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Good news & bad news on food costs

Wholesale food costs will ease significantly for restaurants this year, but operators will still feel a pinch on margins because of customers’ resistance to pass-along increases in menu prices, according to the National Restaurant Association.

In releasing its economic forecast for 2012, the association projected this morning that wholesale food inflation would ebb to 4 percent during 2012, a dramatic slowdown from the 8-percent clocked in 2011. The pressure on food costs last year was the most intense in three decades, according to Hudson Riehle, senior vice president of the association’s Research & Knowledge Group.

But the association is forecasting that menu prices will rise by 2.7% in 2012. That’s an uptick from last year’s 2.4% gait, but still below the expected impact on food costs, Riehle noted.

“Consumers have been sensitive to menu price inflation. Operators are aware of that and have been very deliberative and conscious about raising menu prices,” Riehle said during the webcast.

Instead of hiking prices, the industry may be more selective about what it cooks and serves, he suggested. “You do see ample opportunities for operators to re-examine and adjust their menu mix not only to tap into growing food and beverage trends, but also to tie into some of the commodity price dynamics,” he explained.

He noted that restaurant prices will likely rise more moderately than supermarket charges, which are currently climbing at a 5-percent gait.

Overall, the association expects 2012 to be a better year than 2011, but still abounding in challenges. “Fundamentals have improved, and will continue to improve,” said Riehle.

The industry will split a $21-billion increase in sales, too $632 billion, a 3.5% rise, Riehle forecast. With price increases factored out, the projection translates into “real” growth of .8%, a rise still below the typical growth rate prior to the Great Recession.

Quick-service places will fare better as a group than full-service places, with sales increases of 3.1 and 2.9%, respectively.