Factuals

Reason for Higher Prices of Pizza, Blame Cheese

Reason-for-Higher-Prices-of-Pizza-Blame-Cheese
Reason for Higher Prices of Pizza, Blame Cheese

Did you ever wonder that why does the pizza parlors charge extra for the stuffed crust? The reason is cheese, an essential ingredient that is a part of it and adds to the cost of pizza. It accounts for #0 to $0 percent of the cost and that is why the prices for pizza are rising day by day.

Looking into further details, the mozzarella cheese has risen to 16 percent right from the start December, while in case of cheddar cheese has gone up with about 25 percent, as per the data of Bloomberg.

The unfavorable weather conditions in New Zealand and Europe, while the high feed costs affect the world wide milk production in 2013, as per the reports of agriculture news site Capitalpress.com.

In addition to this, the American dairies sent more cheese overseas that makes up the cheese export of the year 2013, up to 17 percent over 2012 and leaving behind little for the cheese lovers. Quite a considerable share of cheese is sent to China, South Korea and Mexico. However, the consumption rate is anticipated to rise with the lowest inventory over decades.

It is believed that pizza chains will not be affected much because the cost of other items like the wheat and meat has decreased, although the pig virus is one of the set-backs.

The chief financial officer of Domino’s (DPZ), Michael Lawton, was found to quote in one of the investor event: “In the last couple of days, I’ve had a lot of questions about cheese because it spiked up, and cheese is the biggest commodity. Even taking that into account when you look at the whole basket, and you look at the projections on cheese for the year, we are still projecting that we would be down in the range of 0 percent to 2 percent.”

As the price of commodities do not directly affect the overall retail price of pizza, they can drop a bit. The franchises that offer ingredients from the chain corporations may come up with discount offers.  Lawton said “In the commissary system, we have a relatively fixed penny profit per pound”. He further added. “We adjust prices up or down as commodities move up or down. This obviously does impact us in our corporate stores. Longer term, commodities like any cost is an issue, because we want our franchises to enjoy some good financial returns.”

About the author

Paul Morris

Paul Morris is an entrepreneur, consultant and author. He is an advisor at Xpert Automation, a tech-based business incubator focused on scalable startups, and founder of ContentFy.

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