Short order: the soaring cost of dining out

The bill to eat in an Australian restaurant can be "unbelievably, eye-wateringly expensive," says consultant Tony Eldred.

Darren Spiller is a well-paid creative director with a Melbourne advertising agency. Six months ago, he and his wife, Donna, and their five children returned to Australia from a three-year stint in the US, based in Minneapolis with frequent trips to New York, Las Vegas and Los Angeles.

The first time he took the family out to dinner back home, Spiller noticed something different - the size of the bill.

"I couldn't believe how expensive it was compared with before," says Spiller. "We used to enjoy taking the kids to restaurants. But we just can't afford it any more. Now, occasionally we might all go out for breakfast instead."

Spiller says he and Donna have one constant topic of conversation at home. "How outrageously expensive it is to eat out in Australia. And not just eat out; eat."

Spiller is far from alone in his dismay at the rising price of a night out in Oz. Yet the statistics suggest a different story. According to an OECD report released last month, Australian food prices fell sharply in the 12 months to the end of September. The supermarket price war of the past two years has been credited with playing a key role in reducing inflation.

Try telling that to our restaurateurs. Neil Perry runs four top restaurants in three states - NSW, Victoria and Western Australia. Food prices are one thing, he says. It's the input costs that are the killer. Labour, transport, government red tape and energy. "My power costs have nearly doubled since last July," Perry says. "Across the Rockpool group, electricity cost us $1 million in 12 months. We've been really battling not to put our prices up."

The spike in energy costs since the introduction of the carbon tax was one reason cited by Sydney chef Jared Ingersoll for the closure of his popular cafe-restaurant Danks Street Depot. Another high-profile Sydney restaurant, Universal, will close in April.

Restaurant consultant Tony Eldred predicts many more closures this year. In what appears at first to be a paradoxical statement, he says part of the problem is that restaurant food prices are too cheap.

"Main course prices have remained stagnant while the cost of raw materials has soared over the past four or five years, especially premium produce such as beef and lamb and high-quality fruit and vegetables. (The latest statistics from the Australian Bureau of Agricultural and Resource Economics and Sciences show a marked increase in beef and lamb prices over that period.)

"And wages and overheads, especially energy costs, have all gone up," he says.

In an intensely competitive industry, restaurateurs are too nervous to increase the cost of a main course (unless you're in Perth, where the price of a main will frequently exceed $45).

Instead, skinny margins have to be made elsewhere: you might have noticed the amazing shrinking portion size, the rise of dishes designed for sharing, the "fashion" for cheaper cuts of meat, the strange case of the bottomless glass of mineral water and the alarming rise in your booze bill: standard mark-ups on wine have increased over the past three years from 120 per cent to 200 per cent, says Eldred. "The public think the restaurants are gouging, but all they're trying to do is survive."

Recently, while travelling in Vietnam with his two daughters, Eldred took them to one of the best restaurants in Hanoi. The bill at this "world-class" establishment, including a bottle of good French wine, came to about $40 for three.

"Australia is unbelievably, eye-wateringly expensive," he says. "Our agriculture is not as efficient (partly because of labour costs), property values in Melbourne and Sydney are higher than in Paris, London or New York and our taxation regimen is very high."

Chicago-based Jeanne McInerney and her husband David own a house and small vineyard in Hahndorf in South Australia and have visited Australia yearly since their first extended stay in Adelaide in 1988.

"At the time we were amazed at how inexpensive food was yet how crazy-expensive things like paper napkins or toilet paper were," she says. "We used to joke that it was cheaper to eat a lamb dinner than to go to the bathroom."

McInerney, who has owned restaurants in the US for more than two decades, says Australia now is like a "flipped-over" world.

"When I shop at the (Central) market, or at the supermarket, I'm stunned at the cost of everything, from leeks to avocados to broccolini. Sometimes I find I've spent more than $100 on veggies alone." One Sunday night last year, McInerney had dinner at a restaurant in Hahndorf. "Our waiter told me he was being paid $38 an hour. The restaurant wasn't busy ... If I had been the owner I would simply close on Sunday nights. The loss he would have taken in just one night would have given me an ulcer.

"On top of that, tipping has become customary over the years in Australian restaurants, so that waiter was probably making $50 an hour."

Restaurant and Catering Australia chief executive John Hart confirms hospitality industry wages - up 12 per cent a year over the past four years - have been the biggest additional impost on restaurants, followed by rent.

Of course, our strong dollar has a big impact on international tourists' experience of dining here. Hart has done calculations showing that, in 2002, the average price of a meal for an American visitor was $US26; today it's $US65.

But it's not the whole story. Differences in the cost of labour and production are also significant.

John Susman runs a Sydney-based seafood consultancy business, Fisheads, focusing on premium product. "We all have an expectation that the cost of production in Asia will be low, but a lot of people don't realise that compared with Australia the cost of production in Europe and America is cheap, too," he says.

"My clients would like to manufacture products such as preserved tuna, anchovies or pilchards, but the labour costs are so high, as is the cost of the knock-on ingredients such as olive oil, herbs and spices. It would require the price to be among the highest in the world. And would we pay that?"

Susman believes the supermarkets' demand for low prices from suppliers is helping create two tiers of pricing, and restaurants and their customers are the losers.

"Because producers have to cop low margins on the items they're selling to supermarkets, they're seeking to offset that by charging higher margins on the items they sell to foodservice (restaurants)," he says.

"I saw a chef's fruit and veg bill last week. I'd bought blueberries for $2.15 a punnet at Woolworths; the restaurant was buying the same brand, wholesale, for $4.85."

Hart says diners are becoming more cost-conscious, moderating their wine intake and sharing desserts, for example, in an attempt to keep a lid on the bill.

And there has been a big increase in the number of people going out to breakfast instead of lunch or dinner.

Spiller says he and the family were in Ballarat recently, looking for a feed. "We worked out that a quick lunch in one of the pubs was going to cost over $150 for the seven of us. "I thought, we can't do that, so we went down the street to a cafe and had pies instead.

Back in America, meals were costing us about 30 per cent less than they are in Australia. Even accounting for the tip. Without the tip, it would be more like 40 per cent."

Source: The Australian, 5 February 2013