As cost of food soars, restaurants get creative

updated 5:06 p.m. ET May 7, 2008

NEW YORK - Struggling with soaring food costs and cash-strapped customers, restaurants across the country are swapping expensive ingredients for cheaper fare and adding new dishes that won't break their bottom line.

Call it a menu makeover: Steakhouses are adding buffalo meat alongside filet mignon, pizza joints are trying new cheese products and seafood spots are replacing pricier entrees with humbler dishes like catfish.

The changes come as record oil prices and surging global demand for staples like rice, fish, poultry and wheat have pushed wholesale food prices up almost 8 percent in the last year, the biggest hike in three decades, according to the National Restaurant Association.

Food commodities prices have mostly come down from record highs reached earlier this year, but wholesale flour prices have still doubled in the last year, while egg prices have shot up 70 percent and cheese 25 percent.

"This is definitely an unprecedented period of wholesale food inflation. Operators must focus on cost, and one way is using different ingredients," said Hudson Riehle, senior vice president of research at the 380,000-member National Restaurant Association.

The organization recently surveyed restaurant operators and found surging food costs ranked as their No. 2 concern after the economy. A year ago, labor was their second biggest worry.

At Ben Benson's Steakhouse in midtown Manhattan, wholesale costs of prime beef have shot up 50 percent in the last year, forcing the 36-year-old establishment to raise the price of its signature 18-ounce sirloin steak from $40 to $46.

"The cost of beef is staggering," said owner Ben Benson, who has added new menu items like buffalo, boar and elk to help offset the increases. "They sell very well. It's not a big percentage but they cost us a little bit less and we sell it for almost the same, so it hedges a little bit."

Bigger chains are seeing benefits of swapping ingredients, too.

Mark Lennihan / AP "The cost of beef is staggering," says steakhouse owner Ben Benson, who has added new menu items like the buffalo rib steak in front of him, as well as boar and elk to help offset the increases.

Chuck E. Cheese restaurants recently began using a "reformulated" pizza cheese at its 490 locations, helping the company cut costs and turn in positive first-quarter earnings. Richard Frank, CEO of parent company CEC Entertainment Inc., said the high-moisture mozzarella blend gives customers a "cheesier product" that spreads better and allows the chain to use less cheese on some pizzas.

"It's not a product we targeted because of cost ... but it has helped us offset some of the cost pressure from cheese," Frank said, adding that customers haven't voiced any complaints about the change.

"We thought it had an enhanced taste," Frank said. "When you start to change your food products, you have to make darn sure what you're doing makes sense for your guests."

Sysco Corp., the largest food distributor in North America, is helping customers cope with high food prices, for example, by suggesting less expensive meat cuts, butter blends and other cost-saving substitutions.

"You can go from a filet mignon to a cut of meat that when prepared properly tastes just as good or better but has a smaller price point," Sysco spokesman Mark Palmer said.

Industry professionals insist they're not sacrificing quality for cost when they substitute ingredients or menu items.

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