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Milk prices heading higher

Restaurateurs are crying foul over a second industrial milk price increase this year, set to take effect Thursday, which they say will likely lead to higher food prices for Canadians.

In July, the Canadian Dairy Commission decided to boost the price of industrial milk — which is processed into yogurt, ice cream, cheese and butter — by 2.76 per cent. That's on top of a 2.2 per cent hike that occurred in February.

The dual increase, the first in a single year since 2008, was introduced because of a "very unique and unexpected situation," said Benoit Basillais, CDC's chief of policy and economics, in an email.

Basillais said the hikes came because producer revenues "decreased rapidly" last fall, in part due to a decrease in global demand from importing countries and changing consumer preferences — and did not stabilize by early spring as anticipated.

The increase will alleviate producers' financial stress and ensure the fall's high demand for dairy products is met, he noted.

Basillais added the move was intended to be an advance of the CDC's December price decision for 2017, though he said it's "premature" to say there will be no increase next year.

While the dual price hike may provide a reprieve for producers, it's likely to put the burden on restaurateurs, who must decide whether their clients can stomach higher prices for dining out.

Bill Pratt owns eight restaurants and four food trucks in Halifax and Dartmouth, N.S., under the banner Chef Inspired Group of Restaurants. Their menus boast gourmet burgers, poutine, burritos, tacos and quesadillas — all topped with cheese.

"We're a heavy cheese user," Pratt said, adding the price increase is "very difficult for us."

Pratt's already increased prices once this year and doesn't think his customers will take kindly to another one so soon.

He said he'll likely have to absorb the cost increase, which could be difficult considering restaurant profit margins are low in Canada. In 2012, the operating profit margin for food services and drinking places was 4.2 per cent, according to Statistics Canada.

"I'm the guy down here that's kind of struggling to make a buck in a very tough market," Pratt said.

It seems likely diners will end up paying more, according to Pierre Cadieux, vice-president of federal and Quebec government relations for Restaurants Canada, a not-for-profit association representing 30,000 businesses in the restaurant and food-service industry.

"That (price hike) has to be passed on to the consumer somehow," he said.

"So, it's reflected in our menu prices. It's reflected in changes to the menu."

The cost of items using these ingredients at restaurants may increase, Cadieux suggested, or restaurateurs may instead remove some menu items that require a lot of the higher-cost ingredients.

Milkshakes, he said, are the perfect example of an item disappearing from Canadian food outlets as few consumers are willing to pay the price shops must charge for the diner staple.



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