Restaurants and cafes are constantly adapting their menus to try to mitigate the rising cost of produce and cutting staff hours, as inflation hits profit margins in the hospitality sector.
Jackie Middleton, who co-owns Earl Canteen, a small sandwich chain in Melbourne, and Dame, a high-end cafe on Collins Street, says not a single day goes by when she doesn’t get an email saying the price of a product has increased.
To handle it they are adapting their menus, substituting expensive vegetables with cheaper ones and finding inventive ways to use seasonal produce.
“We essentially changed the whole menu,” she said.
As the price of lettuce went up, Middleton stripped baby cos lettuce from the menu at Dame for all but one of their signature dishes – a fancy caesar salad.
“That baby cos is now three or four times the cost, but if we can only use half, that’s eight times the cost, if we throw some of it away, because of the quality, you might be at 10 times the cost.
“[But] there is always a silver lining – fennel is really cheap, our menu might have been crunchy lettuce, and now it’s more shaved fennel and other thicker vegetables that will give a nice crunch.”
It’s not just food. Packaging makes up around 8-10% of the business cost, and in the last six months, it has doubled, she said.
Chef Daniel Wilson said margins for hospitality businesses are already small – and the cost of food alone would be eating at least 10% extra into businesses’ profits every week.
“If you’re spending $1,000 a week on average on vegetables, which isn’t a lot, that extra $100 can mean the difference between being able to afford it and not.
To be profitable, produce should stay under 20% of the cost on the menu, he said.
“If something is $10 it should cost you $2 to put it on the plate,” Wilson said.
“Then you’ve got GST that’s $1 … then you have companies tax, which is 30% based off the $10, that’s $3. Now you’re at $4 – you then have wages,” he said.
He said it is not just big-ticket items such as broccoli and lettuce that have gone up, but herbs, spices and fruits to make sauces with.
“Red peppers, coriander is extortionate, as is good-quality parsley. You go to Harris Farm and you see a bunch of coriander, half the size of what it would have been 12 months ago and it is $9. They’re probably paying $2-3 per bunch to get it on the shelf.
“If you want to make a salsa verde, or a green sauce or put coriander as leaves on a banh mi, it goes from being accessible to somewhat of a luxury profit.”
He said to make ends meet, a lot of businesses would cut down staff hours or buy cheaper produce from overseas that has been frozen.
When businesses increase prices they can lose 20% of their clientele, he said.
“Unless you can justify it. But how do you justify it?”
Nornie Bero owns Mabu Mabu, a restaurant and catering business in Melbourne.
She said the latest cost increase was cooking oil – which has jumped around 50% to $1.50.
“Which seems marginal, but it’s big,” she said.
The Mabu Mabu menus revolve around using native ingredients, and is seasonal – but that doesn’t mean it’s sheltered from price hikes.
“As a society, we need to start thinking: you can’t have a tomato all year round – otherwise you’re going to be paying extreme prices all year round.”
Belinda Clarke, chief executive of Restaurant & Catering Association Australia, said hospitality businesses were on a knife edge.
“In the hospitality industry which is already on a knife edge due to the Covid-19 pandemic and is facing headwinds from the latest variant, the inflationary cost pressures are forcing businesses to reduce opening hours, venue capacity and menu options,” she said.
