Food costs up 5.3%, local restaurants feel the impact

(FOX 9) - The U.S. Bureau of Labor and Statistics released a consumer price index summary this month showing over the last year food prices have increased by 5.3 percent.

Restaurants are starting to feel the impact of those rising prices. The owner of The Lookout in Maple Grove says his costs have increased about 40 percent overall this year.

"It’s burger, it’s chicken, it’s fryer oil, it’s to-go containers," Mike Kinnan said.

Kinnan says some of his prices have increased by 200 or 300 percent. He says he recently had to come out with a new menu, raising the price on a few items, to keep up.

"Chicken wings used to be $45 a case a year ago and we’ve seen them at $190, they’re at $141 this week," Kinnan said. "Hamburger used to be 89 cents a pound… we’re at $3 right now."

He says he’s never this much of an influx in prices for this long. While he says he’s only had to raise prices by a dollar here or there, he’ll have to continue adjusting to stay ahead of his costs.

"We’re just going to have to keep raising our prices and see what the customers do," Kinnan said.

Professor Karen Donohue, who studies supply chains at the University of Minnesota Carlson School of Business, says while food supply chains have always been susceptible to changes related to demand or weather events, the COVID-19 pandemic has presented issues never experienced before.

"Food had a really hard set of lessons they had to go through with COVID," Professor Donohue said.

She says a few of the major factors contributing to price increases right now is that distributors don’t have the people they need to get food where it needs to go.

"Not having labor at any of those, within the warehouse or on the road, is slowing things down for sure," Professor Donohue said.

With fewer people to help distributors get food to grocery stores and restaurants, wait times are longer, prices go up and sometimes restaurants like the Lookout don’t get all of the merchandise the order.

Another issue contributing to high prices is that demand has been hard to predict. With restaurant shutdowns and stay at home orders, people have gone from their normal habits to eating entirely at home with food from the grocery store, back to visiting restaurants as they reopen. Professor Donohue says all of that unpredictability in demand makes for supply chain shutdowns and higher costs on in-demand goods.

"The demand has been difficult to predict and it has changed so substantially in 18 months," Professor Donohue said.

Professor Donohue says she predicts prices to even out, or at least for increases to slow down, after the holidays.