Bird flu fallout: Waffle House ushers in the era of the egg surcharge
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Restaurants are starting to crack under the weight of the nation's egg crisis.
Why it matters: A devastating outbreak of the bird flu has ravaged the nation's supply of eggs, leading to egg shortages and increased prices at grocery stores.
- The bird flu has affected at least 22.8 million birds in the last 30 days, according to USDA data.
Driving the news: Waffle House said Tuesday it's adding a temporary surcharge of 50 cents per egg as the crisis escalates.
- While several major restaurant chains are not commenting on their egg plans in response to Axios requests, industry experts don't think Waffle House will be the last.
- Smaller, more local chains and individual restaurants have already added surcharges for eggs, said Amanda Oren, a vice president at supply-chain platform RELEX Solutions.
- "Waffle House is the only major chain I've heard of so far that is adding a surcharge," Karyn Rispoli, Expana's managing editor for eggs in the Americas, tells Axios. "But I wouldn't be surprised to see others follow suit."
Threat level: Part of the problem is that restaurants have few options to mitigate the crisis.
- Restaurants typically aren't able to lock in egg prices in the same way that airlines hedge fuel costs, International Foodservice Manufacturers Association CEO Phil Kafarakis tells Axios.
- Some restaurants will respond by promoting other items to "manage the demand" for eggs, Kafarakis says.
- "There's no quick fix," says Matt Sutton-Vermeulen, a supply chain expert on eggs, milk and meat for management consultancy Kearney. "That's the harsh reality."
State of play: Egg prices keep breaking new records and no end is in sight for the increases.
- Midwest large eggs will be at $7.79 per dozen after today's market, Rispoli says.
- "I'm also hearing from sources that food manufacturers are evaluating ways to work eggs out of their formulations because these high prices are just not sustainable," she tells Axios.
- But part of the challenge is that eggs aren't just sold individually — they're a crucial ingredient in many dishes, raising the prospect of broader food price hikes, "so we have an inelasticitiy in that commodity," Sutton-Vermeulen says.
Zoom out: For restaurants, pricing decisions are often left to local franchisees.
- IHOP told Axios that franchises "ultimately manage pricing per restaurant" and said its "House Faves menu remains available Monday through Friday for just $6, $7 in some locations."
What we're watching: How low the nation's flock can go.
- Today it's estimated at about 305 million, but "a good rule of thumb is you need a hen per U.S. citizen," Kearney's Sutton-Vermeulen says — and the U.S. population is about 340 million.
