With food businesses continuing to face tight margins and volatile ingredient prices, replacing products with cheaper alternatives may appear to offer a straightforward saving. Ed Wright, Innovation and Growth Director at AVE, argues that strengthening procurement partnerships can help hospitality operators control costs without compromising quality or customer loyalty.
Sourcing good-quality ingredients at an affordable cost is the backbone of all food procurement activity – a task which has become much more challenging given the rate at which prices have spiralled in recent years.
Current Consumer Price Index statistics tell a mixed picture: the figure dipped to 2.8% in the year to May 2026 which, while still above the target of 2%, is well below the 11% peak seen in the autumn of 2022. Whilst the slow-down in price hikes represents a more positive picture, global geopolitical instability continues to have a knock-on effect on everything from fuel costs to supply routes, and availability of ingredients such as coffee, cocoa and fresh produce has declined thanks to smaller yields caused by climate disruption.
This all means the enhancement of procurement processes is essential to ensure cost reductions can be realised where possible – which may involve consideration of alternative strategies, with many considering downgrading ingredients to achieve these vital savings. But here’s why that option should be taken off the table:
The impact of downgrading
The chief reason for downgrading – either sourcing a lower-quality ingredient or swapping for a cheaper alternative – is of course about saving money. Yet when we look at the broader picture, this option can see businesses ultimately losing out if customers vote with their feet. With such low profit margins, particularly in the hospitality sector where Sage states typical profits can be as small as 3%, any impact on consumer loyalty has a profound impact on the long-term future of the company.
And the reality is that people do notice when quality dips, or when their favourite ingredients are replaced, and the digital era has made it even easier for this information to reach a much broader audience in record time. Take the recent online backlash when The Hershey Company replaced chocolate and peanut butter with compound coatings and flavoured crème in their flagship Reese’s products. The grandson of the original creator even got involved, writing an open letter which was reposted across the internet and reported by media outlets worldwide.
They are by no means the first or only company to be critiqued for ingredient swaps: Nutella fans quickly noticed its lighter colour, caused by a small increase in sugar and milk powder proportions, and criticised the Ferrero Group for the changes; McDonald’s attracted controversy when they began using vegetable oil instead of beef tallow when cooking their fries back in the 1990s; and when the recipe for Coca-Cola was changed in 1985, they did a swift about-turn following customer feedback – with cans still bearing the phrase ‘original taste’ some 41 years later.
The alternative options
Some companies may decide that the potential for consumer dissatisfaction can be handled through marketing campaigns and effective communication– but for others, the risk outweighs the potential benefits of the ingredient swap. In this case, there are alternative options to explore which can satisfy consumers and finance teams alike.
The implementation of a more robust procurement strategy will include companies working with both global partners and niche suppliers: the former of which provides stability and availability, while the latter brings agility and innovation to the equation. Procurement teams should also align themselves with GPOs who have influential buying power, opening the door for the kind of rate negotiations which are rarely possible otherwise, especially for smaller companies working in isolation.
This really is a case of working smarter not harder, developing a network of partnerships which can help companies avoid the need for ingredient downgrading. Simultaneously, this optimised supply chain enables them to swerve the type of price increases which can also damage long-term customer loyalty, and the chances of attracting new customers too.
This strategy does not eradicate the type of global challenges that procurement teams are now well versed in dealing with, but it does put them in a much stronger position in terms of buying power and supply chain – helping them navigate through instability and pricing pressures without resorting to downgrading their offering.
In a world where customers are also feeling the price pinch, becoming more discerning about where and how often they dine, swapping ingredients for cheaper options is a risky strategy. But broadening your options, strengthening your procurement position, and continuing to offer the same great quality people associated with your brand can still be achieved, without resorting to downgrading ingredients and risking public critique.
Ed Wright
Ed Wright is AVE's Director of Growth and Innovation, responsible for merging culinary expertise with strategic commercial insight. Ed has more than three decades of experience in the industry - both within the kitchen and the board room. Having worked as an Executive Chef and Development Chef, Ed progressed into management roles, joining AVE in 2023. For more information, visit www.a-v-e.com.
