Hamburgers May Be More Expensive in 2020
Analysts says beef prices will continue to increase, and chains like Shake Shack are monitoring the situation closely.
As 2019 wraps up, everyone has been sharing their big predictions for the breakout food and beverage trends of next year. Chefs spoke about things like health, sustainability, and fermentation. On the drinks side, both sherry and spirits got a shout out. But these are the “fun” predictions. Realists realize that every year will have its highs and lows—and if you’re a pessimist interested in the latter, look no further than the most popular fast food meal in America: the hamburger.
Beef prices are expected to rise in the coming year, and those increases could likely be passed along to consumers at fast food chains like Shake Shack and McDonald’s, according to Yahoo Finance. After a period of increases, cattle prices started to peak towards the end of 2014; they came back down over the next couple years, but more recently, they’ve been surging once again. The livestock publication Drovers spoke to multiple analysists who believed prices would be higher in 2020 as did the ag news site The Fence Post.
Meanwhile, Bloomberg cited analysis from the Telsey Advisory Group stating that the price of beef trimmings—which are used by burger chains—are expected to jump as high as 15 percent in 2020. The result is predicted to be some of the “stiffest margin pressure in over five years,” according to Telsey, meaning costs that are “likely unable to be offset by sufficient menu price increases.” The business site explains that both Shake Shack and Chipotle mentioned they were keeping an eye on beef prices heading into the new year.
“That [commodity inflation] puts a real big pressure on margins for a lot of these companies, and in turn, that means they might have to raise prices for the products that they're selling consumers,” Yahoo Finance’s Heidi Chung elaborated. “So this is something that consumers should also be thinking about as we go into 2020.”
Attempting to predict exactly how much and when burger prices may increase is virtually impossible. Fast food pricing is a lot more complex than simply monitoring trends in the beef market. Large chains will often try to absorb fluctuations in costs so they don’t have to jack up what they charge consumers. But as Shake Shack’s President and CFO Tara Comonte said during their November earnings call, with high beef inflation, they “definitely reserve the right to use price should we ever feel the need.” And CEO Randy Garutti later added, “Beef is all of a sudden, quite a bit up. We need to watch that very closely. That will be our number one impact to [cost of goods sold].”
Translation: We’re far from a burger apocalypse, but it definitely doesn’t sound like we’re going to be seeing many cheaper burgers in the near future.