As food prices continue to soar, many businesses are feeling the pinch. NY1’s Shazia Khan filed the following report.
At the Court Square Diner in Queens, owner Steve Kanellos is finalizing the restaurant’s new menu. Starting August 1st, his customers will see a five to 15 percent price increase on most items.
“This is not an increase to make more money, this is an increase to cover the extra costs of the items that you buy,” says Kanellos.
Kanellos says it was not an easy decision to raise prices, but it was a necessary move to stay afloat. He says soaring food costs have his profits heading for the basement. For example, just last summer Kanellos was paying $12 five gallons of soybean oil. Today he pays $33.
“At the beginning of January, February I lost about 40 percent. From April it started going to 50 to 60 percent,” says Kanellos.
Commodities analyst Jeffrey Christian with the CPM group says the pace of food prices increases has sharply accelerated in 2008.
“The prices that farmers are getting for their corn or soybean or wheat are rising sharply, but then that filters through into the wholesale and manufacturing level for bakeries and food companies that make everything from cheese to bread and it factors into the restaurant and to the retail level,” says Christian.
Amy Scherber of Amy's Bread says she was also forced to raise her prices...both wholesale and retail to meet the high cost of flour alone.
“We're not talking about the increased price of dairy or the cost of the gasoline that's gone up for our drivers or for the new cost of paper supplies, all these other things,” says Scherber. “I’m talking literally flour. The increase in flour is $11,000 a week more right now. So all year long, before we raised the prices, we just were swallowing that.”
Scherber says this year she's lost more than $200,000.
“We're busy, but we're just not breaking even at all,” says Scherber. “So we're hoping that this price increase, I mean it's a little bit, too little too late, but at least it will help us to make it through the year and sort of get back on our feet afterwards.”
Analysts say the immediate future is bleak, with no relief in sight.
“I would say that things will get worse in terms of food price cost over the next 12 months,” says Christian. “I think if you go out 24,36 months – two or three years from now – you may see some improvement.”
But that may prove to be late for some businesses.
– Shazia Khan
July 23, 2008
As Food Prices Soar, Many Small Businesses Suffer
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