Repricing Your Menu When Ingredient Costs Rise

The email that says prices are going up

The notice comes in on a Wednesday. Effective the first of next month, oat milk goes up 55 cents a half gallon. Two sentences, no drama, and the supplier is not asking.

The reflex is to do nothing, because 55 cents sounds like nothing. The second reflex, a month later when the invoices look heavier than they should, is to raise everything by a quarter. Both are guesses. The first one quietly gives away margin on the drinks that got hit; the second one charges your drip customers for a milk they never ordered.

Neither is necessary, because a price rise on one ingredient is a completely knowable event. It moves each drink by exactly the amount of that ingredient the drink contains, times how often it gets poured. Everything below is that one sentence, worked out. If your menu was never priced off ingredient cost in the first place, start with pricing without the guesswork and come back; this post is about what to do when a price you already set stops holding.

One ingredient does not move every drink equally

Take the 55 cent increase and get it down to the unit you actually pour.

A half gallon is 64 ounces. Going from $2.80 to $3.35 moves the cost per ounce from 4.4 cents to 5.2 cents, a difference of about 0.86 cents an ounce. That tiny number is the entire event. Every drink on your menu just got more expensive by 0.86 cents times the ounces of oat it pours, and by exactly nothing if it pours none.

Notice what the table does not care about: menu price. Your $7.25 matcha and your $5.50 cortado did not move in proportion to what you charge for them. They moved in proportion to what they pour. That is why a blanket increase is always wrong in two directions at once, and it is why the ingredient number has to come from real recipes rather than from a percentage. Recipe costing is the input to this whole exercise; without it you are pricing off a feeling with a decimal point on it.

Rank the menu by exposure, not by price

Per-drink cents are not a decision. Multiply by volume and they become one.

Take last month's sales, count each drink that pours the ingredient, including the swaps, and multiply by the per-drink increase. Illustrative numbers, your own will differ:

Now the decision is sized. About $65 a week, roughly $3,400 a year, and three quarters of it sits in the two latte lines alone. The cortado is a rounding error and repricing it would annoy people for two dollars. This is the ranking that matters, and it almost never matches the ranking you would guess, for the same reason your best seller is not automatically your best earner: volume and per-unit cost pull in different directions and only the product of the two pays rent.

Three ways to absorb it, and when each one is right

1. Charge for the swap. If the exposure concentrates in one modifier, price the modifier rather than the drink. A 50 cent alt milk charge covers a 10 cent cost increase five times over, so if you already charge it, you may be done: the increase is absorbed and no menu price moves. If you do not charge it, understand what you are choosing. Free oat on 645 drinks a week, at roughly 60 cents of oat per drink, is about $400 a week you have decided to spend on the customer experience. That can be the right call. Make it a call rather than an accident.

2. Reprice the two drinks that carry it. Raise the iced oat latte and the hot oat latte by a quarter each and you have covered the entire increase with room over, while every other item on the board stays exactly where it was. Customers notice a board where everything changed. They rarely notice two items moving 25 cents.

Be honest with yourself about the overshoot. A 10 cent cost increase covered by a 25 cent price increase is a 15 cent margin expansion, not a defensive move. That may be the right thing to do, especially if the drink was underpriced before the notice arrived. Just do not tell yourself the supplier made you do it.

3. Change the recipe, not the price. Sometimes the honest answer is a 12 ounce cup instead of a 16, or a pour line on the pitcher so the drink actually uses the ounces the recipe says. Tightening a pour that was drifting is the only one of the three that gives you back margin without touching what the customer pays.

What all three have in common: they follow from the exposure table. Pick the drinks that carry the cost and leave the rest of the menu alone.

Time the change and watch what happens

Move on the drinks with real exposure within a week or two of the increase landing, not at the next quarterly review. Every week you wait is a week at the old price and the new cost, and you can now say exactly what that week costs you.

Then check whether the change did what you expected. Compare the same weekday before and after, per drink: units sold, and units times the new price. If the iced oat latte holds 310 units at 25 cents more, the increase is covered and then some. If it drops to 240, the drink was sitting closer to its ceiling than you thought, and the right correction is a smaller bump, or the modifier charge instead. Reading the change per drink, rather than in a lump at the end of the month, is exactly what per-transaction margin data is for.

One more pass, three months out: recompute the affected drinks against current supplier prices and confirm the number held. Ingredient costs do not move once and stop, and a menu that gets repriced only when a supplier sends an email is a menu drifting between emails. That drift is the ordinary reason a food cost number comes out higher than it should, and it is entirely findable.

Start with the ingredient that moved most recently. Cost per ounce, ounces per drink, drinks per week, and you will know within ten minutes which two items on your board need a new number and which twenty can be left alone.