Oh dear! The bill for your dinner date just went up

Eating out and ordering in are getting costlier, as also chocolates. Bills at quick service and fine-dining restaurants may rise 5-8% starting this month as prices of cocoa, coffee, palm oil and sugar have surged over the past quarter. This will be the first such increase in about 1.5 years, said industry executives and restaurateurs.

Prices of cocoa and coffee are at all-time highs and palm oil has risen 10% Y-o-Y. Executives at a dozen restaurant and cafe chains said they are evaluating price hikes this month itself.

Aseem Grover, owner of the upscale The Big Chill Cafe and dessert chain The Big Chill Cakery, is monitoring costs carefully.

“There is a steep surge in commodity prices and inflation is making it increasingly tougher to balance profitability,” Grover said. “We are evaluating the situation closely.”

Cocoa prices have risen to a record, touching over $10,000 per tonne, following disappointing harvests in key producing countries such as Ghana and Ivory Coast. Cocoa prices have doubled in the JanuaryMarch quarter from the preceding one.

“Bad news. We’re pausing production of our milk chocolates. And hiking prices for our dark chocolates… Because real food comes at a real cost,” Shashank Mehta, founder and chief executive of packaged health food company The Whole Truth, wrote on LinkedIn last week.

He added that cocoa prices are at their highest in 45 years and that in just one year, prices of the commodity had risen over 150%, while cocoa butter is up 300%.

Calling this a “devastating season for cocoa farmers”, Mehta said, “There is an unprecedented shortage of supply. Farmers are crying hoarse (because none of the profits are flowing to them). Cocoa futures are in a tizzy.”

The commodity spike is pushing prices up and threatening pack sizes of packaged foods as well as portion sizes at restaurants.

Most commodity prices are going up, resulting in increasing input costs, said Anjan Chatterjee, chairman of the listed Speciality Restaurants which operates Mainland China and Sigree. “Accordingly, we are reviewing our prices and if this continues, we will be compelled to increase our menu prices,” he said.

Executives said companies face the dilemma of taking a hit on profitability or risking the loss of market share if they increase prices.

“The market is quite competitive, so we have taken overall price increases of only 5%, though the hit we are taking is a lot more, given the increase in our input costs,” said Saurabh Khanijo, managing director of the Kylin restaurant chain.

Those who make chocolates and other sugar-based confectionery are also contemplating price increases or a reduction in pack sizes.

“The price increase of cocoa specially is phenomenal, so we have to either increase prices or will be forced to reduce pack sizes,” said Jayen Mehta, managing director of Gujarat Cooperative Milk Marketing Federation (GCMMF), which makes Amul chocolates and flavoured beverages. “We will be taking up prices in a calibrated manner, so it doesn’t hurt consumers too much.”

Prices of palm oil, also a key ingredient for the hotel, restaurant and café (HoReCa) segment, have risen 10% in the last three months due to reduced supply from Malaysia and Indonesia. “The price rise will continue till the early part of June,” said Sandeep Bajoria, chief executive of oil trading firm Sunvin Group.

Jubilant FoodWorks, which operates Domino’s Pizza and Dunkin Donuts, declined to comment as did cafe chains Tata Starbucks and Barista.

Quick service restaurants (QSRs) are evaluating an increase despite listed companies battling low-priced competition from hyperlocal chains. That had forced many chains to introduce menu items at lower prices such as KFC’s Rs 149 lunch combos and Pizza Hut’s Melts thin crust pizza starting at Rs 169.

Some are looking at cheaper substitutes.

“We have requests from some cafe chains to replace cocoa with cheaper alternatives and chocolate with chocolate flavour,” said an executive at a prominent cocoa supplier who didn’t want to be identified. “We are hoping this is a short-term phenomenon.”

Coffee is also getting costlier. The farmgate price of raw Robusta coffee berries touched a record Rs 172 per kg in Kerala last week against Rs 115 per kg during the same period last year. The spot price of Robusta coffee beans stood at Rs 315 per kg, up from Rs 210 during the same period in 2023. Due to unseasonal rainfall, shortage of labour and an increase in demand, coffee inflation hit double digits year-on-year at 15.3% (2.5% quarter-on-quarter), Motilal Oswal report said. Sugar prices increased by 10.8% in FY24 from FY23, with prices currently at Rs 3,800 per quintal.

Tea prices, though, have dropped on low export demand and sluggish rural consumption — down 10.2% year-on-year and 21.1% quarter-on-quarter. However, the new season of Darjeeling teas that have just entered the market are fetching good prices on account of the production of a premium variety. Recently, a kilo of Darjeeling tea fetched a price of Rs 31,000 per kg.

Wheat prices have increased 2.6% yearon-year as the government has raised the minimum support price, though prices have declined by 2.4% quarter-on-quarter.

Harry Byrne

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