There will always be reasons experts blame for a rise in consumer prices – drought, war, consumer competition, political turmoil, etc. Last summer’s drought, the worst in decades, reduced the quality and quantity of corn and soy available to American businesses and consumers. The Consumer Price Index (CPI) predicts the price of beef to rise 4-5%, dairy 3.5 – 4.5%, bakery and cereals 3-4%. The average annual price increase for all foods is 2.8% (Forbes.com). Many of the food items served in assisted living and nursing home cafeterias and restaurants rely heavily on corn and soy. A bill that passed the U.S. Senate this week will limit price increases in milk for the next nine months by providing subsidies to farmers.
Food prices have risen quickly in senior housing communities, from an estimated $4.50 per resident per day in 2005 to $19-20 for the same in 2010. All senior housing providers will face the rise in raw food prices this year and most will turn to proven industry tactics for passing the increase on to customers. One tactic is to pencil in the hike and absorb the cost by seeing a decrease in revenue. This is usually done for a fixed amount of time or until the absorbed costs become too painful for the bottom line. Another, is to scale back on discounts. Sunrise Senior Living increased the price employees paid for their meals three years ago from $1 to $3. Price increases are usually accompanied by some upgrade in quality of offerings, minimizing complaints. Wholesalers may absorb some of the costs if the client is important enough, but like an assisted living community, even they have limits and will not suffer losing money consistently.