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Small Sydney restaurants and bars are feeling the bite of ingredient price hikes

Joe Soglimbene has worked in the hospitality industry for 40 years.

Ten years ago he opened Pappardelle, an Italian restaurant in Sydney’s western suburb of Haberfield.

He’s been through many tough times for a business, including the closings of the past two years.

But it was the recent spike in the cost of ingredients and the shortage of staff that forced him to close the restaurant. Pappardelle will serve its last pasta on Sunday.

Crucial ingredients in Italian cuisine, including tomatoes, olive oil and zucchini, have all risen up to four times their usual price.

The cost of ordering products from Mr. Soglimbene has increased from around $3,000 per week to $9,000 per week.

Joe Soglimbene says rising costs and lack of staff make it difficult to enjoy running a restaurant.(ABC Radio Sydney: Declan Bowring)

“I can assure you that not many people in our food industry make money because of the cost of food,” Mr Soglimbene told ABC Radio Sydney Breakfast presenter James Valentine.

“The restaurateurs, they no longer have the joy they had before.

“Actually, we don’t socialize. We don’t enjoy our restaurant, but we have to work from 10 a.m. to 11 p.m. Who likes that?”

It was a similar story for Lou in Manly. She told ABC Radio Sydney she closed the fish and chips 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.

“Each crate of food is more expensive: tomatoes [and] salad. We all know lettuce.”

Tomatoes on display in a grocery store
Ingredients like tomatoes have become expensive for restaurants like Joe’s.(ABC: Bec Whetham)

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 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 just going back.”

“A Perfect Storm”

The stories of Mr Soglimbene and Lou are “too common” according to Wes Lambert, who is the director of the Australian Foodservice Advocacy Body.

What bites the most is the shortage of workers throughout the supply chain, which has affected the industry since October 2021, according to Mr. Lambert.

“It doesn’t matter how many working holidaymakers the government says have arrived or how many international students or people wanting to get back into the industry or be skilled and trained, or even the unemployment figures,” Mr Lambert said.

“We don’t see these people going back into hospitality, we don’t see these jobs being filled.”

Mr Soglimbene said travelers on working holiday visas who usually worked in the hospitality industry were no longer coming, mainly because they could not afford to come to Australia.

Skills and Training Minister Brendan O’Connor told ABC Radio Sydney the government recognizes the problem and has promised to speed up the process for workers to enter the country.

Brendan O'Connor speaks to reporters outside Parliament regarding the Racial Discrimination Act 18c
Skills Minister Brendan O’Connor said the government must speed up the country’s temporary migration scheme.(ABC News: Matt Roberts)

“We have a crowded application process that we need to speed up,” Mr O’Connor said.

The minister also said they needed to attract people to Australia after a flight of temporary visa holders departed during the pandemic.

“Employers couldn’t keep employing them because they had never received any form of support. Even when, as we know, there was a lot of support in the economy,” Mr O’Connor said.

Landlords have also raised rents for hotel businesses, adding more financial headaches to already struggling businesses.

Alex Fenshan runs The Temperance Society bar in Summer Hill and said their landlord has raised rent by $200 a week, even though their average turnover has fallen.

“Make rent commensurate with this kind of hot fool [property] market does not represent what small businesses are capable of,” Fenshan said.

The exterior of a small bar
Alex Fenshan says he doesn’t see himself passing on the rising cost of beer to his customers.(ABC Radio Sydney: Declan Bowring)

Mr Lambert said businesses were facing rent increases of up to 10%.

Other costs businesses face are taxes due the previous year, which Lambert said were due now.

“This is the first time we’ve had a severe labor shortage, 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.”

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Mr Lambert said current coffee and food prices were unsustainable given rising 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 raised your prices, 5-15% at the start of this fiscal year, you better get on with it. very, very quickly.

“You’re going to be behind the curve in inflation and behind the curve in those rent increases this year.”

A middle-aged man with a beard stands behind beer taps behind a bar.
Alex Fenshan worries about the future of small bars in Sydney.(ABC Radio Sydney: Declan Bowring)

The rise in the excise tax on alcohol further compounds the pain of rising expenses. The alcohol tax rose 3.84% on August 1 for pure beer, the biggest increase in 20 years.

Mr Fenshan said the increase would drive up the cost of beer by $2.50 a liter 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 don’t see people [paying extra] in the current climate when we are already struggling to encourage people to come back,” he said.

“Asking people to spend more than $15 for a glass of beer. It’s going to scare off customers.”

A pint glass being filled with beer from a tap
An increase in alcohol tax increases pressure on small bars to pass the costs on to customers.(ABC Great Southern: Sophie Johnson)

Mr Fenshan fears the current climate could set back Sydney’s nightlife as smaller bars feel the pressure.

“With the kind of economic climate and the difficulties that all kinds of small businesses are facing…I think we are really at risk of businesses becoming just homogenized and franchised.”

Richard Dement

The author Richard Dement