👉 Background: Domino’s Pizza as the ASX-listed company that’s had a wild ride over the past few years. During the pandemic, its market cap jumped to over $15 billion, but it’s come back down to earth at just over $3 billion.

👉 What happened: Now, Domino’s is facing a new challenge because the price of cheese is up nearly 40% since the end of March. As a result, investors and analysts are expecting Domino’s profit to be flatter than their gluten-free bases.

👉 What else: Domino’s basket of commodity inputs is now back at the highest level since November 2022, according to Barrenjoey, and with consumers also cutting back on spending, this is NOT a combo that leads to cheese-tastic results.

What's the key learning?

💡Commodity prices is one of the major sources of business risk that can upend hospitality companies. Food costs on average accounts for around 33% of a restaurant’s revenue.

💡When a company experiences price inflation on essential commodities, like cheese, it can majorly impact their costs and profit margin. And there's a limit to how much consumers are willing to pay before sales volume starts to decline.

💡In fact, last year, Domino's increased their prices and its profits dropped by more than 20%. So Domino’s finds itself between a crust and a hard place because cheese is the core topping to any good pizza.