Restaurants re-think tactics as costs of ingredients rise

Dean Christopher, owner of Blind Onion Pizza & Pub stores in Reno, hangs up the phone after a lengthy conversation with his bookkeeper and shakes his head.

Christopher each month purchases more than a ton of flour and about 2,000 pounds of cheese between his two stores, and prices are rising rapidly on both commodities, as well as other dairy products, produce and meats.

"That is what is frustrating about food prices - as soon as there is some sort of catalyst, they will raise prices right away," Christopher says. In addition to the rising cost of fuel, which has many food-service companies adding surcharges of $4 to $7 per delivery, a harsher-than-average winter and increasing global demand for U.S. commodities have resulted in sharp increases in commodities prices.

The U.S. Department of Agriculture says that the Consumer Price Index for all grocery store and restaurant food is expected to increase by 3 to 4 percent for the year, with the biggest price hikes expected in U.S. meats. Owners of restaurants, delis and pizza parlors in Northern Nevada are scrambling to find ways to control and absorb rising costs to keep from raising menu prices.

For Gilles Galhaut, the owner and chef at Z Bistro in Carson City, the salmon he usually orders is three times more expensive than it was a year ago.

"Between the non-sustainable seafood and the prices it doesn't make you want to cook much of it," he said. "We're talking halibut at $18 a pound. Salmon at $9."

Galhaut drafts a menu for the French restaurant each week and because of the rising costs he's starting to shy away from seafood.

"Food prices have gone up a lot more than people realize," says Chuck Mantor, owner of Newman's Deli on California Avenue in Reno with his wife, Maria. "Everything went up - it is the most expensive I have ever seen."

Mantor says Newman's has been hardest hit on its produce bills. After several years of owning the deli, the Mantors are used to cyclical swings in produce prices and often shop between three different produce outlets seeking the best prices. To date, avocados, tomatoes and cucumbers have had the biggest price increases, Mantor says.

Other commodities are on the rise as well. Mantor says the cost of five dozen eggs has spiked $1.50 in the past few weeks, and roast beef is up 20 percent. Chicken breast has increased 10 percent year-over-year, and many of the deli's signature specialty items have ticked up 15 to 20 percent.

Newman's re-strategized to keep from passing along higher prices to its customers. The owners keep a keen eye on inventory levels to avoid waste and have re-thought many of their daily special lunch offerings.

"We haven't run too many specials with lettuce, tomatoes or onions because of the produce," Mantor says. "We have been constantly analyzing how to do better on our cost of sales without raising prices. We didn't raise prices for two-and-a-half years during the recession, and any we have increased we feel we have given a better portion."

Blind Onion also has been hit hard on its cost for produce. Christopher says one of the main goals for the quarter is to figure out additional ways to reduce costs without sacrificing quality.

"We are trying to save to keep the cost of goods down, but it gets hard," he says. "I do not want to raise prices because everybody is raising their prices, and if I can do a better job at controlling my prices its keeps my costs of goods down."

Blind Onion has revamped internal processes to shave costs on labor and offset hikes in the price of bulk mozzarella, which spiked 46 percent from January to February, Christopher says. A minor change in the way 500 pounds of cheese per week is shredded cut the labor for the process from 10 to two hours, and it also resulted in slightly faster cooking times.

Scott Allen, executive chef at Bistro 7 in South Reno, says price increases don't necessarily lead to changes in the restaurant's menu offerings, but they can lead to slight price increases or slightly smaller portion sizes.

"It does raise the cost to the guest in the long run. It's not something I like doing, but you will always get what you pay for."

Allen, who spent time working in Malibu, Calif., also notes that prices for food items often run significantly higher in northern Nevada. For instance, he says, Chilean Sea Bass cost about $15 a pound there while it's running closer to $20 a pound in Reno.

"Everything has to be trucked in from a decent distance," he says.

Ricky Volpe, research economist for the USDA Economic Research Service, says the brutal winter experienced in many parts of the nation has a more short-term effect on the price of commodities such as corn, soybeans, rice and wheat.

The increase in the price of fuel affects both production and processing for meat and dairy Volpe says, and those costs are passed along to consumers. Though the price for fruits and vegetable also has increased, Volpe notes, those commodities are expected to return to relatively normal pricing.

However, a weak U.S. dollar means stronger buying power in other parts of the world, and China and India have both driven competition for U.S. meats. Volpe says U.S. meats are expected to see the biggest increase in international demand, which should lead to higher prices throughout the year.