Restaurants watching tomato prices closely, yet to increase prices

Another problem for restaurants is the availability, owing to the crop being damaged

As tomato rates have soared to record highs, restaurants are keeping tabs on the price movement, as the overall cost has gone up by 5 per cent for some of them.

Restaurants typically sign annual rate contracts with suppliers and buy ingredients at predetermined prices. However, the smaller players suffer as they don’t opt for contracts. The big players are yet to raise prices.
 

Another reason that is also becoming a problem for restaurants is the availability of tomatoes due to the crop being damaged. This has led to the spike in prices.
 

Last week, some outlets of McDonald’s in Delhi had stopped using tomatoes in their menu items, citing low availability.

Restaurants have added that vegetable prices and those of other ingredients are fluctuating and this is not usual for the industry. Last year, restaurants had faced an issue with high edible oil prices.
 

 “Smaller restaurants that don’t have annual rate contracts will be hit more and resort to price increases. But the bigger issue the industry is facing is paucity of tomatoes,” Anurag Katriar, trustee at National Restaurant Association of India, and founder of Indigo Hospitality told Business Standard.
 

He added that if the prices hold up for more than a month, then the supplier would revise them (with those who have inked contracts). And, the industry will have to comply.
 

But he also said that tomatoes may not be the main ingredient for all restaurants. While it is one of the main ingredients for pizzerias and Indian restaurants, it is not needed in big quantities for Chinese and Japanese cuisine.

Another restaurateur, Yash Bhanage, founder of Hunger Inc Hospitality, which runs popular eateries in Mumbai such as The Bombay Canteen, O Pedro and Veronica, said the rise in tomato prices has not affected the company yet. So, it won’t be increasing prices.
 

“We are closely monitoring the supply impact, but my team has not raised red flags yet,” Bhanage said.
 

Andhra Pradesh is the largest tomato producer in the country after Madhya Pradesh. Despite this, some parts of the state, like the Rayalaseema region, saw retail prices skyrocketing to around Rs. 160 per kg last week. There was not much relief for restaurants in the other two major producing states — Karnataka and Tamil Nadu.
 

“We are continuing to maintain the same quality being a reputed food chain. We take tomatoes in bulk, too, in some places. Owing to this higher price, our food cost has increased by at least five per cent. We are unable to charge this increased rate from customers,” said K T Srinivasa Raja, promoter of the well-known Adyar Ananda Bhavan restaurant chain in Tamil Nadu.

According to him, prices have increased also because of higher demand from other states.
 

“We are expecting that in another two to three days, prices will become normal. We purchase directly from farmers, which is why there is some relief for us. There is so much demand; buyers from Gujarat and other states very aggressively source from the Tamil Nadu market,” Raja added.
 

On Sunday, prices of tomatoes in the Chennai retail market were seen at Rs. 110 per kg. According to dealers, this is unlikely to see any relief soon.
 

“In the last one week, prices increased from Rs. 60 per kg to Rs. 110-120 per kg. This is mainly because of the rain and we expect it to normalise only after at least 90 days,” said Habibullah from Tomato Town, a tomato wholesale dealer in Chennai.

Tamil Nadu produced 1.49 million tonnes of tomato in 2021-22, contributing to around 7.34 per cent of the country’s total production.
 

Another executive of a company, which runs multiple restaurant chains, said that the rise in tomato prices will not push them to take price hikes as the quantum to its overall cost remains minuscule.
 

Katriar also said that restaurants witness a rise in commodity costs quite frequently and 

it is part-and-parcel of the business. Last year, when oil prices shot up, many smaller players started to procure ghee at a lower rate and some also resorted to changing their menu. He added that restaurants are also using tomato puree, which has a long shelf life. It is also a much cheaper alternative to tomatoes.