The spike in the cost of some materials such as frying oil or packaging is forcing small retailers and fast food giants to significantly raise their prices.
It is one of the most popular “doner kebabs” in the 18th arrondissement of Paris. Every day dozens of people line up in front of the “Gemüse” to taste one of their “kebaps”. But in recent days, customers have been informed of bad news: a billboard announces a significant and almost general increase in prices.
The restaurant explains that it can no longer collect price increases only on certain materials, in particular “200% on frying oil” (obviously widely used) or even “packaging” in cardboard. As a result, he is forced to increase dishes, fries and formulas by a few tens of cents to “preserve” his economic model.
“We can not do otherwise”, indicate other owners of this type of restaurant to our colleagues France blue. Everyone had to raise their prices by a few tens of cents to make it.
Oil, sauces, packaging
The soaring price of sunflower oil is turning into a nightmare for this type of fast food. It is one of the many consequences of the war between Ukraine and Russia, the two countries that account for 78% of world exports of sunflower oil. Sold for € 640 per tonne in mid-February, today it is trading for over € 1,000.
And this inflation affects not only the frying oil, but also the sauces that are specifically made with this oil.
This problem does not spare the fast food giants. Like McDonald’s. In the United States, despite the chain’s colossal footprint allowing it to absorb some of this inflation, menu prices have risen 2.7% over the past three months, according to analysts at Gordon Haskett after rising 6% in 2021. .
It must be said that the cartel also had to accept an average 10% increase in wages across the Atlantic.
In the US, it increases at McDonald’s and Burger King
At Chipotle (Mexican food), prices have gone up 10% year on year. Same thing at Burger King in North America. “We anticipate further price hikes in 2022 and are working closely with franchisees to make the best decision for customers,” said José Cil, CEO of Restaurant Brand International, last February.
More generally, fast food menu prices could still increase 6-8% in 2022, according to Wedbush Securities.
In France, the trend is similar even if it is still difficult to assess precisely because in most cases the restaurants are franchises and are free from their prices.
Contacted, Burger King France explains: “Today, faced with the constant increase in raw materials, we have made some price adjustments in our restaurants but they remain below the inflation we are experiencing and which affects the vast majority of our ingredients. We give advice to our affiliates (85% of our restaurants are managed by franchisees) but are therefore free to set their own sales prices to customers “.
“We maintain (and advise our affiliates to maintain) the prices of some nationally iconic products such as the King Junior children’s menu which is 4 euros or our King Deal menu (Burger Fries and Drink) which is 5 euros in the most of our restaurants in France, “adds the group.
Contacted, McDonald’s has not yet responded to our requests for comment.
Asked by BFM Business, Bernard Boutboul, president of Gira Conseil (specialized in the out-of-home catering sector) explains that today there are two “camps” among operators.
“The former absolutely do not want to apply price increases for fear of decreasing attendance. The latter are looking for solutions to mitigate or circumvent these increases by reducing costs, in particular by making changes to their recipes”.
For franchisees, “some will follow the recommendations of the franchisor, others will not, they have no obligation. So there will be incomprehensible price disproportions for the consumer in the area”, adds the expert.
But in the case of McDonald’s (83% of the 1,500 restaurants are franchises), Bernard Boutboul believes the increases will be consistent. “Franchisees generally trust the franchisor’s recommendations.”
Problem, there will be a psychological threshold not to be exceeded. According to a survey by independent analyst Mark Kalinowski conducted among affiliates (who may or may not apply parent company recommended price increases), the price increase is already starting to weigh on sales in the United States.
“Is there a tipping point where customers start deciding that it is not worth paying $ 9.50 for a burrito, that it is not worth paying $ 7 for a burger?” Said the Morningstar analyst. Sean Dunlop.
“We are not very far from this breaking point in France”, adds Bernard Boutboul, “we already have one of the most expensive restorations in the world, we are stuck”. Especially since the prices of raw materials, basic products and even packaging are not going to change. “It’s not over, we can expect a new outbreak this fall”, warns the expert.