We’ve heard this story so often it must be true.
A bottle of ketchup is made by a food manufacturer. The manufacturer attaches a UPC to the bottle, puts the bottle in a box, and ships it out the door. If the box is destined for grocery, nothing changes. If it’s headed to restaurants, all useful information is stripped off and the distributor attaches their own identifying information. Through this obfuscation, the restaurant gets screwed.
A little backstory is needed to fully appreciate what’s happening here.
In the more civilized world of grocery, universal product codes (UPCs) have been standardized so the industry can track product all the way from production through purchase. A non-profit standardization body named GS1 first standardized the barcode (UPC) in 1974: that’s 44 years ago.
It doesn’t take a genius to figure out why the UPC is important: the UPC creates data specific to an item that can then be used for any number of analyses. Marketing analyses, distribution analyses, the list goes on and on.
The restaurant industry doesn’t operate on UPCs. A common excuse is that the restaurant itself a manufacturing facility, whereby it gobbles raw ingredients in the back door and outputs its own products out the front.
Before you begin to believe there’s logic to this, think about this:
Restaurants have demonstrably proven themselves behind every other retailing category by literal decades. There is no excuse not to have better, consistent, and standardized data to run your business. None.
Yet once again, the restaurant industry’s ignorance is causing them more pain.
The ramifications of this unsophistication were brought to light by Plate IQ in a great blog post of theirs. Using data, Plate IQ shows precisely why the distributors are putting their own identifying marks on products and why restaurants should care:
Vendors frequently charge restaurants different prices for the exact same ingredients and supplies.
We wanted to understand just how common this form of price variation is, so we combined invoice data from thousands of restaurants to create a dataset of millions of individual items purchased over a 90-day period.
We analyzed instances where the same supplier sold the same item to different restaurants for different prices on the same day. There are several reasons that might explain some of this variance — vendors often change their pricing for restaurants based on overall purchase volume, restaurant location, or for a variety of contractual reasons.
Nonetheless, we saw daily price variation for nearly two thirds of items in our dataset. While vendor prices typically varied by less than 25% for an individual item, these price discrepancies can add up quickly.
Even when adjusting the data to account for changes in daily pricing, only 36% of items had the same price. The remaining 64% of items had different prices to difference restaurants on the same day!
When ascertaining how much prices changed, the answer was more than 10% two thirds of the time.
If you’re looking to understand where suppliers might be gouging restaurants the most, these are the categories Plate IQ found with the largest daily pricing variance.
There’s a further breakdown in Plate IQ’s blog post, but the takeaway should be obvious after looking at this data.
Restaurants continue to suffer from their strong aversion to running their restaurant like, well, a business. Tools like Plate IQ are making this easier with more transparent data, but it will be a good while before it’s widespread enough to become common practice.
The silver lining for the restaurant industry continues to be that things can’t more antiquated, despite their best efforts to stifle progress.
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