Why are Food Prices Going Up?

Oct 04, 2022

Prices are high. And unfortunately, it’s no longer a surprise. From the gas station to the grocery store, people see prices up nearly 10%. Not only do these price increases affect individuals and families, but there are also significant consequences for business owners.

When it comes to an increase in food costs specifically, restaurants are feeling the pressure, too. The rise in grocery prices is reflected in other food providers – like the ones that supply restaurants across the country. So how are restaurants weathering the storm, and when will it end?

Increase in Food Prices

We often hear about inflation and higher prices, but it can be challenging to put those terms into perspective. Inflation is a part of most economies, right? It’s something everyone has to deal with and combat. So how does the current inflation compare to years past?

According to the U.S. Labor Department’s Bureau of Labor Statistics, in the last 12-month period (ending in August 2022), overall inflation is up 8.3%. That may seem reasonable or even manageable, given the previous few years. But the number is more startling when we break down inflation by category (i.e., food, energy, etc.).

Food inflation, for example, has increased to 11.4% over that same 12-month period. That’s quite an increase. But this number can be divided even further. There are often two food categories to consider – food at home and food away from home.

Food at home looks at the inflation rate at the grocery store. This category is seeing the highest level of inflation – 13.5%. This increase means American families have the highest grocery bills in almost three decades.


food costs increases


The outlook is only slightly better when looking at food away from home. This includes fast food, sit-down restaurants, and convenience store snacks. Here, the inflation rate is up 8% over the last 12 months. Not only are the food away-from-home prices causing problems for the consumer, but restaurant owners and employees are feeling the impact.

Reasons for the Increase in Food Prices

When prices start rising, the first question is often, why? The trouble with the current food crisis is identifying just one cause. The ever-increasing food prices are a combination of many issues.

Not only are the world market and supply chains still recovering from the global pandemic of 2020, but several climate issues are contributing to the increase. The United States was hit with severe Avian flu this year, meaning there are fewer chickens to lay eggs. Brazil also saw record droughts this year, which has affected the coffee crop. To top it all off, the Russian invasion of Ukraine has caused an extreme spike in wheat prices.

All of this makes it difficult to keep up with the demand for food. With a shrinking supply, a greater demand drives prices even higher. The worst part? Food is essential. Consumers can’t simply stop purchasing food until prices start to fall consistently. It’s a perfect storm. And the result is higher prices across the board.

Effect on Restaurants

No area of the food industry is unaffected by these price increases either. Restaurants, for example, are forced to reevaluate how and what they offer customers to stay ahead financially. In many areas, restaurants keep costs consistent but shrink portion sizes. Pizzas and burgers, usually considered the most affordable restaurant options, are getting smaller and smaller. Many consumers have taken to calling this phenomenon “shrinkflation.”

It’s not all bad news, though. Some experts are expecting restaurants to fair better with the high inflation rates. Because the cost of food away from home is still cheaper than food at home, many believe restaurants will see a boost in business – possibly even to pre-COVID levels.


Menu Reengineering

Inflation is here to stay, at least for the foreseeable future. It’s a time to prepare and get creative, including analyzing and reengineering your restaurant menu.

There is a silver lining, though, because as the saying goes, “what goes up, must come down,” and we hope that includes food prices.