Smaller food cos. get set for a high-priced holiday season

NEW YORK -- Holiday celebrants in Hilo, Hawaii, might notice something different about the traditional Yule Log cake from the Short 'N Sweet bakery this year.

Maria Short typically makes her popular $35 buche de Noel with two logs combined to look like a branch. This year, thanks to soaring prices for eggs and butter and other items, she's downsizing to one straight Yule log.

"It's the same price, but smaller," she said. "That cuts down on size and labor."

Higher prices are hitting everyone this holiday, but food vendors are seeing some of the biggest increases. Small businesses that count on food-centric holidays like Thanksgiving and Christmas are bracing for a difficult season.

At the wholesale level, egg prices are more than triple what they were a year ago, milk prices are up 34% and butter is up 70%, according to data from the U.S. Department of Agriculture. Businesses are also paying more for everything from packages to labor.

Eric Ludy, right, and Gene Graf, co-founders of Cheese Brothers, an online purveyor of Wisconsin cheese, pose at their business July 1 in Barron, Wisconsin.Jesse Hamble via AP

Many owners are raising prices to offset the higher costs. But raising prices too much risks driving away the crucial holiday shopper. So, businesses are adapting: adjusting the way they make products, changing gift basket components and adding free gifts instead of giving discounts, among other steps.

Maria Short says that even for Hawaii, where the cost of living is among the highest of any U.S. state, the price increases are "drastic."

For example, she says, the Short N Sweet Bakery is paying $123 for a case of eggs that cost $42 in October last year. A case of butter that was $91 in October ago; it's $138 this year.

Among the ways Short is cutting costs, she'll use a generic box decorated with stickers instead of using a customized box for her desserts. And she ordered a cookie printer rather than having bakers hand-pipe frosting, to save on labor costs.

Sarah Pounders, who co-owns Nashville-based Made in TN, a retailer of locally made food and gifts, says the local vendors who make the items she sells are facing higher prices. The cost of butter needed to make cookies is five times the price from a year ago and cardboard packaging is double.

Kevin Smith, the owner of Beast and Cleaver, a butcher shop, poses in the store June 13 in Seattle.Amber Fouts via AP

Made in TN has raised some prices and is selling other items for less profit. Customers are already paying more for things like gas, clothing and cars, as well as services like eating out and travel, so they're not as quick to spend as they might have been in prior years. They're noticing the price increases, she said.

"If bread is up 50 cents you will still buy bread," Pounders said. "But if it's an impulse buy or luxury specialty item -- if chocolate-covered cookies are up $1 -- you might think twice."

Price increases aren't an option for her popular gift basket business. Corporations often have a $50 cap and events at hotels like weddings can have a $20 sweet spot. So, Pounders has made adjustments. In some cases, she has replaced a $20 bag of coffee, which is up $3, with less expensive hot chocolate. Or she puts one less chocolate bar in the basket.

She's also buying more items that could sell throughout the year and less seasonal inventory like peppermint bark and hot chocolate on a stick.

"Every year is a guess, and the economy makes it even more volatile," she said.

Eric Ludy, co-founder of Cheese Brothers, an online purveyor of Wisconsin cheese and gift baskets, faces a tricky task this holiday season as he tries to offset higher costs for packaging, labor -- and cheese. Half of his business comes in the weeks between Black Friday and Christmas.

Cheese Brothers has nominally raised prices for their cheese - a block of cheddar will cost customers $7.50 instead of $7, for example. Ludy says he'll also rely less on discounts this year and more on gifts and other giveaways.

A bit of a gamble that Ludy is taking is upping the spending limit for free shipping to $70 from $59.

"People buy enough to get free shipping, it's a huge motivator," he said. He hopes raising the shipping price could push the average order up to $70. But it could also stop people from clicking the "Buy" button.

"We might start to see people push back and not buy as much," he said. "It's a delicate balance."

Americans eat an estimated 40 million turkeys during the holidays, according to industry group The National Turkey Federation. But turkey purveyors are facing a double whammy this Thanksgiving: higher prices plus an avian flu epidemic that is shaping up to be one of the worst in history.

Kevin Smith, owner of Beast and Cleaver, a butcher shop in Seattle, Washington, gets his turkeys from small, local farms. He says he's paying $6 a pound for turkey this year, up from $3.80 to $4.20 last year. In addition, he only plans to sell 150 turkeys this year, down from 250 last year, due to shortages caused by the avian flu.

Still, Smith doesn't plan to charge more for turkey than he did last year: $9 a pound. He says he has a "solid base of customers" willing to pay for more local, sustainable turkeys, but there's a limit.

"We don't want people to have to pay $12 a pound for turkey," he said.

He's raising the price of other items, like ground sausage and pates, to offset the higher costs of poultry. And while the rush of panic-buying during the pandemic has subsided, he's still expecting a good holiday season.

"We're still very busy," he said. "It's just a more stable busy."