In the LACA Survey published last month, caterers have told LACA that they are ‘increasingly concerned’ about the future of their school meals service especially in rural areas where transport costs place extra pressure on provision.
LACA’s updated cost of living survey, received a response from 87 caterers, who provide services across more than 11,500 schools and feed 1.1 million pupils every day.
LACA has been running these surveys since the start of the Covid-19 pandemic, with members repeatedly saying that due to rising food costs and difficult supply chains, food shortages and substitutions have become the norm. However, LACA members are now stating there is very little room for manoeuvre.
Howard Allen, Senior Consultant at Litmus Purchasing, warns of the dangers of schools simply accepting high prices from their suppliers, how the ‘rule of thirds’ is key to managing price increases and suggests solutions to help keep costs in check.
With extraordinarily difficult market conditions, the relationship between any education setting and its purchasing service provider or contractor has never been so important.
The education sector – like all others – has seen significant price increases across their catering and facilities provision. However, what’s interesting is a general acceptance that this is ‘just how it is’ – that there isn’t anything that can be done. Yes, market prices will of course have risen: but it shouldn’t be that prices are accepted without negotiation or cost analysis whether with a direct supplier to a self-managed operation or via a contractor who procures goods on behalf of their client.
There is a potential danger, given the current market, that any price rises – no matter how steep – have been accepted because astronomical price rises are almost expected. Which paves the way for agreement of revised prices without an ounce of negotiation.
The degree to which this negotiation is done will depend on the operational set-up.
Most education settings tend to operate in one of three ways. Either they: outsource catering to a third party and review the bottom-line number charged; have their own catering staff in-house but take expertise from a third-party buying organisation; or they go direct to wholesalers.
In any of these three set-ups, price increases will be passed through, often with no formal review around if the increases are fair or not.
Whichever set-up is in place, a ‘rule of thirds’ should be taken when navigating price increases.
For example, take an average 15% rise in food costs – and break it down into thirds.
The first 5% could be solved by menu engineering. So, looking at product swaps, recipe management, utilisation of seasonal produce, less red meat and so on, which will mitigate the overall shopping basket increase.
The second 5% could be tackled through good negotiation. There is always margin for movement, no matter what inflation is doing.
The final 5% – or third – would be the increase that is paid because nothing can be done about it! The rule of thirds doesn’t mean you’re able to keep costs exactly the same, but you know you’ve done your due diligence.
It’s never quite that easy though because what competitors are charging remains a mystery to most and so the buyer has no idea if what they are quoted is in line with market averages.
Which is where we can come in.
Litmus has visibility of the market as a whole – and we can help. Conducting a benchmark equips our clients with market average pricing and enables them (or us) to challenge cost increases.
Or it might be the existing purchasing strategy needs a complete overhaul. Again, something we can guide on. A strategic review will give this insight, along with an options appraisal and then, if the current service provider isn’t the right fit, tender management to find the right partner who is aligned on mutual goals.
For Multi Academy Trusts, aligning the purchasing also brings consistency. Clearly, if all establishments across a group have the same produce, suppliers and menus, it’s far easier to ensure the same high quality of food and beverage provision.
It’s a very challenging market – but at this time, working together with a supply chain and utilising third-party expertise will ensure organisations are running as tight a ship as possible.
Collaboration and negotiation now will be a contributing factor to riding out this negative wave and coming out the other side.
For further information visit us here.