up to the production level of 2022. Climate change affects restau- rants in numerous ways. But the most common, and subtle, is through the supply chain. Weather events, droughts and fires, made worse in a warming planet, ravage cropland and drive up the cost of what’s available. A global economy means that even a weather event on one side of the world can increase costs on the oth- er side. A drought in Mexico is making it hard for Huy Fong Foods to source enough peppers for its Sriracha hot chili sauce. A wet year in France has spread a fungus that is endan- gering grapes used for wine. A pair of hurricanes in the Southeast U.S. has hammered the orange crop. Hot ocean temperatures are making it tougher to source seafood as fish search out cooler temperatures. But over the long term, global temperature changes will make nu- merous crops less productive. For every 1-degree Celsius in- crease in global average tempera- tures, for instance, production of wheat decreases 6%, rice 3.2% and corn 7.4% by 2027, according to a National Academy of Sciences study. “You cannot find a crop or a spe- cies that is not impacted by climate change,” said Greys Sošić, a profes- sor of data sciences and operations and the E. Morgan Stanley chair in business administration at the Mar- shall School of Business at the Uni- versity of Southern California. By 2027—just three years from now—at least one estimate suggests restaurant industry revenue could start declining as rising costs for food leads to restaurant closures, particularly among independents, according to a report from the James Beard Foundation and the Global Food Institute at George Washing- ton University. And yet while the supply chain and food costs are a casualty of glob- al warming, they are also a cause of it, one that is generating a lot of ac- tion among restaurant chains and their suppliers.
A FRAGILE SUPPLY CHAIN To understand the potential impact of some of these issues on restaurant costs, just look at a pair of different events over the past decade. In the winter of 2011-2012, below-normal snowfall left much of the coun- try without the spring snowmelt, according to the National Weather Service. What snowmelt there was quickly evaporated in March with above-average temperatures, creating dry conditions that would worsen by the summer. By July, much of the Midwest was entrenched in the worst drought since the 1950s. The drought hammered the country’s corn crop. Farmers had their lowest crop yield in nearly two decades, and the lack of supply drove prices skyward. At one point, the price for a bushel of corn that year hit a record $8.31—well over double what it typically is. The price of corn has a substantial impact on food prices, because it’s used as feed for animals, particularly cattle. Beef prices took off the next year, hurting profits for chains like Ruth’s Chris and other brands, and remained elevated for more than two years. But the drought affected many other crops, like wheat, and drove up those costs, too. Drought is certainly not uncommon, hitting the U.S. at least once per de- cade. And much of the food industry has adapted to it. Yet climate change increases the chance for drought worldwide. Much of the U.S. is currently in a drought. The global economy means the impact of these weather events is felt worldwide. A persistent drought in Spain has ravaged the olive crop, produc- ing a shortage of olive oil and driving up prices worldwide. Olive Ventura, a retailer out of Ventura, California, recently raised prices for the olive oil it sells while explaining the prices to its customers on its website. But the fragility of the supply chain was also demonstrated in an event that, in many respects, had nothing to do with climate change. In 2020, a global pandemic shut down much of the worldwide economy as governments took steps to keep people home to stop the spread of COVID-19. As the economy reopened in late 2020 and 2021, production ramped up far more quickly than did people’s willingness to work. The lack of labor made it difficult for many industries, including food pro- duction businesses, to meet demands for their goods. And it drove up global inflation to levels unseen since the oil shocks of the 1970s. The impact of that inflationary period is still being felt, as voters angry
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JANUARY 2025 RESTAURANT BUSINESS
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