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Why the cost of ingredients has gone up '50%' in 2019

Awareness of commoditization of agricultural products has increased. Influenced by the market, there is now a higher demand for the quality of agricultural products, the beauty of the fruit surface and packaging (in the case of fruits, for example, fruits with a beautiful appearance, good taste, and beautiful packaging are sold at a higher price, while traditionally poor-quality fruits have come to the point where no one cares about them in the market). Now the polarization is even worse, so it feels like produce prices are getting higher.

The cost of selling has increased, with transportation needed from the place of origin to the place of sale, some fruits and vegetables needing refrigeration, and stalls needing to be rented out for market sales. These are the marketing costs of agricultural products. Affected by the market, these costs have generally been on the rise in recent years, indirectly leading to year-on-year increases in the price of agricultural products, resulting in a variety of increases in the price of ingredients as well.

Instrumental impact on the restaurant is difficult to survive, the ingredients are the most basic price system for food and beverage. Once the bottom price system changes, this impact will not only be reflected in the supply chain, but also the wage cost of employees will increase. They will demand higher wages. Landlords will also increase rents accordingly to maintain a stable net income. This will be a huge blow to businesses that rely on a low-cost operating model. When the price of ingredients goes up and costs in all areas rise, these brands will have to rely on price increases to keep up with costs, thus losing their strongest low price advantage will also be hard to survive.

Under normal circumstances, ingredient price increases are seasonal or cyclical. Therefore, merchants should budget their purchases in advance to minimize the negative impact of rising food prices on restaurants. Secondly, having stable and high-quality supply chain merchants, signing long-term supply contracts, and locking in the price and quantity of raw materials before the crisis arrives are important measures to avoid the risk of raw material price fluctuations.