Restaurants are raising menu prices, reducing portion sizes and steering customers to less expensive items to offset the high costs of beef.
They have been feeling the sting from increasing beef prices for more than a year as demand continues to rise, thanks to a growing economy and the popularity of high-protein diets. Even the first case of mad cow disease in the United States in the winter didn’t scare beef eaters.
Prices of Prime and Choice beef have increased 20 percent and 15 percent, respectively, compared with a year ago. The wholesale cost of prime rib, for example, rose 15 percent to $2.81 per pound compared with $2.44 per pound a year ago.
For high-end restaurants that use only top-grade Prime beef, the price has increased as much as 40 percent, depending on the cut.
Smith & Wollensky raised prices three times in 2003 for a total of a 3.6 percent increase.
“We’ve had no choice because it’s been outrageous,” said Alan Stillman, chairman, chief executive officer and founder of Smith & Wollensky.
The upscale restaurant chain, which has a location on 19th Street in Northwest, saw a 30 percent increase in beef prices last year.
The price increase hasn’t hurt business, though. The chain’s sales were up 20.7 percent to $93.3 million for 2003 from 2002.
“Supply is tight and demand is up,” said James Robb, director of the Livestock Marketing Information Center. “Beef demand has improved — especially at restaurants, because of the growth of the U.S. economy and the awareness that having protein isn’t bad for you.”
The center provides economic analysis and projections about the livestock industry and is a cooperative effort among state university extension specialists, U.S. Department of Agriculture economists, industry officials and the center’s staff.
Menu prices are expected to increase about 2.7 percent this year, said Hudson Riehle, senior vice president of research at the National Restaurant Association. That falls in line with the 1 percent to 2.9 percent increases during the past 10 years.
“Nationally, menu prices have moved,” Mr. Riehle said.
The industry is so competitive that restaurants don’t want to run the risk of losing customers because they have raised menu prices too much, he said.
“In general, consumers are fairly sensitive to menu price increases,” Mr. Riehle said.
To combat the higher prices, restaurants have to look more closely at their operations.
Charlie Palmer Steak was open just over a month in the District when it experienced its first beef-price increase last year. It was a sign of more price increases to come during its inaugural year. About 60 percent of the restaurant’s food sales are from beef.
But the high-end steakhouse has not raised prices. Instead, it offers alternatives such as fish for its daily specials or pairs less expensive items such as scallops with a pricey filet.
“The price point is not as high, but the cost factor is better,” said Bryan Voltaggio, chef at Charlie Palmer.
Three weeks ago, the upscale steakhouse removed from the menu the “porterhouse for two,” a 42-ounce beef dish for $72. The restaurant still sells the entree to regulars who want it, but the price ranges from $79 to $81.
“Customers get it,” Mr. Voltaggio said. “If they really enjoy it, it’s here for them, but we can’t give it away.”
Mr. Voltaggio says he also is starting to see seafood prices rise.
As a result, Charlie Palmer is selling a smaller fish portion and giving more vegetables. For instance, a 6- or 7-ounce fish may be reduced to a 6- or 5.5-ounce serving supplemented with more vegetables.
“Prices are not going down,” he said. “I see people’s portions smaller with more vegetable garnish — which is healthier anyway.”
The company has no plans to cut beef portions, though. Instead, the kitchen is more careful to ensure that nothing is wasted when the beef is being cut. For instance, staffers will grind up leftover meat for burgers or use tenderloin tails in a salad.
“We watch things a lot more closely,” said Mr. Voltaggio, who is negotiating with four meat purveyors for the best price.
M&S Grill has absorbed the price increases and has not passed them on to customers, said Rob Fleming, executive chef at M&S Grill in Reston and former executive chef at M&S Grill in the District.
The price increase “has been significant, but our concern is about finding the best quality,” Mr. Fleming said. “We refuse to sacrifice quality and portion size.”
To offset the cost, the staff tries to balance the menu by promoting less-expensive items. For instance, servers push items such as salads and desserts, which are much less expensive to produce.
“Everything comes out in the end if you can run a mix,” Mr. Fleming said.
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