Schools cafeterias are in crisis
Because they don’t have the funds to buy disposable utensils, some school districts offer finger food. One school district is subsidizing the cheese used in its pizzas with a federal voucher. Another is debating whether to reduce staff to pay its grocery bill.
This is because U.S. schoolchildren aren’t paying in this economy.
Representatives from hundreds of schools across the country and their food-buying organizations told NBC News that food providers that many public school students rely upon for meals are charging administrators more than they can afford. They are transferring higher costs to their long-term contractors, a variety of distributors, manufacturers and suppliers, who have been providing food for the nation’s public schools since 1999. This includes everything from milk to aluminum foil.
Many administrators are now weighing the options for cutting costs as they have fewer choices to purchase ever more expensive food. As a national advocacy group, the School Nutrition Association will lobby for more control over cafeteria costs, hundreds of school nutrition professionals will be heading to Washington, D.C. next week.
Federal data shows that inflation is slowing. However, food prices at primary schools and secondary schools rose more than 300% in January compared to the previous year. This figure is due to the expiration of pandemic-era assistance to schools . However, it also includes economic pressures that have driven up food and energy costs for consumers and businesses alike over the past year.
Anji Branch, Idaho’s School Nutrition Association president, stated that substitutions, cancellations and delays are “the new normal” for her, and she’s not the only one.
Flood caused by force majeure
Paula De Lucca was the Wake County Public Schools’ nutrition director. She used to get a letter from food contractors stating that they were unable to provide adequate nutrition.
However, those notices, which warn of price increases above what was contractually agreed due to external factors, have already indicated that there will be an increase in 200 of the 700 products the district’s purchasing group ordered for the current schoolyear. Food distributors and manufacturers of all sizes can cause price increases that are force majeure. They may pass on higher costs to their suppliers for everything, from fuel or labor, to raw materials.
We do not want to lower our quality. Positions are the only alternative.
Paula De Lucca is the nutrition director for Wake County (N.C.) Public Schools
North Carolina Procurement Alliance, the state-run consortium representing Wake County and other North Carolina districts that cover more than 1,000,000 students, said that the price increases include 52 bid items from distributors and 148 directly from manufacturers.
De Lucca stated that “we’re very serious about next year” and added that the district cannot afford to pay higher prices. The district has been reluctant to sacrifice students’ meals and recently increased the salaries of employees, so difficult staffing decisions are being made.
“We don’t want to lower our quality. She stated that there is no other choice than to keep our quality high.
Leann Seelman is a consultant with the NCPA. She said that her hopes for price relief are now dim.
She said that she met with manufacturers last month and they still see issues in the market.
School nutrition directors also reported more frequent price increases this year, some of which were steeper than normal. Officials stated that the price increases could be as high as 15% or more above the contracted price of an item, which can affect everything from plasticware to yogurt to chicken.
NBC News received a force majeure warning letter last July that warned of a 300% rise in the liquid whole eggs used in French toast and omelets. A second letter stated that foil-based products, such as aluminum wrap and serving dishes, would see increases of between 12 and 20% this fall.
Schools are not able to pass on higher prices to their customers like restaurants and grocers. Many families can’t afford school lunch. Although households can apply for reduced-price or free meals, not everyone meets the strict income guidelines. Districts often end up paying the bill.
The School Nutrition Association conducted a November survey and found that nearly 850 school systems had meal debt. This was an increase of $3,400 from pre-pandemic. Administrators and policy experts indicated that while some of the meal debt in the nation’s 13,000+ school districts could be carried over to the next year or written off for operating expenses, most of it must be paid off by the end this school year.
The U.S. Agriculture Department has long subsidized many food expenses of schools that participate in the National School Lunch Program. In recent years, additional lifelines such as the universal free meal program which expired at the end last school year and other pandemic aid helped to cover temporary costs.
Food service workers are facing greater challenges than ever, especially in K-12.
Kathryn Fenner, Principal Consultant at Technomic
However, those are fading away and Kathryn Fenner who monitors the K-12 market for Technomic, a food-service consultancy, said that current USDA reimbursement rates are far behind schools’ needs.
Fenner stated that food service operators, especially K-12, are now more challenging than ever. It’s not an easy job. But the pandemic made it more difficult.
A spokesperson for USDA said that the USDA encourages schools to apply “community eligibility”, which means that, if enough students apply and are eligible for reduced or free meals, all districts can receive free breakfast and lunch.
The consumer price index’s “food far from home” category is adjusted each year to adjust reimbursement rates. This January , it was 8.2% higher than the previous year. According to the spokesperson, Congress would need to increase reimbursement rates beyond CPI adjustments in order for the USDA to have greater funding power.
Unstrategically important markets
A handful of large corporations dominate the food service industry. Technomic reports that only three companies — Sysco and Performance Food Group — accounted for nearly 40% of all distributor sales by 2021. This is up from 30% in 2018.
Technomic discovered that 67% of the top 50 broadline distributors, which supply large quantities to institutions such as hospitals, catering groups, universities, and public schools, were those three companies. Fenner stated that the food service industry has not grown in recent years due to the pandemic. However, Sysco, Performance, and US Foods have increased the market share through acquisitions.
The K-12 market is an untapped opportunity for major food service businesses.
K-12 schools face strict regulations about what they can serve, tight budgets tied to taxpayer funding, and limited scale. Even a consortium of dozens lacks the purchasing power of a large hospital system, so they are not the most lucrative customers. They account for only 4% of all operator purchases, according to Datassential (a food and drink research company).
Pietro Satriano, US Foods CEO, stated that K-12 was among the “segments that are less strategic” in May 2021. He also mentioned “added complexity” as one reason K-12 customers “tend not to be as profitable.”
We are hoping for a distributor to service our group.
Rae Hollenbeck is the executive director of power buying group in florida
US Foods did not comment on its strategic outlook in the school market. A spokesperson stated that US Foods supports many K-12 accounts in the United States and takes its commitments seriously. “We may, as with all customers,” a spokesperson said.
Sysco did not comment on Sysco’s K-12 business. Performance Food Group did not respond to requests for comment.
School officials claim that there are not enough food suppliers to keep their business. Administrators claim that contractors are dropping service to whole regions. Some people are receiving only one bid, whereas they used to receive several. Some people are not getting any bids at all.
Florida’s largest purchasing group, which represents over 600 schools, received an alert in July 2021 that US Foods was ending a contract for a period of 90 days. This was the end of a nearly 20-year-long relationship.
Rae Hollenbeck is the executive director of the Power Buying Group. The group entered into an emergency contract with Sysco after scrambling to find new bidders. Its delivery fees were 250% higher than it paid before, Rae Hollenbeck said. These costs were covered by federal pandemic assistance, which expired at the end this school year.
Hollenbeck stated, “We’re hoping that we’ll find a distributor that will serve our group.”
A spokesperson for US Foods stated that “In the event that we do decide to terminate a customer relationship”, they honor their contractual obligations and work diligently for a smooth transition for customers. Sysco did not respond to requests for comment regarding the emergency contract.
A buying group representing 60 Pennsylvania school districts claimed that it was offered a US Foods bid for the current school year. The price is up 35% over its previous contract. Kristan Delle, the Upper Dublin School District’s food services director and leader of the buying group, stated that the group has received numerous price rise notices in the last year citing inflation.
“In our role of a distributor of food services, we have been working closely alongside our customers to help navigate higher food costs by offering cost-appropriate options,” said a spokesperson for US Foods. He added, “We take very seriously our contractual obligations.”
Branch of the Idaho school nutrition organization said that she has spent hours searching for suppliers or off-bid sources that meet USDA requirements. She said that several Idaho school systems have switched to six-month bid cycles as providers are unable to secure full school year prices. She said that many of the items Branch agreed to purchase last June are no longer available or too expensive.
Schools are also reporting that their food vendors are becoming less reliable. Inconsistent delivery times have been caused by a shortage of truck drivers. Some districts now pay overtime to staff to wait for food trucks until late at night. Officials said that some deliveries do not arrive.
Some schools have made deals with local grocery stores, whose prices are higher than usual.
Lori McCoy is the Colonial School District’s director of food services. She said that she had been working with Giant Supermarkets in order to get food into her cafeterias in suburban Philadelphia after US Foods’ delivery schedules became irregular.
While many districts work with secondary suppliers and specialty distributors, it is less common for schools that they rely on off-bid sources to supply their cafeterias. McCoy stated that this is the first time she has had to use a supplementary source for food.
McCoy stated that many regional grocers do not carry USDA-approved products, so she has tended to stick with what she can find. Although some of the rules have been relaxed by the USDA due to supply chain issues and inflation, many of these criteria will be back in force next school year. More guidelines have also been proposed.
McCoy stated, “I guess I’m supposed not to say that I serve [unapproved ingredient] anyway, but if you get down to it and not feeding your kids, I mean we have to take action.” “We do our best to comply with the regulations, but there are some challenges that we cannot control that make it very difficult.”
US Foods stated that it works with customers to offer alternatives products in the event of disruptions in supply.
Filling the gaps
Some schools have come up with creative solutions, even if they are sometimes imperfect.
Lori Danella, nutrition director at Lee’s Summit Schools District, said that her district was among the few in Kansas City that hadn’t been dropped by distributors in recent times.
After prices tripled in the school year she had to remove chicken wings from the menu. However, “Big Daddy’s Pizza” has survived thanks to federal Foods in Schools. This program allows districts to place bulk orders for USDA-purchased commodities to be sent to a processor company. This helps to pay for the cheese that is added to Schwan’s brand pies.
It’s not just food that has become more expensive and more difficult to source. De Lucca explained that Wake County School District purchased silverware after it was unable to get plastic utensils due to the pandemic. Although the shortage has improved, short-staffed cafeteria workers have to wash “a thousand forks per day” since they don’t own a dishwasher.
Technomic’s Fenner stated that some districts now offer finger food to help avoid this problem.
After suffering from supply chain problems and price increases, Adelante Schools in Indianapolis decided to start fresh. Jordan Habayeb, the Managing Director of Operations, said that he was concerned about his K-8 cafeterias’ narrow and repetitive menus. This is after the availability of USDA-approved food options became scarce. Adelante will be partnering with an area nonprofit next year to source fresh food from local vendors, he said. He said that the idea will save money as well.
Crystal FitzSimons, an advocate from the Food Research and Action Center, stated that long-term solutions to curb cafeteria costs will likely require more federal funding and broad policy action. She suggested that raising the USDA reimbursement rates for next school year would be beneficial, as well as reinstating universal food assistance as a permanent program. Both of these moves are supported by the SNA.
FitzSimons stated that it took longer than anyone expected for school nutrition programs to recover, and that it is still far from over. “They have not recovered from what the pandemic has done to them.”
