Joe Soglimbene has worked in the hospitality industry for 40 years.
- Hospitality venues will be forced to increase their prices soon, according to an industry body
- Increases to alcohol taxes are putting pressure on small bars
- Restaurateur Joe Soglimbene is closing his restaurant, citing the increased cost of ingredients and staffing
Ten years ago he opened Pappardelle, an Italian restaurant in the Sydney inner-west suburb of Haberfield.
He has been through many tough periods for a business, including the lockdowns of the past two years.
But it is the recent surge in the cost of ingredients and staff shortages that has forced him to close the restaurant. Pappardelle will serve its last pasta on Sunday.
Crucial ingredients for Italian cuisine including tomatoes, olive oil and zucchinis have all gone up by as much as four times their usual price.
The cost of Mr Soglimbene’s produce order grew from about $3,000 a week to $9,000 a week.
“I can assure you that not many people in our food industry is making any money because of cost of foods,” Mr Soglimbene told ABC Radio Sydney Breakfast presenter James Valentine.
“Restaurateurs, they haven’t got that joy that they used to have.
“We actually don’t socialise. We don’t enjoy our restaurant, but we have to work from 10am to 11pm. Who enjoys that?”
It has been a similar story for Lou in Manly. She told ABC Radio Sydney 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 was working six days a week to lose money,” she said.
“Every case of food is more expensive: tomatoes [and] lettuce. We all know about lettuce.”
The price of food rose by 2.1 per cent this quarter while fruit and vegetables rose 4.8 per cent, according to the latest data from the Australian Bureau of Statistics.
Lou also said they were unable to pass the cost on the customers.
“People were not happy to pay 50 cents more for fish and chips. So we’re just going backwards.”
‘A perfect storm’
Mr Soglimbene and Lou’s stories are “all too common” according to Wes Lambert, who is the director of the Australian Foodservice Advocacy Body.
What is biting the most is the shortage of workers across the supply chain, which has been affecting the industry since October 2021, according to Mr Lambert.
“Doesn’t matter how many working holiday makers the government says has arrived or international students or individuals wanting to come back in the industry or being skilled and trained, or even the unemployment figures,” Mr Lambert said.
“We are not seeing those individuals returned to hospitality, we are not seeing those jobs get filled.”
Mr Soglimbene said travellers on working holiday visas who would usually work in hospitality were no longer coming, mostly because they could not afford to come to Australia.
Minister for Skills and Training Brendan O’Connor told ABC Radio Sydney the government acknowledged the problem and promised to speed up the process of getting workers into the country.
“We have a clogged-up application process which we have to accelerate,” Mr O’Connor said.
The minister also said they needed to attract people back to Australia after a flight of temporary visa holders left during the pandemic.
“Employers could not continue employing them because they never received any form of support. Even when, as we know, there was a lot of support out for the economy,” Mr O’Connor said.
Landlords have also been raising rents on hospitality businesses, adding more financial headaches to already struggling businesses.
Alex Fenshan runs The Temperance Society Bar in Summer Hill and said their landlord had increased the rent by $200 a week, even though their average turnovers had decreased.
“Making a rent proportionate to this sort of crazy hot [property] market doesn’t represent what small businesses are capable of doing,” Mr Fenshan said.
Mr Lambert said businesses were facing rental increases of up to 10 per cent.
Another cost businesses are facing are taxes owed from the year before, which Mr Lambert said were due now.
“This is the first time that we’ve had a severe workforce shortage, that we’ve had rental resets and such high inflation,” he said.
“It’s a perfect storm, but we’re going to have to weather it.”
Prepare for higher prices
Mr Lambert said the current prices of coffee and food were not sustainable given the increased costs due to supply chain issues and inflation.
“If you’re a hospitality business, or you’re along the supply chain, and you haven’t increased your prices, 5 to 15 per cent going into this fiscal year, you better get on it very, very quickly.
“You’re going to be behind the curve of inflation and behind the curve of those rental increases this year.”
Further compounding the pain of growing expenses is a hike in the alcohol excise tax. The alcohol tax rose by 3.84 per cent on August 1 for full-strength beer, the largest rise in 20 years.
Mr Fenshan said the increase would push the cost of beer up by $2.50 a litre and he could not imagine trying to pass the cost on to consumers.
“It’s something that we’re probably going to have to absorb because I can’t see people [paying extra] in this current climate when we’re already struggling to encourage people back out,” he said.
“Asking people to spend $15-plus on a glass of beer. It’s going to frighten customers.”
Mr Fenshan worries the current climate will set back Sydney’s nightlife scene as small bars feel the squeeze.
“With the sort of economic climate and the hardship faced by all sorts of small businesses … I think we really are at risk of business becoming just homogenised and franchised.”