Vol. IV, No. 8, August 2004

Cheese Price Increases Impact Profitability

Low-carb diets are having an impact on the price of cheese, a major ingredient in pizzas. For pizza restaurants, cheese is the single largest ingredient expense.

Due to a soaring demand and resultant higher prices, many farmers took advantage of high beef prices and slaughtered their cows. As a result, there are 150,000 fewer dairy cows today than in 2003. In addition, the mad cow disease problem last year closed the border to the import of Canadian dairy cows. And the cows that remain are not producing as much milk, because of factory problems resulting in a shortage of Posilac, a milk-production-stimulating-hormone made by Monsanto. Posilac increases milk output in dairy cows by 10%.

So fewer cows and less milk from the remaining cows adds up to less milk to make cheese. Demand is greater than supply, so prices increase. Many firms report an 11% price increase in cheese just during the past few months. Publicly traded pizza companies are sounding the alarm to investors. Chuck E. Cheese's says its 36% higher cheese costs will erase $6 million from profits this year.

So the big issue is no longer, "Who moved my cheese?" but rather, "Who priced my cheese?"

Vol. IV, No. 8, August 2004

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Vol. IV, No. 8, August 2004

Cheese Price Increases Impact Profitability

Vol. IV, No. 8, August 2004

LOCATION-BASED LEISURE & ENTERTAINMENT