Vermont businesses face new challenges as high gas prices compound inflationary pressures - VTDigger

2023-02-28 14:26:54 By : Ms. Shining Xia

Today's Economy news sponsored by:

Chiuho Sampson had a reckoning with price hikes when the pallets of seitan, a popular wheat-based meat substitute she buys from an importer, arrived at her Burlington restaurant last month. 

Sampson was used to paying $200 to $300 to have a pallet delivered from New Jersey to the restaurant, A Single Pebble. Last month, it cost $1,036. A driver delivered a second pallet the next day and demanded $800 before he would offload the pallet. Sampson told him to take it back.

“I feel like somebody just jabbed a knife in my heart,” she said. Sampson called a salesperson for the importer, who agreed to charge only $300 for transporting the pallet to Burlington.

Vermont business owners attribute such price increases to an accumulation of inflationary forces, many related to the pandemic: shortages brought on by a surge in demand for manufactured goods, supply chain disruptions and labor shortages. 

The trend has been exacerbated more recently by the rising price of fuel. Over the last month, trucker blockades in Canada and the Russian invasion of Ukraine have, in some cases, turned gradual price increases into price shocks.

The Bureau of Labor Statistics reported last week that the consumer price index, which measures the cost of goods and services, rose 7.9 percent over the previous year in February. It was the highest 12-month increase since 1982. In New England, the index rose 6.9 percent.

Vermont businesses have been facing price increases on everything from soybean oil to two-by-fours. Some of the greatest impacts are hitting the construction industry and food supply, according to business owners who spoke with VTDigger. 

Sampson’s restaurant, which serves high-end Chinese food, had 22 tables before the pandemic but cut back to 12 for safety reasons. Sampson said she’s been hit by rising prices for many of the staples that go into her cooking. 

The price of rice has increased from $38.50 for a 100-pound bag to $50 for a 50-pound bag. Cornstarch went from $36 for a 100-pound bag to $40.75 for a 50-pound bag and peeled garlic from $13 a gallon to $30.48.

“And we use a lot of garlic,” she said. “I really would like someone walking through that door (to) be able to have a great dinner and feel fulfilled (for) under $20. However, it is really hard right now.”

Sampson said she has raised her menu prices gradually over the course of the pandemic, but, she said, those increases hardly match her rising costs. 

At Myer’s Bagels in Burlington, owner Adam Jones is still charging $10 for a dozen bagels, same as he has for nine years — but he’s not sure how long he can hold out. 

Jones said that, in December, he “did a small bump” on prices on 60 percent of the items on his menu.

Jones said the price of a 50-pound bag of flour has increased from $15 or $16 before the pandemic to $24. And deliveries now come with a fuel surcharge of up to $6. 

For Matt Birong, who owns 3 Squares Cafe in Vergennes, it’s not the price of ingredients but to-go containers, cold cups and coffee cups that is out of control. 

“We’re getting murdered on those,” said Birong, who is also a Democratic state representative.

He said that, for two weeks now, he has not been able to order 16-ounce coffee cups from any of his vendors. Pre-pandemic, compostable to-go containers cost $35 to $45 a case. Now, if he could find them, they would cost around $140 a case. 

“We’re basically trying to lose money as slow as possible right now until we can get to our busy season,” he said. The busy season is when the tourists come: May until the end of the fall foliage season. 

Eric Sorkin is struggling with the price of glass containers.

Some of the glass that Sorkin uses to bottle syrup and honey has doubled in price since before the pandemic. 

Sorkin, owner of Runamok Maple in Fairfax, said transportation costs are the main issue. Shipping a container from Asia to the West Coast cost $4,000 to $5,000 before the pandemic and $20,000 to $25,000 now. Transporting the glass, Sorkin said, costs more than the glass itself. 

The glass he uses for honey jars comes from Europe and, in recent weeks, the cost of shipping has soared, Sorkin said.

“As soon as the war started, everything, just everything, shifted. Everything skyrocketed,” Sorkin said. 

Until last summer, Sorkin said, Runamok had not raised its prices for six years.

“But now, it’s hard to know where this is going,” he said.

For Bram Kleppner, the problem begins at the tin mines in Asia. 

Kleppner is CEO of Danforth Pewter in Middlebury. The workshop handcrafts jewelry, holiday ornaments and lamps, key rings for Life Is Good and bottle stops for WhistlePig Whiskey, among other items.  

“The prices we pay for all the things that go into our products have gone up,” Kleppner said. “It feels like we have no choice but to raise prices.” 

Kleppner said the business has taken the biggest hit in the cost of pewter. After being stable for many years, he said, pewter prices have more than doubled over the past 14 months. 

“So we are feeling that crunch,” Kleppner said.

Pewter is 92 percent tin, he said, with a mix of antimony, some copper, sometimes a bit of bismuth or a pinch of silver. And what is driving the cost of pewter is the cost of tin, he said. 

Half the world’s tin goes into solder for electronics, he said. Between increasing demand for electronics during the pandemic and Covid-related lockdowns at the tin mines in Malaysia, Indonesia and China, he said, the price of tin shot up.

With the average price of gasoline in Vermont at $4.27 a gallon, according to AAA, higher fuel costs are also taking a bigger portion of employees' wages. 

“It’s all more expensive,” said Joe Miles, owner of RK Miles, a third-generation building materials supplier with 10 locations in Vermont and Western Massachusetts that sells primarily to professional builders and remodeling contractors.

Miles said the price of dimension lumber, such as two-by-fours, as well as plywood, has almost returned to last year’s high levels. 

The National Association of Home Builders reports that after dropping sharply last summer, framing lumber prices have been soaring since August. They are now approaching $1,400 per 1,000 board feet, almost as high as the price peaks reached last May and three times what they were before the pandemic.

Miles attributes the price spikes to transportation problems. 

“Trucking has been a significant issue in our business and I think it’s driving the price of materials up because we simply can’t get it to our locations,” Miles said. “We have many cases where we have products waiting for us at the mill, but we can’t get it to our locations.”

Miles said a lot of his company’s products come from eastern Canada. He said the trucker slowdown in Canada, prompted by protests against the government’s response to Covid, has had a “significant” impact on the business.

The increased cost of trucking has had a particularly pronounced effect on traditionally less expensive products, such as drywall, cement blocks and bags of concrete mix, Miles said, because shipping makes up a greater percentage of their cost. 

Miles said that since a deep freeze in Texas last year ruined a production facility, it has been hard to get construction adhesive.

Insulation is another product affected by price hikes, Miles said. After receiving a notice that it would go up in price by 14 percent in April, he recently received word that it would rise an additional 17 percent in May. 

Miles is starting to hear from builders that the cost of materials is causing them to cancel some custom residential projects because customers are balking at higher costs. 

For Justin Barrett, it’s the unpredictability of produce prices that is confounding.

“What it was yesterday it might be an extra 25 percent the next day,” said Barrett, who owns Piecemeal Pies, a British-inspired meat pie shop in White River Junction.

Barrett said he is adapting by buying more from local, small producers and farmers, whose prices have not gone up as much as those who depend on the national food distribution system. Already, he said, 60 to 80 percent of the ingredients he uses are local. 

Barrett gets his lamb from Scuttleship Farm in Panton, which still charges him the same price as when he first ordered, $7 a pound. The pork comes from Royalton Farms.

The flour is from King Arthur Baking Company, in Norwich. The milk and cream come in glass bottles from McNamara Dairy across the river in New Hampshire.

But buying local does not always work. Barrett buys Cabot butter and cheese, but since the company cut back on production, he has not been able to get Cabot products from his two big vendors, so he buys in stores, which costs a lot more.

Barrett made a chart of how much the price of ingredients has increased since the pandemic and found they had jumped an average of 60 to 70 percent, though he has raised his prices only an average of 7 percent, he said. 

“I was pretty depressed when I made that chart,” he said. He found the exercise so depressing, he stopped. 

To boot, he said, his rent has just gone up 30 percent.

Barrett said he has had to get creative to cope with rising prices. For example, he has encouraged his wholesale buyers to move from paying invoices with credit cards, which charge him 3.5 percent, to checks or electronic checks, for which banks charge him only 1 percent. 

And the baked goods no longer ship in cake boxes. He used to ship baked goods to wholesale customers in paper cake boxes. When the price of those boxes increased 70 percent, he switched to plastic tote bags and asked customers to return the bags.

Want to stay on top of the latest business news? Sign up here to get a weekly email on all of VTDigger's reporting on local companies and economic trends. And check out our new Business section here.

Fred Thys covers business and the economy for VTDigger. He is originally from Bethesda, Maryland, and graduated from Williams College with a degree in political science. He is the recipient of the Radio, Television, and Digital News Association's Edward R. Murrow Award for Investigative Reporting and for Enterprise Reporting. Fred has worked at The Journal of Commerce, ABC News, CBS News, CNN, NBC News, and WBUR, and has written for Le Matin, The Dallas Morning News, and The American Homefront Project.

View all stories by Fred Thys

VTDigger is now accepting letters to the editor. For information about our guidelines, and access to the letter form, please click here.