Electricity wholesale prices are a key building block of electricity retail prices. The pain many food businesses are feeling today has been a long time coming.
From 2003 to 2013, there was an 80% increase in household electricity cost which, amongst other reasons, has been a major contributor to the stay at home entertainment revolution. Families everywhere now look to redirect limited disposable income away from entertainment spend and toward the staples of life, energy and mortgages. They do this mainly by eating in. Working harder and longer as most families are doing to meet this growing cost, has resulted in being time poor. Time scarcity is driving the sharp growth in home delivery services. The convenience industries from home care, cleaning, food delivery and more have been the beneficiary of the opportunity rising energy cost has created.
During the same period, business electricity and gas went up 30-50% adding to marginal cost in production of the consumed product. Add to this the many other costs, staff and rent being the highest and margins are being squeezed. A perfect storm fuelled by rising energy costs. Household disposable income is being redirected to higher energy costs reducing non home based entertainment and the same rises in business are squeezing profitability as prices are under constant pressure to meet demand for leaner pricing to coax families back out.
Many food businesses are starting to feel the impact of the energy paradox and are making smart decisions to survive and prosper. In the area of kitchen equipment, energy efficient equipment has become more vital. Saving on energy consumption by updating and upgrading regularly protects margins, which over time, underpins profitability. This is because like customers who are redirecting disposable income toward staples - mortgages and energy, businesses too are starting to wake up and redirect cash toward business staples, marketing, rent and staffing. Operating leases like that offered by Silver Chef facilitate this. Cash is not spent purchasing equipment only to find months later energy efficient features have been added to the newer model.
The energy paradox is that rising costs for families is keeping them home when the same issue for businesses is reducing prices in a bid to attract them back.