Joe Soglimbene has worked in the hospitality industry for 40 years.
Key points:
- Hospitality venues will be forced to raise their prices soon, according to an industry body.
- Alcohol tax hikes are putting pressure on small bars
- Restaurateur Joe Soglimbene is closing his restaurant, citing the rising cost of ingredients and staff.
Ten years ago he opened Pappardelle, an Italian restaurant in Haberfield, an inner-western suburb of Sydney.
It has been through many difficult periods for a business, including closures in the last two years.
But it is the recent increase in the cost of ingredients and a shortage of staff that has forced him to close the restaurant. Pappardelle will serve his last pasta on Sunday.
Crucial ingredients for Italian cooking, including tomatoes, olive oil and courgettes, have risen to four times their usual price.
The cost of Mr. Soglimbene’s production order grew from around $3,000 per week to $9,000 per week.
“I can assure you that not many people in our food industry are making money because of the cost of food,” Mr Soglimbene told ABC Radio Sydney Breakfast presenter James Valentine.
“Restaurants, they don’t have that joy that they used to have.
“We don’t really socialize. We don’t enjoy our restaurant, but we have to work from 10 am to 11 pm. Who likes that?”
It’s been a similar story for Lou at Manly. She told ABC Radio Sydney that she closed the fish and chip shop she ran with her husband after 28 years of service after the price of cooking oil doubled.
“My husband worked six days a week to lose money,” she said.
“Each box of food is more expensive: tomatoes [and] lettuce. We all know lettuce.”
Food prices rose 2.1% this quarter, while fruit and vegetables rose 4.8%, according to the latest data from the Australian Bureau of Statistics.
Lou also said that they were unable to pass the cost on to customers.
“People weren’t happy to pay 50 cents more for fish and chips. So we’re going backwards.”
‘A perfect storm’
Soglimbene and Lou’s stories are “too common”, according to Wes Lambert, director of the Australian Food Service Defense Agency.
What is most bothering is the shortage of workers throughout the supply chain, which has been affecting the industry since October 2021, according to Lambert.
“It doesn’t matter how many holiday-working tourists the government says have arrived or international students or people who want to get back into the industry or be retrained and skilled, or even the unemployment numbers,” Lambert said.
“We’re not seeing those people go back into hospitality, we’re not seeing those jobs get filled.”
Soglimbene said travelers on working and holiday visas who would normally work in the hospitality industry were no longer coming, mainly because they couldn’t afford to come to Australia.
Skills and Training Minister Brendan O’Connor told ABC Radio Sydney that the government recognized the problem and promised to speed up the process of bringing workers into the country.
“We have a backlogged application process that we need to expedite,” O’Connor said.
The minister also said they needed to lure people back to Australia after a flight of temporary visa holders left during the pandemic.
“Employers couldn’t keep employing them because they never got any kind of support. Even when, as we know, there was a lot of support for the economy,” O’Connor said.
Landlords have also raised rents at hospitality businesses, adding more financial headaches to already struggling businesses.
Alex Fenshan runs The Temperance Society Bar in Summer Hill and said the landlord had raised his rent by $200 a week, even though his average billing had dropped.
“Make a rent proportional to this kind of hot madness [property] market doesn’t represent what small businesses are capable of,” Fenshan said.
Lambert said businesses were facing rent increases of up to 10 percent.
Another cost businesses face is taxes owed the previous year, which Lambert says are now due.
“This is the first time that we’ve had a severe labor shortage, that we’ve had rent resets and inflation this high,” he said.
“It’s a perfect storm, but we’re going to have to weather it.”
Prepare for higher prices
Lambert said current coffee and food prices were not sustainable given rising costs due to supply chain issues and inflation.
“If you’re a hospitality business, or along the supply chain, and you haven’t increased your prices, 5 to 15 percent this fiscal year, you better do it very, very quickly.
“You’re going to be behind the curve on inflation and behind the curve on those rent increases this year.”
Compounding the pain of rising expenses further is an increase in the excise tax on alcohol. The alcohol tax rose 3.84 percent on August 1 for straight beer, the biggest increase in 20 years.
Fenshan said the increase would raise the cost of beer by $2.50 a liter and he couldn’t imagine trying to pass the cost on to consumers.
“It’s something we’ll probably have to absorb because I can’t see people [paying extra] in this current climate where we are already struggling to encourage people to withdraw,” he said.
“Asking people to spend more than $15 on a glass of beer. It’s going to scare customers away.”
Fenshan is concerned that the current climate will set Sydney’s nightlife scene back, as small bars feel the pressure.
“With the kind of economic climate and the difficulties that all kinds of small businesses are facing… I think we really run the risk of businesses homogenizing and becoming franchises.”
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