
Don’t let rising costs eat into your profits. With Freshways by your side, you can access competitive pricing, timely deliveries, and expert insights to navigate these challenges. Start saving today—partner with Freshways!
Let us help you keep your business running smoothly despite rising costs.
