Global Food Prices Hit Six-Year High

Global food prices are the highest they've been in six years, with the price of agricultural commodities traded on the global stage rising 50% since the middle of 2020, according to economists at Rabobank.

Additionally, global food demand is projected to rise anywhere between 59% to 98% by 2050 and food prices are soaring faster than inflation and incomes.

With food prices surging, here's a look at the factors at play:

Import Demand is Up

As countries seek to build up their domestic stocks of commodities such as wheat, corn, and soybeans, import demand is rising, reported Australian Broadcasting Corporation (March 10). Full Story

The highest among that group is China, whose economy is rebounding.

Major exporters are also holding stocks back. For example, Russia introduced export taxes on wheat and Argentina placed quotas on corn exports. Some publicly listed food companies are also increasing the amount of stock they hold in warehouses to avoid COVID-related disruptions.

In wealthier countries, governments are focusing more on self-sufficiency than price controls, reported Bloomberg (Feb. 28). Full Story

France is planning to boost output of high-protein crops to cut reliance on soybean imports, while Singapore became the first country to approve sales of lab-grown meat as it pushes to boost domestic food capacity.

Pressure from Market Speculators

According to Rabobank senior commodity analyst Charles Clack, market speculators are playing a role in the upward trend.

"While more fundamental things like weather and demand are the trigger for prices rising, it's without doubt speculation by non-commercial players in the market that exaggerate the move," he said in the Australian Broadcasting Company report.

Other factors playing a role in rising food prices include:

• A weakening U.S. currency
• Recent poor weather
• A shortage of truck drivers and shipping containers
• The rising price of oil

Additionally, low interest rates are drawing money away from government bonds and into commodity markets as they look for higher returns. Food Institute Focus

Plant-based Meat Trend Continues to Grow Among Major Industry Players

Plant-based companies are finding a home in fast food, as demand for meat-free options grows among consumers.

About one-third of consumers said their consumption of various meat alternatives has increased over the past year, according to a Datassential survey conducted in January. The figures are similar for those who say they plan to increase their consumption of plant-based meat alternatives in the coming year, reported SmartBrief (Feb. 4). Full Story

Beyond Meat Strikes Deals with Fast Food

Beyond Meat recently signed partnerships with fast-food giants McDonald's and Yum Brands, as noted in a report by CNBC (Feb. 25). Full Story

Under the agreements Beyond will be the preferred patty supplier for the McPlant burger and work with McDonald's to develop new substitutes for pork, chicken, and egg.

The company will also work with Yum to make exclusive menu items for KFC, Taco Bell and Pizza Hut. Financial terms for both partnerships were not disclosed. However, Beyond Meat CEO Ethan Brown told analysts that the impact of the deals in 2021 is expected to be "fairly modest."

"These deals are enormous," Brown told CNBC. "They are the biggest deals you could possibly put together in food in our sector. And we don't want people to get ahead of themselves."

Brown also noted the company will release two updated versions of its meatless patties this spring, claiming them to be its "juiciest burgers yet." One will have 55% less saturated fat than a traditional 80/20 beef patty, while the other will contain 35% less, which is consistent with its current iteration.

Meanwhile, the company said fiscal fourth-quarter net sales rose 3.5% to $101.9 million, missing average analyst forecasts of $103.2 million.

Good Catch Bring Plant-based Fish to Bareburger

Gathered Foods, makers of Good Catch plant-based seafood, announced a foodservice partnership with Bareburger, an organic and clean-comfort food restaurant. For a limited time, Bareburger will add two new fish-free burgers to the menu featuring Good Catch's Plant-Based Classic Fish Burger. Full Story

The partnership marks Good Catch's first foodservice partnership for its produce, which is part of its existing line of frozen appetizers and entrees. The partnership comes at a time when consumers are becoming more open to plant-based seafood.

A majority, 59%, of frequent seafood consumers say they are likely to try plant-based seafood analogs, according to the Power of Seafood 2021 report from FMI. The report also noted a high correlation of interest in plant-based fish and nutritious eating, while sustainability also has a major impact with 62% of consumers naming it the top factor in their decision to try plant-based foods. Food Institute Focus

Examining the Viability of Virtual Restaurant Brands

On February 18, DMA, in conjunction with the Food Institute, hosted a webinar that examined the recent explosion of ghost kitchens and virtual brands. The event, which featured executives from Denny's, Kitchen United, and Lettuce Entertain You, also reviewed the prospects for virtual brands and tips for restaurant operators interested in launching such programs.

After all, delivery-centric concepts are popping up with minimal initial capital investment, such as Mr. Beast Burger, which launched in December with over 300 locations. According to Chowly, as of August 2020 there were approximately 100,000 virtual concepts on third-party apps.

"I think what [operators] like about virtual brands is it's cheap to test," noted Joy Lai, the COO of Kitchen United, which aids restaurant brands in off-premises dining. "So, they can turn something on, see if the consumers like it, get the feedback, and tweak where needed."

A Closer Look at the Trend

Virtual restaurant brands – brands that have a full menu, but don't exist in their own space and typically share kitchens with other businesses – have been well-received by customers due to third-party delivery options and the variety of food available from ghost kitchens. Denny's CEO John Miller said younger generations are especially receptive of delivery-centric virtual brands like his company's new Burger Den.

Virtual brands aren't without logistical hurdles, though. They require a thorough understanding of a restaurant's trade area and demand, panelists said.

"Another very important element is: can you achieve that level of consistency frequently, as you get busier and busier," said Scott Barton, partner with Lettuce Entertain You, a company behind dozens of restaurant brands. "It takes a little time to work through, especially when you're rolling out a new concept."

Keys to Virtual Success

Panelists offered the following tips to help ensure the successful launch of a virtual restaurant brand:

• Be straightforward with your brand name by including your main product in it (example: Mr. Beast Burger)
• Be clear and descriptive with menu items
• Use social media for marketing

Addressing Skepticism

The speakers also addressed skepticism about the long-term prospects for virtual restaurant brands, acknowledging that some industry peers feel the concept's popularity will dissipate as the pandemic fades. Lai acknowledged that many consumers will eagerly return to brick-and-mortar restaurants once indoor dining restrictions subside.

"I think some of those brands may go away. You would expect that with the brand-development cycle," Lai said.

That said, she still sees growth opportunities for many virtual brands.

"For a lot of our existing brands, when they have a primary brand where they have a brick-and-mortar store as well, when they launch a secondary, virtual brand, we've seen it bump their revenues anywhere from 30 to 50 percent," Lai noted. "For smaller operators...maybe a good [virtual] brand is doing $5,000 a week. And, when you compound that with three or four brands, you get meaningful revenue." Food Institute Focus

No Safe Harbor: West Coast Port Backups Impacting Food Trade

Imports and exports may be slowing at West Coast ports, but that's not due to a lack of demand: logjams are complicating efforts by U.S. agricultural companies looking to export their products. Meanwhile, retailers are reporting shortages of key food items as container ships vie for access to the nation's ports.

Washington State Farm Exports Stuck

Before the pandemic, Wenatchee, Washington-based tree fruit exporter Stemilt Growers would typically ship 15 containers of fruit per week to Taiwan. In a recent week, the company shipped exactly zero, according to export sales manager Dave Martin, reported CBS News (March 10). Full Story

Shipping companies are finding it more profitable to ship empty containers back to Asia quickly rather than filling them up with U.S. agricultural goods. This rapid movement is helping to sate import demand stemming from increased online spending in the U.S. since the start of the pandemic.

"My biggest worry is that suddenly what seemed like a blip in exports and a temporary problem becomes, well, now China is going elsewhere for their apples and their cherries and their hay," said state Rep. Kim Schrier, who wants the government to address the increasing number of empty shipping containers leaving the country.

Disruptions Across the Country

While Midwest agricultural producers sounded the alarm months ago, the entire West Coast seemed to slow down more recently, according to Tom Greene, president of Bainbridge Island, Washington-based Interpack Northwest Frozen Foods.

Greene, who also worked with shipper K-Line earlier in his career, noted these disruptions rippled throughout the food industry, with processors, importers, exporters, and growers working on uncertain timelines as ships wait to reach ports. He argued it was more profitable for the cargo companies to ship the empty containers right back to China than to pay to ship the containers out to the Midwest for lower-cost agricultural exports.

Greene said his company first noticed the issue when imports of pineapples were delayed. However, now the issue is affecting exports of frozen fruit products, too. He said imports of frozen apple juice concentrate, dark sweet cherries, pear juice, and more were incredibly difficult to source.

"It started as an issue with inbound containers, but now we are having an issue sending them out. We're having trouble getting export containers, even for our highest-revenue products," he said.

Demand from China on the Rise

Demand for U.S. agricultural products remains strong, particularly in China, which is reviving its relationship with the U.S. following a three-year trade war. The country is working to import U.S. grains to feed its rebounding hog herd, which was impacted by outbreaks of African swine fever in recent years.

Despite the country's plans to increase domestic pork production, USDA expected China's pork production to remain below pre-ASF levels, indicating a stronger market for imports in 2021. Pork imports are expected to reach 4.5 million-lbs. during the year.

Sourcing of Imported Products an Issue

Costco is one retailer reporting issues stemming from the congestion at the ports, saying it is having difficulty stocking imported cheeses due to the bottlenecks, reported AZ Central (March 10). Full Story

Additionally, the retailer said it was having difficulty sourcing imported seafood and olive oil, alongside other non-food items. CFO Richard Galanti said port delays and container shortages remained an issue, causing timing delays for specific import categories.

"We expect these pressures to ease in the coming months, but it's impacting everyone, of course," Galanti said. Food Institute Focus

Severe weather in many parts of the country in February hampered the softening of customer transaction declines at major U.S. restaurant chains reported in the last few months of 2020 and this January, according to The NPD Group. Major restaurant chain customer transactions declined by 13% versus year ago, compared to a 9% decline in January. Full Story

Selected Results

• Jack in the Box reported a same-store sales increase of 13% in its quarter ended Jan. 17, compared with 1.7% in the prior year. The company said operating costs and expenses increased 5% from the prior year to $249.6 million, reported MarketWatch (Feb. 17). Full Story
• Wingstop saw record growth in 2020, reporting systemwide sales growth of 28.8%. The chicken wing brand saw same-store sales climb 21.4% for the year, and the chain had 153 net new store openings – a unit count bump of 11%, reported Restaurant Business (Feb. 17). Full Story 
• Papa John's reported global same-store sales jumped 15.5% in its fiscal fourth quarter, while North American same-store sales jumped 13.5%. The company cited higher food costs, a new corporate office, and employee bonuses as headwinds that weighed on profits, reported CNBC (Feb. 25). Full Story
• Domino's Pizza said global retail sales rose 21.7% in the fourth quarter and U.S. same store sales increased 11.2%. Full Story