Pizzeria owners will see a different type of dough rising this year as commodity prices continue to drop leading to an opportunity for higher profits.
The price at the pump may not bode well for Wall Street, but it should boost profits at pizzerias.
Gas prices dropped to an average of $2 per gallon nationally which is great news for your pizza delivery costs. This compares to a price of $3.34 per gallon just two years ago.
As oil prices go, so goes the other commodities. Look for the price of pork, beef, dairy and other commodities to continue their long slide downward. Here are some notable numbers to consider:
Milk prices dropped 29 percent last year. Whereas milk receipts hit a record high of $49.3 billion in 2014, they lagged mightily last year. The drop in price was due to a 60 percent decrease in corn prices. With costs subsiding, farmers were able to provide more feed to their cattle increasing the number of milk cows dramatically and driving down the price of milk.
Falling milk prices affected cheese which hovered around $1.50/lb. That is a 30 cent per pound decrease in price from high $2.00/lb. in 2014.
Both pork and beef prices followed suit, down 60 percent in December and expected to fall another 50 percent within the next two to three years. Total production costs are expected to fall for the first time since 2009.
Your pizza crust should also cost a lot less this year as wheat prices spiraled downward to below $4.30. That’s almost $2.00 lower than in 2014.
How will the shrewd pizzeria owner adapt to these drops in prices? Distributors will be paying less for products so their prices should be adjustable. Also, their fuel costs will be lower which should reduce their overall shipping costs. Have a conversation with your distributor about passing the savings on to you.
Even though you may be faced with higher minimum wage salaries, the overall cost of your business should be less than it has been in quite some time. Will you offer lower menu prices to your customers? Will you use the money to pay off bills and solidify your credit?
With no end in sight for oil price increases, your overall costs should remain low and your profits should rise…just like that dough in your oven.