By Sara Ruberg —
NBC News
School canteens are in crisis.
Some school districts serve more finger food because they can't always afford plastic utensils.
One uses a federal coupon to subsidize the cheese on his pizzas.
Another is torn between cutting staff to make up for food prices.
The reason:
feeding the country's students is not profitable
in this economy.
Food vendors that many of the nation's public school students depend on are charging more and more than administrators can afford, representatives from hundreds of districts and their food buying groups told NBC News.
Its longtime contractors—an array of manufacturers, distributors, and suppliers—are passing on the rising costs of everything from milk to aluminum foil, raising prices at short notice, skipping deliveries, or diverting their supplies. businesses in the primary and secondary education market.
Allie Sullberg for NBC News
As a result, many managers are weighing which costs to cut, while faced with fewer and fewer options to buy increasingly expensive food.
Next week,
hundreds of school nutrition professionals will be heading to Washington, DC
, for the School Nutrition Association, a national advocacy group, to lobby for more help to control cafeteria costs.
Although inflation is coming down,
food prices at elementary and secondary schools rose more than 300% in January from a year earlier
, according to federal data.
This figure reflects the expiration of pandemic-era school aid, but also includes the economic pressures that have pushed up the costs of food, energy, labor and transportation last year, both for businesses and consumers.
Increase in the price of food
Annual Variation in the Price of Meals in US Elementary and Secondary Schools.
Notes: Data not available for all months, including school closures.
Source: Bureau of Labor Statistics Graphic: JoElla Carman / NBC News
Anji Branch, president of the Idaho School Nutrition Association, says that
“substitutions, cancellations, and delays”
represent “the new normal for us,” and she's not the only one.
The flood of "force majeure"
Paula De Lucca, nutrition director for Wake County Public Schools, North Carolina, used to receive a “force majeure” letter from food contractors once a year.
But those notices—warning of price increases above the contractually agreed level due to factors beyond the supplier's control—have already led to increases in 200 of the approximately 700 products ordered by the district's purchasing group for the current school year, according to her.
Force majeure price increases can come from food distributors or manufacturers of any size, passing on higher prices to their own suppliers, from labor or fuel to raw materials.
The North Carolina Procurement Alliance — the statewide consortium representing Wake County and most other North Carolina districts, serving more than a million students — said the recent price hikes include 52 items tendered to the group's distributors and 148 to manufacturers from whom it purchases directly.
“We are very worried about next year and the years to come
,” De Lucca said, adding that the district has no choice but to pay the higher prices.
Since his district is reluctant to make sacrifices in student meals and has recently raised pay for employees, painful personnel decisions are now at hand.
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“We don't want to reduce our quality.
So the only other option, obviously, is the positions that we have
,” she said.
Leann Seelman, a consultant with the North Carolina Procurement Alliance, said her hopes for price relief have been dashed.
“We met with the manufacturers a couple of weeks ago,” he said late last month, “and they say they are still seeing problems in the market.”
Other school nutrition directors are also reporting more frequent price hikes this year, many of them steeper than usual.
According to officials, the increases can range from a few percentage points above an item's contracted price to 150% or more, affecting everything from chicken and yogurt to plastic utensils.
A force majeure letter seen by NBC News warned of
a nearly 300% increase in liquid whole eggs
— used in dishes like omelettes and French toast — last July.
Another letter announced increases of between 12% and 20% for aluminum foil items this fall, including aluminum foil and pans.
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Unlike restaurants and grocery stores, schools have little ability to pass on increased prices to their students.
Many families can no longer afford school lunch.
Families can apply for free or reduced-price meals, but not all meet the income requirements, so districts often pay the price.
In a November survey by the School Nutrition Association, nearly 850 of the 1,200 school systems reported having
meal debt,
with a median of $5,164 per district, up from $3,400 before the pandemic.
While some of the meal debt for the nation's more than 13,000 school districts may be carried over to the following year or written off as an operating expense, most will have to be paid off before the end of this school year, according to administrators and policy experts. .
Many of the food expenses of schools participating in the National School Lunch Program have long been subsidized by rebates from the Department of Agriculture (USDA).
In recent years, extraordinary aid, such as a universal free meal program that expired at the end of last year, and other aid due to the pandemic, have also helped cover expenses temporarily.
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Kathryn Fenner, who tracks the school market for food service consultancy Technomic, says the Department of Agriculture's current reimbursement rates are far behind the needs of schools.
“Food service operators are having a harder time than ever, especially those in public schools,” says Fenner.
“It has never been an easy job, but the pandemic has made it much more difficult
. ”
A Department of Agriculture spokesperson said the agency encourages schools to apply for "community eligibility," meaning that if enough students apply and qualify for free or reduced meals, their entire district can receive free breakfast and lunch.
Reimbursement rates are adjusted annually to reflect the “food away from home” category of the Consumer Price Index, which this January rose 8.2% from a year earlier.
Increasing reimbursement rates beyond CPI adjustments would require Congress to expand the funding powers of the Department of Agriculture, the spokesman said.
A "less strategic" market
The restaurant sector is dominated by a handful of large companies.
Just three—Sysco, Performance Food Group and US Foods—account for nearly 40% of all distributor sales as of 2021, up from about 30% in 2018, according to Technomic.
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Among the 50 largest distributors that supply large quantities of food to institutions, from hospitals and catering groups to universities and public schools, those same three companies accounted for 67% of sales, according to Technomic.
The food industry hasn't grown much in recent years, largely due to the pandemic, but Sysco, Performance and US Foods have increased their collective market share in part through acquisitions, according to Fenner.
For large food service companies,
the public school market is in the background.
Faced with strict regulations on what they can serve, budgets tied to taxpayer funding, and limited scale (even a consortium of dozens of districts lacks the buying power of a massive hospital system), schools are not the most lucrative customers.
According to Datassential, a food and beverage research company, they only account for 4% of operator purchases.
In May 2021, US Foods CEO Pietro Satriano told investors that public schools are among the “segments that are least strategic for us.”
In a February 2022 earnings call, chief financial officer Dirk Locascio said executives "expect to grow below market there" and cited "added complexity" among the reasons why school customers "tend not to be so profitable.
US Foods did not comment on its strategic outlook for the school market.
“We support many school accounts across the United States and take our commitments seriously,” a spokesperson said.
"As with all clients, we can evaluate new and existing relationships based on strategic market needs."
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Sysco did not comment on its school business.
Performance Food Group did not respond to requests for comment.
Many school officials say that there have never been so few caterers who want their business.
Some administrators claim that contractors have stopped serving entire regions.
Others only receive one offer, when before they received several.
A few are getting none at all.
In July 2021, Florida's largest purchasing group, representing more than 600 schools, was alerted that US Foods was going to terminate a contract set to run through 2024 in just 90 days, ending a nearly 20-year relationship.
After seeking new bidders, the Power Buying Group signed an emergency contract with Sysco, with shipping costs 250% higher than what it previously paid, according to Rae Hollenbeck, the group's chief executive.
Federal pandemic aid helped cover those costs, but that funding and the emergency contract expire at the end of this school year.
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“We're chomping at the bit hoping to get a dealer to service our pool,” Hollenbeck said.
A US Foods spokesperson said: "In the event that we decide to exit a relationship with a customer, we honor our contractual obligations and work diligently to ensure a smooth transition for the customer."
Sysco did not respond to requests for comment on the emergency contract.
In Pennsylvania, a buying group representing 60 school districts said it received an offer from US Foods for the current school year with prices 35% higher than its previous contract.
In the past year, the group has received hundreds of price increase notices citing inflation, said Kristan Delle, the director of food services at the Upper Dublin School District and a leader of the buying group.
“In our role as a foodservice distributor, we have been working closely with our customers to help navigate rising food costs by offering cost-appropriate alternatives,” a US Foods spokesperson said, adding: “ We take our contractual obligations very seriously."
Branch, of the Idaho school nutrition group, said she has spent hours looking for non-bid sources or local vendors that may meet USDA requirements.
Several Idaho school systems are moving to six-month bidding cycles because providers can't secure prices for an entire school year, she said.
Many of the items the Branch district agreed to purchase last June are no longer available or prohibitively expensive, she said.
Allie Sullberg for NBC News
The schools also said their
food contractors are becoming less reliable.
A nationwide shortage of truck drivers has contributed to inconsistent delivery times, with some districts saying they now pay staff overtime to wait for food trucks until late at night.
Some deliveries never arrive, according to officials.
These problems have led some schools to sign contracts with local supermarket chains, whose prices tend to be higher.
Lori McCoy, director of food services for the Colonial school district, which is in the same buying group as Delle, says she has been working with Giant Supermarkets to get groceries at its suburban Philadelphia cafeterias after US Foods deliveries they became incoherent.
Although many districts contract with specialty distributors and secondary vendors, it is less common for schools to use non-bid sources for their cafeterias.
McCoy says it's the first time he's had to work with a supplemental source to get food on the go.
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Because many regional supermarkets don't carry some of the USDA-approved items that schools are required to serve, such as certain whole foods, McCoy says she often has to make do with what she can get.
The USDA has relaxed some rules in light of supply chain issues and inflation, but many of those criteria are expected to go back into effect next school year and more guidelines have been proposed.
“I guess I shouldn't say I serve [unapproved ingredients] anyway, but if it comes down to it and not feeding our kids anymore, I mean, we've got to do something,” McCoy said.
“We are doing everything we can to comply with the regulations, but at the moment there are challenges that are beyond our control and that are making it really difficult for us.”
US Foods stated that it works with its customers "to offer them alternative products that meet their immediate needs" in the event of a supply interruption.
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Fill the gap
Some schools have found creative, if often imperfect, solutions.
Lori Danella, director of nutrition for Lee's Summit School District, says her district is one of the few in the Kansas City metropolitan area that hasn't been abandoned by its distributors in recent years.
He had to take chicken wings off the menu after prices tripled earlier this school year, but he's managed to keep serving “Big Daddy's Pizza”.
Its survival is due to the federal Food in Schools program—which districts can use to bulk order USDA-purchased staples for shipment to a processing company—which helps pay for the cheese on top of popular cheesecakes. Schwan's brand.
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It is not only food that is more expensive and difficult to obtain.
The Wake County School District bought silverware because it had trouble getting plastic utensils during the pandemic, De Lucca explained.
Although the shortage has diminished, workers at the understaffed cafeteria sometimes hand-wash “a thousand forks a day” because they don't have a dishwasher, she explained.
According to Technomic's Fenner, some districts have started serving more finger foods to avoid that problem.
In Indianapolis, Adelante Schools decided to start from scratch after experiencing supply chain problems and price hikes.
Chief Operating Officer Jordan Habayeb said he was concerned about narrow and repetitive menus in his cafeterias after USDA-approved affordable options dwindled.
He said Adelante will partner next year with an area nonprofit to source fresh food from local vendors.
The idea, he said, would also likely save money.
Crystal FitzSimons of the Food Research and Action Center, a children's rights group, said broad action would be needed to solve the problem of school canteen costs in the long term. politics and more federal funding.
Increasing USDA reimbursement rates for the upcoming school year and reinstating universal free lunch as a permanent program would help, she said.
Both measures have the support of the SNA.
“I think the school nutrition programs have taken longer than expected to recover,” FitzSimons said, adding that the process is far from over.
“They have not yet recovered from the impact of the pandemic.”