Special Report On Materials And E&S Pricing: Manufacturers, Operators Face Quandary Over Price Increases

With prices for key metals and other commodities running 25% to 35% higher than a year ago, many suppliers of foodservice equipment and supplies have told FER Fortnightly they want to or will raise prices late this year and early next. (See related stories below). Whether they will be able to push through the increases is problematic, as large operators, stressed by increases in food prices and other costs, are often pushing back.

The E&S price increases follow a nearly two-year period when the depressed market precluded many suppliers from trying to raise prices. According to AutoQuotes Inc., the average price increase for the year ended June 30 was only 1.3%, the lowest annual average increase since AQ was founded in the early 1990s. Only 43% of manufacturers in its database raised list prices during the period; 19% actually cut prices. Taken by product category, list prices fell for cooking equipment, coffee equipment and tabletop products for the year ended June 30.

And in fact, given market conditions, street and “deviated” pricing granted big chain customers and dealer buying groups was often deflated. Foodservice Equipment Reports estimates E&S prices fell 2.3% in 2009 and are down another 0.7% this year.

During this same period, manufacturers have seen their costs for many materials and components, as well as freight costs, rebound strongly from the cyclical lows reached in ’09. For example, the MEPS Stainless Steel Price Index for North America shows prices per ton jumped nearly 50%, from $2,945 in September ’09 to $4,379 a ton this June. Prices have softened since to an average of $3,639 a ton in September. Still that’s nearly 24% higher than September a year ago. On the other hand, spot-market price data from IHS/Global Insight shows 304 moving 11% higher since August.

Copper prices, a major component in motors and wiring, as well as piping for refrigeration systems, are running 36% higher this year, according to Tom Stundza, senior analyst in the Pricing and Purchasing Group at IHS/Global Insight. The price of urethane insulating foam more than doubled last year, according to Chemical Marketing Associates data. The commodity price index for industrial metals maintained by The Economist stands 25.3% higher as of Oct. 23 versus a year ago.

“The reality is, the E&S manufacturing community never caught up when commodities prices soared back in 2007 and 2008,” says Dean Landeche, senior v.p. of marketing for the Manitowoc Foodservice Group. “All of us got a little break last year, but now all manufacturers are faced with another round of run-ups across nearly all our cost inputs.” Landeche also expresses concern that the faster growing economies in China, India and Brazil will lock up contracts for key industrial metals and other commodities before the U.S. economy recovers, leaving manufacturers here to compete for materials in a tighter market. Manitowoc has announced moderate price increases for many of its products starting Jan. 1.

“There’s no question the current market has put suppliers in a bind,” says a leading executive for a chain-oriented dealership. “Manufacturers and dealers are struggling with higher costs, for sure. But so are operators, who continue to see soft sales and rising costs in critical proteins, especially. The operators do research on their customers and know they can’t push the price-points much in this environment. That’s why we’re all getting so much push-back on these increases.”

RELATED CONTENT

Untitled design 2022 07 13T114823.757

Patience Pays Off for a Reach-In Repair

RSI’s Mark Montgomery's persistence and patience is key in repairing an operator's failing reach-in cooler.

Henny Penny

Oil’s Sweet Spot: How to Get There and Maintain It

Like many in the world of foodservice, you may assume that cooking oil performance is at its peak when you first start using it — but did you know there...

- Advertisement -

- Advertisement -

- Advertisement -

TRENDING NOW

- Advertisement -

- Advertisement -

- Advertisement -