September 29, 2011

Businesses around the world are wondering what the state of the economy will be a year from now. The costs of running a hospitality-related business are a big concern, and the effects that global demand has had on food and beverage prices will have more of a direct impact on budgets going forward. Fortunately, Avendra helps protect customers from volatile market conditions with forecasts, expertise and cost-effective solutions.

Various sources predict that the U.S. economic growth rate will end between 2.5 - 3% for 2011. Looking toward 2012, gross domestic product (GDP) growth is projected to be 3.3 - 3.7% in the U.S., according to the Federal Reserve. Long-term inflation is expected to remain stable.

In other markets - according to the Bank of Canada’s Monetary Policy Report released in July 2011, Canadian real GDP will increase by 2.8% in 2011 and 2.6% in 2012. And according to Scotiabank, Mexican economic growth is projected to be 3.9% for 2011 and 3.5% for 2012.

The U.S. Energy Information Administration (EIA) projects that oil - the West Texas Intermediate (WTI) spot price - will average almost $100 per barrel by the end of 2011, up 19% from 2010. Those prices are projected to maintain in 2012, keeping the cost of importing and exporting of goods elevated.

While the economy and energy prices remain unpredictable, Avendra customers will be protected from most fuel surcharge fees and many of the volitile market conditions. Overall, this reduces the short-term impact of potential increased costs.

In the U.S., food and beverage costs in the ‘food away from home’ category are expected to increase 2 - 3% in 2012, which is slightly down from 2011, according to the USDA. India and China are a driving force in world demand, and their growing populations have permanently altered the global supply chain. For example, world GDP for 2012 is forecast at 4%, while India is forecast at nearly 8% and China nearly 9%. Strong global demand means U.S. exports remain robust, keeping future U.S. food prices high, especially for commodities like beef, pork and poultry.

Considering all of these influencers, it’s important to find ways to keep food and beverage costs down. Items such as beef, veal, pork and fish are projected to increase by up to 7% in 2012, according to the USDA. However, properties that deal with Avendra will be protected from the extremes of surging costs.

Avendra controls costs and formulas for a significant number of items which help protect customers from volatile market conditions. Businesses looking to capitalize on more activity and provide cost-effective products to their customers should consider working with Avendra on their procurement and supply chain strategy.

For more information, Avendra customers can visit www.myavendra.com and download Cost Outlook 2012 Forecast, Avendra's annual cost-forecasting publication. For companies not currently doing business with Avendra, fill out an information request form to learn more about what Avendra can do for you.

Disclaimer: Predicting the future carries a certain amount of risk. While every effort has been made to ensure accuracy, the information presented here is predictive and not intended to be taken as fact. This material is furnished for informational purposes only, is subject to change without notice, and should not be construed as a commitment by Avendra or our suppliers. While Avendra has made every effort to supply complete and accurate information, Avendra assumes no responsibility or liability for errors or inaccuracies that may appear herein.