Good Questions! One Question, three answers

How does food inflation impact the hospitality industry?

timer2,5 minSeptember 2023

In the ‘Good Question’ section, experts express their opinion on topics that stir up the hospitality industry. Short and sweet. The question on today’s menu: How are restaurateurs responding to food inflation? Are they passing on price increases or keeping them as small as possible?

In 2016,

Julia Komp

became the youngest Michelin-starred chef in Germany. She owns two restaurants, Sahila and Yu*lia Mezze Bar, and is founder of the ‘Kenzolie’ brand. She uses synergies to keep cost increases as small as possible for her guests. But if the value added tax for the hospitality industry is to rise again in 2024 to the standard rate of 19%, she sees no alternative but to pass on the increased prices to her guests.

"Increased food prices are a burden on everyone. But rather than passing on price increases in full, we prefer to look for synergies. It’s a benefit to us that the Sahlia Restaurant and the Yu*lia Mezze Bar share the same kitchen so we can make the best possible use of the food. Also, the menu at the Mezze Bar advertises only the ‘Catch of the Day’, rather than a specific type of fish. This means we can be more flexible if suddenly one day, turbot is 100% more expensive. The issue I’m currently dealing with is the announced increase in value added tax in the hospitality industry. If this rises again from 7% to 19%, we really will have to pass on this increase to our guests in full."

Stefan ‘Bob’ Meitinger

currently runs 17 BOB’S Lokale across the south of Germany. Here, he combines classic hearty fare like burgers and pizzas from wood-fired ovens with sporting activities like bowling, pool, table football and darts or the screening of major sporting events. And all at stable prices.

"Our guests come to us to escape the daily grind and our team ensures that this continues to be possible. Our relaxed ‘matey’ style spreads to our guests and voilà – any tension is left at the door! We want to offer this experience to our guests all the time, even in times of inflation. If we raise prices now, many would no longer be able to afford to come. For this reason, we’re making savings in other places, for example in furnishings. We simply use things that others no longer want. This even includes items such as sofas, pictures and lamps that have long been discarded by their original owners. But we’re not lowering our food standards. Here, we continue to rely on high quality and always give 100%. People like coming to us – because it’s comfortable, the food is delicious and it’s always affordable."

Götz Braake

is Head of Gastro Consulting at METRO Deutschland and a consultant and expert in hospitality and accounting. He recommends that restaurateurs carry out a cost report to calculate the necessary contribution margins.

"To generate a good contribution margin in times of inflation, it’s important to start with a cost report. Then you should carry out a menu analysis, to divide the meals into four categories: First come the frequently purchased winners with the highest contribution margin. Second come the frequently purchased bestsellers with a contribution margin that’s too low. Third come the less frequently purchased snoozers that do still have a good contribution margin. And fourth are the losers, that neither sell well nor have a good contribution margin. These losers should be removed from the menu immediately, while the bestsellers need to have their prices adjusted upwards to increase the income they generate. The snoozers could be offered more cheaply and be promoted visually on the menu and in the dining area. The basis is always the necessary contribution margin. The aim is for the menu to consist almost exclusively of winning dishes (good sales and high contribution margin)."

Saving on costs with takeaway sales

When restaurateurs develop takeaway sales via their own website, for example using DISH Order, they save on costs as there is no commission for delivery services.

Why are food prices rising?

Food prices in Germany are rising – why is that? What’s behind these persistent price increases? And how are they impacting the hospitality industry?

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Facts about 2023 food inflation

In mid-2023, price rises especially on food are driving the inflation rate higher. In July 2023, prices for vegetables were 15.7% higher year-on-year, while food and non-alcoholic drinks were around 10.9% higher overall than in July 2022. [Source: Statista]