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Beef is a mainstay of many Canadians' diets, but external pressures are causing costs to rise sharply and many in the industry worry about the impact that rising prices can have on consumer appetites. To date, consumers have absorbed the cost increases in this food product, but as industry experts predict that droughts are making beef farming unviable for many ranchers, limited availability is likely to have a staggering impact.
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Why beef farming is challenging
Ranchers are facing increasingly high inputs as they need to supplement their herds' diet due to the drought and problems with feeds. The cost of these feeds has increased dramatically as a result of shipping challenges and logistical complications, and ranchers are not insulated from the high interest rates that are affecting their cash flow in other areas, too.
Many are having to sell cattle and reduce the size of their herd to remain financially viable, but this means that they have fewer productive females in their herds to create the next generation that will one day end up on the table.
The presence of fewer cattle not only has a local impact; it also reduces the amount of beef available to export, attracting longer-term financial ramifications and propagating this vicious cycle. Even if the drought in the prairie regions were to end now, it could take years to grow the national herd back to more sustainable numbers. In the meantime, prices will only continue to rise.
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What restaurant franchises can do about this situation.
Restaurant franchises have three options for handling this situation:
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Seek economies of scale
By centralizing all franchisees' beef orders, it may be possible to benefit from economies of scale. It will require a concentrated effort and a seamless logistics system, but there is a possibility that franchises could achieve cost efficiencies by working together.
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Portion control
By positioning beef as a premium product, restaurant franchises may be able to reduce portion sizes and hold costs steady without upsetting their customer base. It may be necessary to introduce larger or complementary sides to ease buyer disappointment, but this should be determined on a case by case basis.
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Raise prices
It may ultimately become necessary to raise prices. The drought and its impact on the farming community are well documented, and consumers will understand the necessity of the price rises as they will be in accordance with other retail outlets. Businesses that are looking to raise prices should ensure that the increases are fair, commensurate with market pressure, and can be held stable for a reasonable period of time.
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In short, there is cause for restaurant franchises to be concerned about reports of beef shortages, but there are ways of dealing with this problem that should be explored by individual franchisors, so the most appropriate strategy can be enacted for each food business.
