High and Higher

When food costs skyrocket, chefs outsmart the market.

Whether on land or by sea, the rising price of beef and seafood can do serious damage to the bottom line. But chefs accustomed to rough waters know how to navigate away from danger: they diversify and adapt.

Consider the menu at Red, The Steakhouse, a four-unit chain with locations in Northeast Ohio and South Florida. The restaurant’s 10 beef options, such as prime steaks, account for 60 percent of its sales, but the remaining 45 dishes include seafood, pasta and other proteins. 

“By having those pasta and fish options and other non-steak items, you then have a lot less impact when beef prices go through the roof,” says Jonathan Bennett, executive chef of Red.

Beef supplies began tightening last year after a three-year drought thinned herds and upped the cost of feed. The U.S. Department of Agriculture predicts beef production will plunge 6 percent this year to 11 million tons. Ranchers are reportedly keeping cows from feedlots to breed more cattle, which will command higher prices due to shortages.

If cattle prices continue to climb as predicted—a fate also facing seafood—operators will be faced with passing along the costs to diners, dealing with smaller margins or making menu changes.

After last year’s significant price increases for nearly every popular species, including shrimp, salmon and tilapia, seafood experts like John Sackton say the cost hikes will continue. Reasons vary but experts agree that supply constraints, swelling worldwide demand and sellers’ resulting ability to raise prices contributed to the increases.

"A variety of interesting value cuts from the chuck have great marbling and can be grilled as steaks."

-Andrew Hunter, Los Angeles-based chef and consultant

Dealing with higher seafood costs is not as challenging as beef, Bennett says. Like all chefs, he can offer lesser known types of fish or purchase seafood in season to avoid higher food costs. 

“It’s one area where we have more possibilities to change,” he says. “It’s not that big of a deal whether we’re running grouper, halibut, scallops or black cod. You have such limited ability to really play around with profitably with steaks.” 

The inevitable, however, is around the corner if it hasn’t hit already, Bennett and other chefs say. No longer able to absorb the higher cost of seafood, restaurateurs will have to pass on the increases to diners.

Like many restaurant operators, Tommy Lee, chief executive officer of the Dallas-based, 13-unit Rockfish Seafood Grill, prefers not to raise menu prices and lose customers.

“I’ll always take an additional guest who comes in for compelling offerings over saving a few pennies here and there,” says Lee, who doesn’t expect seafood prices to stabilize for two to three years. 

But new items are pushing past the $20 mark on a menu where seafood entrees have sat in the teens. For example, a dish of seared U15 shrimp and U10 scallops with asparagus and orzo, which performed well as a special, is now a regular entree priced at $21.99. 

New Directions

In recent years, creative chefs have learned that they can satisfy carnivores’ cravings with lesser cuts of beef, an approach they will need to call on more often as prime cuts become even costlier.

“If you are a small-scale operator and have menu flexibility,” says Lauren LeFranc, a foodservice purchasing consultant at Results Thru Strategy, “then it’s just customary to push guest palates in other directions.”

Chef Matt McMillin recently pulled a 19-ounce bone-in USDA Choice ribeye from the menu at Cooper’s Hawk Winery & Restaurant after realizing he’d have to up the $34.99 price to maintain the profit margin. Its replacement: a 14-ounce strip steak for $32. “It’s a better value all around for everybody,” he says.

McMillin, director of culinary arts and beverage for the 15-unit chain based in Countryside, Ill., contracts yearly for beef, but he continues to experiment with value cuts. An 8-ounce grilled prime skirt steak, which is served with chimichurri sauce, roasted vegetables, Parmesan fries and citrusy aioli, for example, has been successful. “We don’t have to go high on that,” he says of the $23.99 dish. Skirt steak is now making a cameo in salads instead of more expensive tenderloin.

Small is Better

Portion size is shrinking, whether for beef or seafood. “It doesn’t have to be that 24-ounce cowboy ribeye,” says Dave Zino, executive chef for the National Cattlemen’s Beef Association, who recalls being thrilled by a plate of steak tacos in an airport steakhouse in Denver. “It was presented in a DIY (separately) fashion, so I got to make my own steak tacos.” 

Using beef as an ingredient rather than a center-of-the-plate protein appeals especially to millennial diners, he says. “Life is an experience for them. They’ll take a picture of the dish and say, ‘Look, I got to make this.’”

Perception is Reality

At Michael Chiarello’s Coqueta in San Francisco, beef works within the Spanish-inspired concept and the bottom line. For example, on the family-style “larger plates” section of the menu, the 32-ounce grilled bone-in ribeye steak with aromatic Moorish pepper is $20 per person but serves four.

Chef de cuisine Ryan McIlwraith has also served an 8-ounce ribeye steak, grilled medium rare, thinly sliced into ribbons and piled high on a cutting board with a seasonal relish and mizuna.

“We want to get chefs to think about presenting (meats) in a beautiful way that has dimension, to dazzle customers with visual presentation,” says Andrew Hunter, a Los Angeles-based chef and consultant. “If you’re serving a steak at the center of the plate with a vegetable at nine o’clock and the starch at three, your dish is boring. Those days are over.”

Instead, Hunter recommends using cost-effective eye of round for a popular Asian dish. “What’s better than sliced teriyaki marinated beef and lightly steamed Chinese broccoli with a wonderful sauce?” he says. “It’s a nice presentation, and it feels like a bigger portion.” 

David Farkas is a freelance business writer and restaurant critic who has covered the hospitality industry for 20 years

Meat & Seafood Futures 

Industry analysts predict that beef and seafood prices will continue to climb steadily this year.

By the second half of 2014, restaurants will start reacting to price hikes, says Walter Sommers, president of Ruprecht Company, a Chicago-based meat distributor. He believes prices for ground beef, along with chuck and round cuts—typically the least expensive of subprimals—could leap 20 percent this year.

John Sackton, editor and publisher of Seafood.com News, considers 2014 “a reaction year,” a time when restaurants finally raise menu prices for seafood after spending the last few years absorbing higher costs. This will be true particularly with shrimp because pressure on margins has become too great to bear. 

“Shrimp availability has come to my attention as an issue across our concepts,” says Rob Wilder, chief executive officer of Washington, D.C.-based ThinkFoodGroup, which operates 163 upscale restaurants nationwide. “It’s truly a concern when it comes to price and quality.” 

Seafood consumption in the United States, however, has dropped almost 13 percent since 2006, according to a report by the National Marine Fisheries Service. The report shows that shrimp consumption fell from 4.2 pounds in 2011 to 3.8 pounds per person in 2012. The decline was due in part to the high cost of shrimp driven by shortages. Last year, black gill disease seriously hampered both farm-raised and wild-caught production in the United States and abroad. 

High prices worry Andrea Hance, who owns two shrimp boats in the Port of Brownsville, near Brownsville, Texas. She estimates wholesale costs for Texas Gulf shrimp have climbed 20 to 30 percent in the last year. “We have buyers calling us up wanting to buy our catch before it even hits the dock,” Hance says, citing prices of $7.50 a pound. “We don’t want prices rising so much that people stop buying Gulf shrimp.”