Paying more to eat out?
Restaurants may raise prices as supply chain disruptions continue
Connecticut restaurantgoers may soon see increased menu prices, a result of supply chain disruptions that have put many oft-used paper products in short supply.
Many mills shifted focus to packaging material production as demand rose when people were staying home and ordering online more often. And widespread shipping bottlenecks have caused shortages for products across several industries, said Brian Marks, executive director of the Entrepreneurship and Innovation Program in the University of New Haven’s Economics and Business Analytics Departments.
The shipping bottleneck is caused by several factors, including a lack of truck drivers, port congestion and container shortages, among other factors.
Shifts toward to-go containers and individual packaging at restaurants also increased demand, Marks said. The lack of supply and heightened demand is driving paper goods’ prices up. Consumers may feel that lack of supply when doing their home shopping as well — some major retailers have announced limits on the amount of toilet paper and paper towels that can be bought per purchase.
Pulp, paper and their related products’ price points have been ticking upward since roughly September 2020 and started
rising sharply at the start of this year. They rose by about 33 percent from September 2020 to September 2021. There was only a marginal difference between September 2019 and 2020 — about 5 percent, according to the producer price index.
“All this ripples through the economy and so for an industry that was already fragile, it’ll be a significant task for many restaurants to survive the winter,” he said.
A recent survey showed that Connecticut’s restaurants are still suffering from effects of the pandemic. About three-quarters of local eateries’ sales in August were weaker than in 2019, according to information from the Connecticut Restaurant Association.
In addition to rising costs of paper goods, 90 percent of state restaurant operators are paying more for food, 65 percent have higher occupancy costs and 79 percent have higher labor costs, according to the early October news release from the state association.
“While Connecticut continues to be a national leader on combating COVID, it’s clear that restaurants are still being harmed by the pandemic and will be for some time,” said Scott Dolch, executive director of the Connecticut Restaurant Association.
Typically, to adjust for rising business costs, restaurants can either increase menu prices or cut down on portion sizes, Marks added.
He’s found that many Connecticut restaurants are either planning to or have already raised menu prices, he said.
Duchess Restaurants, a Milford-based chain with 14 locations in Connecticut, will soon need to raise prices on certain items in order to accommodate the increased price of paper goods, labor, food and utilities. There’s “really no other option,” said Gary Lavin, president of the chain.
Their paper costs are up by about 60 percent, he said.
“For over a year, we’ve had just all of the sudden certain products aren’t available, or we’re getting substitutes and prices just keep going up with no end in sight,” Lavin said.
Competitors are also increasing prices, he added.
Price increases will mostly be less than 50 cents. One of the largest rises is in the price of their chicken Caesar salad, which has been $6.99 for years, Lavin said.
The shortages also mean Lavin’s establishments must use substitutes for certain products. For example, their cups and wrapping paper for burgers will soon be generic, missing traditional logo markings.
The company they purchase from isn’t personalizing products anymore, he added, because it takes too long and further slows the supply chain.
Earlier in the pandemic, the four-cup trays used to hold drinks were a problem. Then, it was the takeout trays for breakfast platters. Now, the cups and wrapping paper.
“I’m just hoping it normalizes at some point,” he said. “The whole situation is stressful.”
Bill DaSilva, chief executive officer of Southport Brewing Company and Sitting Duck Tavern, said his restaurants are also feeling the effects of the paper goods shortage.
In particular right now paper towels are in short supply — and not the same kind most people buy for their homes. Businesses use particular sizes for the bathroom dispensers, and when businesses place paper towels on top of their dispensers, that’s likely a result of the shortage, DaSilva said.
Plastic cups for their outdoor seating have also been tough to come by, he said. Rather than buying just a couple of cases at a time and ordering more often, the eatery is ordering up to 10 cases at once.
The price increases paired with increase in labor costs, labor shortages, and other business costs going up mean his restaurants will soon raise prices, although “we’ve held out as long as we could,” DaSilva said.
“Everything’s up. Everything has gone up, and it keeps going up,” he said. “There’s no sight of anything going down.”
It’s unclear when the supply chain will be back to normal. In the restaurant survey, about half of the operators said it “could be more than a year until business normalizes.” Nearly 25 percent said they think it never will.
“I would say a certain aspect of inflation could be transitory as we resolve these supply chain issues and re-imagine manufacturing, but that takes time,” Marks said. “So I would not be surprised if we continue seeing these supply chain issues well into 2022 and maybe into 2023.”