Galway restaurateur and food writer JP McMahon knows all too well how hard it can be to turn a profit at the best of times – and we are not in the best of times.
As well as his Michelin-starred Aniar he owns the Cava Bodega, and up and down the supply chain has had to contend with price hikes over the last two-plus years.
“We have seen a kind of levelling out, but with things like chocolate and butter and cooking oils, some went up 50 per cent, some 100 per cent some 25 per cent,” he says.
“There is a lot of talk of VAT, but that is only one issue, and there is energy and labour and food costs,” he continues. “As the labour costs go up, prices go up, and then as the food costs go up prices go up, and it is the same with energy.”
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He says that in many restaurants, wages now account for about 40 per cent of the costs, with 13 per cent going on VAT. Food costs that used to be about 30 per cent are now about 35 per cent.
If there isn’t enough return, then a lot of independent restaurateurs are going to say there are easier ways to make money
— JP McMahon, Aniar restaurant
“There’s very little wriggle room, and if an owner was making 10 per cent before it might be down to 2 or 3 per cent now,” he says.
That is not much of a reward for a lot of work by any measure. “And if there isn’t enough return, then a lot of independent restaurateurs are going to say there are easier ways to make money, ways to make money with less judgment, because we’re still very judgmental about money being made off food in Ireland.”
McMahon says when it comes to the unusual price differentials between retail and wholesale, it is “like the supermarkets have turned it on their head and can be cheaper than wholesalers. The model is broken and I don’t know what way it’ll go. I just keep thinking the pricing of food is being uncoupled from the cost of the food. There is a lot of money in Ireland and someone is making a lot of money, but it’s not the independent restaurateur.”
He was in Chicago in August and was talking to the one restaurant owner about the costs they face, after which he was handed a bill for a steak for $78. “I wonder if that is where we’re going in Ireland, I don’t know.”
Graham Heterich is known as the Cupcake Bloke and runs a popular bakery in Rialto in Dublin 8. He has also published two cookery books and until recently ran a wholesale business supplying sweet treats to cafes.
Like most of those in his business, he is really struggling.
“Everything is going up, and it is not like it used to be when a supplier would ring or send an email outlining the month’s price increases or decreases, now you don’t even get a notification. We used to have a little bit of buying power, but that’s completely and utterly gone now as a small independent.”
He points to understandable reasons for some of the price increases, including the war in Ukraine, which stopped sunflower oil being exported, and some sort of beetle attacking cocoa trees in West Africa which is “causing this crazy price increase”, but says he can’t understand others, including the sky-high price of Irish dairy products. “If one dairy farmer could turn around to me and say ‘My life is better because you’re paying a little bit more’ I would totally accept it, but I know they couldn’t,” he says.
I don’t know what the answer is because I’m spending so much time looking at prices and I actually haven’t got time to figure out how to deal with it
— Graham Heterich, Cupcake Bloke
He has approached dairies to see whether he could buy direct and has been knocked back, and one supplier of butter that he did have gave up a couple of years ago, buckling under the pressure of doing business.
It is not just dairy though.
“The cheapest I can buy sultanas at the moment is just over €56 for 10 kilos. That is twice the price they are selling for in Lidl. I go through about 10 boxes of sultanas a week; that’s €280 saved if I could shop in Lidl. There must be a lot of middle-ground people making an awful lot of money,” he suggests.
He recalls an email from one supplier on a Friday evening saying his chocolate was going up by 110 per cent from the following Monday, and since January of last year, much of the chocolate has gone up by more than 200 per cent.
“We have some amazing producers of chocolate in this country, and I genuinely don’t know how they’re doing it with the price of chocolate, the way it’s gone. It’s sad. A reduction would be great, but for food producers and small independents it is not going to change anything, and what is killing us are the constant price increases.”
When he started his cake business more than a decade ago he used to work off a 53 per cent margin. “That would cover all my wages and electricity and all other overheads. Now that margin is down to less than 40 per cent on most of my products, and everything below the line has to be covered out of that.”
Heterich now spends a huge amount of time looking at pricing and working out ways to save. “Lord it’s terrible,” he says flatly. “I have put up my prices twice in the last year, but a supplier will continually increase their price, sometimes on a weekly basis. I simply can’t do that in the shop or I would have no customers left.”
He is at a loss as to where the solution might lie.
“I don’t know what the answer is because I’m spending so much time looking at prices and I actually haven’t got time to figure out how to deal with it because just keeping on top of things is consuming so much of my time. Last week somebody said to me, ‘What would you say to somebody starting off a business?’ and I said that if I heard of anybody trying to get into the food business at the moment, I would tell them not to do it.”
While Heterich runs a small business, Gareth Mullins, as executive chef at the Anantara the Marker Dublin Hotel, heads up a much bigger operation – but like others he is facing big challenges.
The current situation is, he says, a perfect storm, with geopolitical crises and climate issues happening in tandem with wage and employee entitlement increases. “I have been a chef for over 25 years and it’s the hardest it has ever been, and I don’t want to sound like I am whingeing because I really am not – but it has never been as challenging as it is now.”
He acknowledges that fluctuations in the pricing of ingredients is “part of running the business and you will have dishes on your menu that you lose money on, but you’ve also got ones you make money on, so menu engineering is vital – but the problem with this perfect storm of costs is, many restaurants have to push higher prices on to consumers, and that is happening at a time when covers are dropping, particularly early in the week.”
Many of the businesses I deal with, they’re not trying to make millions, they just want to keep their families fed and they want to keep their farms open and they want to keep their businesses running
— Gareth Mullins, Anantara the Marker Dublin Hotel
He has a degree of protection in his situation because the business has hotel rooms to sell too, but he is acutely aware of the struggles people are facing. “When somebody has made the decision to close a restaurant, it is because they’ve exhausted every single other avenue to keep the doors open. They will have tried to change in their menu to cheaper cuts or cheaper vegetables, but the problem is when you start moving away from the core values of your restaurants, it starts to change what the restaurant is.”
He tries to buy direct from artisan producers to cut out the middle man, something that can save more than 15 per cent. “Having a very open relationship with your suppliers, especially your artisanal ones, will really help them – and you.”
Sometimes, he notes, there is a disconnect between the prices consumers see in shops and in restaurants. “In a supermarket you are looking at a chicken for €4 or €5, and then go to a restaurant and they’re charging you €28; you are just scratching your head wondering how has that happened? €4 chicken is really poor quality, over-produced and probably not from Ireland. We’re trying to buy high-quality Irish produce, and that’s the cornerstone of what I do.”
He notes that food sales are built on volume, and it’s the same with procurement. “If you’re a big brand you can say ‘My purchasing power is this’, they’ll say ‘Well normally we make profit of 13 per cent but if you’re guaranteeing volume, then we will take a hit’.”
Sometimes that is not possible.
“Many of the businesses I deal with, they’re not trying to make millions, they just want to keep their families fed and they want to keep their farms open and they want to keep their businesses running and they want to keep all the people that they’ve promised employment to employed, so I want to make sure we’re supporting these small local artisans and I think consumers should support them too and buy that cup of coffee from the smaller local businesses, even if it costs a little bit more and you had to do it one day less a week.”
