Pizza shops are forced to eat something they don’t like — higher costs

Pizza shops are forced to eat something they don’t like — higher costs.

STAFF/WIRE REPORTS

Local pizza makers are in shock over soaring flour costs.

“It’s very, very tough,” said Steve Cocca, owner of Cocca’s Pizza, which has four shops in Mahoning County.

Store owners are hoping they can avoid passing along the shock to customers.

“We’re just going to have to work harder,” said Filomena Riccioni, one of the owners of Wedgewood Pizza in Austintown. “Fewer people are going to work harder.”

If flour costs remain high, she will look to cut operating costs instead of raising prices. She said she plans to schedule her employees for fewer hours and rely on family members’ putting in more time.

“Thank God we’re a family business,” she said.

The price for a 50-pound bag went from $17 to $21 last week, but her wholesaler told her it could top $30 this week.

“Big companies can lock in their prices,” Riccioni said. “But we smaller ones are going to be hit. We don’t buy in bulk.”

Cocca said he’s heard that flour could reach $40 a bag this week. Six weeks ago, the price went from $11 to $21.

“It’s hard to keep things afloat when this is happening,” he said.

He’s reluctant to raise prices because he was forced to increase them in January 2007 when the minimum wage was increased and then again in the spring of 2007 because of rising cheese costs.

He doesn’t know how long he can hold off price increases, however. Flour costs used to make up 1 percent to 2 percent of the price of a pizza. Now, they are up to 6 percent to 7 percent.

“Pretty soon, pizza is going to be like lobster — the menu will say, ‘Based on market prices,’” he said.

All across the country, players big and small in the $30 billion pizza industry are feeling the heat as they figure out how to deal with the double-barrel price spikes of the gooey and grainy commodities without sacrificing their quality, competitive edge or customer loyalty.

“Our commodity costs have probably tripled since last year on the flour,” said Wes Pikula, vice president of operations for Buddy’s Pizza, a 63-year-old Detroit-area chain of nine restaurants. “We’re stuck with an uncertain future as well as price increases ... that are unprecedented.”

The price of wheat has surged in the past month because of constraints to global supply and swelling demand from places such as China. But its volatility is as much of a concern as its price.

Spring wheat traded as high as $25 a bushel recently on the Minneapolis Grain Exchange. Then it dropped to $18. Wheat historically trades at $3 to $7 a bushel.

Likewise, the price of cheese has been rising during the past year in part because of lower-than-normal cheese production and higher demand.

According to the U.S. Department of Agriculture, cheese prices are up 35 percent.

Some big pizza chains, such as Pizza Hut and Papa John’s International Inc., last year raised the price of their cheese-only pizzas to the same amount as one-topping pizzas at company-owned stores.

Chris Sternberg, spokesman for Louisville, Ky.-based Papa John’s, said in an e-mail that the chain last fall locked in the purchase of part of the wheat supply needed for 2008.

“Through this strategy, which we have continued in 2008, our restaurants are somewhat insulated from the recent run-up in the cost of wheat during the first half of the year.”

He said the company is controlling inventory and working with suppliers to control costs.

Bob Goldin, executive vice president of Technomic Inc., a food industry consulting firm, described the cost increases as a “disaster scenario,” with no real end in sight and limited ability for most to pass on the bulk of the costs to consumers.

“There are no simple solutions,” he said. “The trend will be to reduce product costs, and some of that may very well affect quality.

Making matters worse, he said, is an already-slowed demand for traditional pizzas.

“It’s hard to imagine, but there may be pizza burnout.”