Many of our customers often ask what drives pricing changes in common non-foods foodservice items such as products made of plastics, bio plastics, wood, aluminum, paper, etc. These products are commonly found in every imaginable foodservice establishment across the United States. From plates and to-go food containers to foil and chopsticks, these are vital products to every restaurant.
Quite simply, there is no single reason for price fluctuations. Manufacturers are often reluctant to pass along price increases and are constantly working to find other efficiencies and ways to absorb and deflect the changes in raw material and other costs. However, we see these increases with changing regularity due to market conditions. We all source the products in our lives from an interconnected global supply chain that touches almost every item found in the typical American home and business. In this global economy, it’s fundamentally an issue of supply and demand. Let’s explore some of the factors that drive industry price changes.
Starting in 2018, we saw the United States government levy tariffs against countries around the world impacting the foodservice industry. While this effects a variety of products, the plastics industry (with many products imported from Asia) is particularly hard hit. As a result, we are seeing a reaction by global markets adjusting to increased costs (and decreased demand) for products manufactured in China and other countries. This also has an impact on domestically produced product pricing as fewer products are imported and available domestic inventories shrink.
Federal regulations designed to increase traffic safety on our nation’s highways has led to a truck driver shortage. Drivers legally prohibited from working an excessive number of hours and have more stringent rules regarding mandatory rest time. While this is great for highway safety, it has served as the catalyst for increased transportation costs as fewer available drivers are able to command greater compensation per load hauled. This is impacting every industry in the USA that is dependent on shipping products by truck.
Fuel costs are the other component behind transportation costs. As fuel prices rise, so do the costs associated with products shipped. Global oil prices are often the source of transportation related foodservice product price increases but fuel taxes, such as those passed in California, also play a role.
When we talk about oil, we must also talk about resin prices as plastic resins are a derivative of crude oil. Resin is the most common commodity found in almost every plastic product produced for our industry. From plastic bags to plastic cutlery to every possible disposable food container, resins are a core component for non-foods items. Resin price indexes along with oil price indexes offer a window into the dynamics shaping downstream product pricing of items created using plastics.
Supply chain disruptions
Fires, hurricanes, typhoons, earthquakes, labor strikes, transportation disruptions, political unrest and more, either in the U.S. or abroad, can have a dramatic impact on product pricing. Sometimes, the price impacts are shorter. Others can have a lasting and more profound reverberation.
So when you are wondering what is causing the prices of foodservice disposables and other plastics to increase, the answer is often found in the supply and demand dynamics of global commodity markets, oil and transportation.