Pub meal back in favour

Posted by Daniel Palmer on 26th May 2008

The impact of higher inflation, interest rates and fuel costs is beginning to become apparent on restaurants and cafes, but pubs appear to be galvanised by the economic concern.

A relatively low priced local meal in a smoke-free room has, according to the latest figures, lured increasingly time-poor Australians back to the pub for a meal. A Westpac report on the outlook for food retailers indicates that sales of food and alcohol at pubs and clubs increased by 8.9 per cent in the twelve months to March. Restaurants and cafes, meanwhile, reportedly had a 7.2 per cent decline in sales in March this year.

The increased ‘hip-pocket nerve’ of consumers due to the current economic climate has clearly forced some away from the higher priced restaurants, with the monthly decline the worst reported since Australia’s last recession in 1990/91. “Consumers have clearly cut back sharply on dining out as they have become increasingly concerned about meeting mortgage repayments, their job security, and financial situation more generally,” the Westpac report said.

Australian Hotels Association Chief Executive, Bill Healey, said that pub owners who have altered their offering have been the biggest winners but believes many are still struggling in the wake of smoking bans. “There’s no doubt that the ones that have had the foresight to invest in their properties, to retain their food offering, to provide a diverse entertainment venue have perhaps weathered the storm better than others,” Mr Healey said, according to AAP. “While there may have been a kick up in food and beverage sales, it is still very tough out there,” Mr Healey added.

The escalating food costs have put even greater pressure on restaurants. Tough decisions now need to be made as to whether current margins should be maintained by increasing meal prices or whether margins should be cut in order to keep prices at similar levels.

The cost of food and decisions by the Reserve Bank of Australia will be monitored with great interest by restaurants, with further hikes potentially devastating to some businesses. Fortunately, many economists do not anticipate rates to rise again this year and food prices are beginning to retreat from the record highs witnessed in February.

Sales in the industry are forecast by Westpac to increase by 1 per cent overall this year, down from 2.4 per cent last year, with growth to be stimulated mainly via pubs and take-away outlets.