DETROIT -- First, it was cheese. And many pizza makers across the country absorbed sharply rising prices of the staple ingredient as long as they could before passing along some of the expense.
Now, they're dealing with the surging price of wheat used to make pizza crust.
Players big, small and in between in the $30 billion-plus industry are feeling the heat as they figure out how to deal with the double-barrel price spikes of the gooey and grainy commodities without sacrificing their quality, competitive edge or customer loyalty.
"Our commodity costs have probably tripled since last year on the flour," said Wes Pikula, vice president of Buddy's Pizza, a 63-year-old Detroit-area chain of nine restaurants. "We're stuck with an uncertain future as well as price increases ... that are unprecedented."
The price of wheat has surged in the past month because of constraints to global supply and swelling demand from places such as China. But its volatility is as much of a concern as its price.
Spring wheat for March delivery fell $1.75 Thursday to close at $18.25 a bushel on the Minneapolis Grain Exchange. It traded as high as $25 a bushel this week. Wheat historically trades at $3 to $7 a bushel.
Likewise, the price of cheese has been rising during the past year in part because of lower-than-normal cheese production and higher demand. According to the U.S. Department of Agriculture, a 40-pound block of cheddar cheese cost $70.40, or $1.76 per pound, on Feb. 16, compared with $52, or $1.30 per pound, a year ago.
For Buddy's Pizza, raising prices is the last option -- and one it's evaluating. One effort has been to offer more salads, sandwiches and appetizers.
"You have to drive your business with a different menu variety that doesn't rely so heavily on a single product," Pikula said.
Some big chains, such as Pizza Hut and Papa John's International Inc., last year raised the price of their cheese-only pizzas to the same amount as one-topping pizzas at company-owned stores.
Chris Sternberg, spokesman for Louisville, Ky.-based Papa John's, said in an e-mail Thursday that the chain last fall locked in the purchase of part of the wheat supply needed for 2008. "Through this strategy, which we have continued in 2008, our restaurants are somewhat insulated from the recent run-up in the cost of wheat during the first half of the year."
He said the company is controlling inventory and working with suppliers to control costs.
Messages were left Thursday seeking comment from Domino's Pizza Inc. officials. The company in October estimated it paid 64 percent more, on average, for cheese during the third quarter of 2007. Chief Executive David Brandon said at the time that he had tried to raise prices to offset the higher cheese costs, but found it difficult with consumers strapped for cash because of soaring gas prices and the weak housing market.
Posted By: Siebra Muhammad
Tuesday, August 21st 2012 at 12:29PM
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