* Beef prices up about 7 percent so far this year
* Long-term price contracts not favorable for eateries
By Lisa Baertlein
Feb 1 It is getting harder for restaurant chains
to lock in long-term prices for hamburger and other beef cuts as
the impact of last summer's historic drought sends prices
Such purchasing contracts help companies predict their food
costs over time, and if done well, can save them significant
money in times of rising prices.
Chili's Grill & Bar parent Brinker International Inc
was one of the first large operators to signal the trend.
"We can't really contract for ground beef anymore ... We can
just lock in supply but not price," Guy Constant, Brinker's said
on a conference call with analysts last week.
Overall beef prices are up roughly 7 percent so far this
year, and hamburger is up as much as 10 percent, said Adam
Werner, co-lead of consulting firm AlixPartners' restaurant and
food service practice.
The worst drought in more than 50 years in the U.S. Midwest
has pushed up prices for feed corn and led to the smallest
cattle supply in more than 60 years.
That supply squeeze also comes at a time when Tyson Foods
Inc, the largest U.S. meat supplier, already was cutting
back on annual fixed-price agreements.
On Friday Tyson reported quarterly profit that topped Wall
Street's view, after strong beef and chicken prices helped
offset higher feed costs.
The average price per pound for beef sold during the
quarter, ended Dec. 29, was up 11.7 percent from a year earlier,
while chicken was up 8.2 percent, Tyson said.
Restaurants that want to lock in long-term prices for
hamburger and other beef products, said John Davie, chief
executive of Consolidated Concepts, a firm that helps
restaurants negotiate purchases.
"We can get them, they're just not very good," Davie said,
referring to pricing terms.
McDonald's Corp, the world's largest restaurant
chain by revenue, declined to comment on its beef supply and
pricing saying it such information is "confidential and
Wendy's Co uses only fresh beef and says it is
business as usual at the fast-food hamburger chain.
"Wendy's is still able to lock in prices for its fresh
hamburger on a quarterly basis," spokesman Bob Bertini said.