SOARING PRICES PUT PRESSURE ON CURRY INDUSTRY
Mounting food and energy prices are pushing the curry industry to its limits. Restaurateurs, suppliers and trade organisations weigh in on the crisis
Brexit, the Covid-19 pandemic and now huge hikes in the price of food are putting unprecedented levels of pressure on the many small businesses, such as curry houses, that make up the UK’s hospitality sector.
An additional nail in the coffin was Chancellor of the Exchequer Rishi Sunak’s recent announcement to end the 12.5% VAT relief rate for the industry. From 1 April, the VAT rate for most goods and services within the hospitality industry has returned to 20% (the temporary reduction from 20% had been introduced during the pandemic).
The price of food has been rising steadily over recent months due to a number of factors: bad weather conditions have impacted harvests and there have been increases in the costs of processing meat, as well as higher oil and energy costs. The conflict in Ukraine has only served to make a bad situation worse. A report from analysts Kantar, released last month, pointed to how grocery prices rose at their fastest rate in more than eight years in February. The report said this situation is likely to continue as a result of supply-chain disruption and the conflict in Ukraine.
Curry Life spoke to a number of curry houses and suppliers, all of whom expressed anxiety, not just about the current situation and the rising costs of key ingredients such as spices, oil, onions, tomatoes, peppers and meat, but also about what might happen in the coming months.
Surviving but not thriving
Iqbal Ahmed OBE is chairman and chief executive of Seamark Group, an exporter and distributor of frozen food and one of the largest suppliers of king prawns to the restaurant industry and retail. The business has been going for more than 45 years and is headquartered in Manchester, with operations in Bangladesh too.
“Small businesses cannot sustain themselves with all these price rises, big businesses will also suffer but they have more resources to lean on,” says Ahmed. “We are surviving but not doing great, we cannot fulfil our ambitions to expand. We had blueprints drawn up and consultants on board but we are literally just hanging on. All we can do is continue to pay our bills, our staff and our suppliers.”
Ahmed believes the pressures stemmed from when the UK exited the European Union, resulting in different currencies to deal with and increasing bureaucracy. The pandemic too prompted a huge growth in online businesses, which he said has also had a detrimental effect on small businesses, as it has widened the competition.
“It was a shambles dealing with different exchanges and you can imagine what happens with fluctuating rates; if you buy in dollars and it is strong against the pound, your prices go up,” he explains. “We are not getting any deals – there is nothing available for the food industry, And we lost a lot of our European staff because of Brexit, particularly many of our drivers.”
Ahmed adds that freight costs have also more than doubled; as an example, he says, the cost of importing containers from India, Vietnam, Bangladesh or China was around $2,500, the price has increased massively and there is also a shortage of containers to contend with, which only serves to push prices up even more.
“I am suffering and so are my staff,” he says. “We need to put pressure on the Government and raise awareness of these issues. Curry houses are very vulnerable as they are small businesses and most of them will not be making money – their bills will be more than their takings.”
Take an honest approach
Aklu Miah, who runs superstore Food Bazar, says he has received a lot of complaints from customers (a mix of mostly retail with a few curry houses), but says there is nothing he can do as he is having to buy in the goods at inflated prices too.
“Everything is going up – mostly oil and meat, and we can’t pass on too many margins,” he says. “People are cutting back on the more expensive items, but we are still selling, albeit a little less. There is a lot of competition so we are being honest with our customers.”
Shahanoor Khan, the owner of Cafe Goa in Barton-Le-Clay, says increasing menu prices is not the answer.
“Our menu prices cannot change frequently, otherwise the customer notices this and instead of coming twice a week, they will only visit once a month,” he says. “The financial help from the Government can only help in the short-term; I am very scared when I see my invoices and on top of this, my staff are asking for an increase in wages as their cost of living has gone up. Even if I were to consider putting prices up, this is not something I can implement immediately, it will take time to design the menus and print them.”
Khan adds that curry houses are already suffering from a staff shortage and says it’s vital for the younger generation to step up and help where they can.
“We need to make the curry industry attractive to younger people and also boost their perception of cuisine and being a chef – it’s an art and a respectable profession,” he says. “And suppliers need to ask themselves this question: if restaurants are not buying their goods, then how will they survive?”
Balancing act
Razz Ahmed, who owns two curry houses in South Shields, has a similar view. In the new year, his businesses were just getting back on track following Covid.
“Our customers are happy and we’ve got a lot of plans for this year and we hoped to overcome all the Covid challenges,” he says. “But now prices have gone through the roof, I can’t just put the prices up on the menu, I have to balance things. We need support from suppliers, everyone is in the same boat. In the last few weeks, meat, chicken and oil has doubled in price and we expect these to get higher. If we increase our prices, we lose customers.”
Ahmed is leaning towards having fewer items on the menu and reducing staff numbers as those options are less likely to alienate customers while helping him to reign in costs. At present, he only has the minimum number of staff working as he has already cut their hours down. He also says he is fortunate in that many of his staff are family, making it an easier proposition to reduce or increase their hours, while having staff on hand that can work at short notice.
“We can increase the prices of our dishes but even then the margins won’t be enough, so the plan is to make the menus smaller and cut staff,” he says. “And whatever we do, it will need to be done quickly and then it will depend on the customers – if they are not happy we will have a rethink and if they are happy, that will go towards our bills and wages.”
For Ahmed, a reduced menu will apply across the board, from starters to main courses to rice, with four chicken dishes being reduced to two for example.
“It’s a constant juggling act, going from one pressure to the next and we have to take each day as it comes,” he says. “We are not thinking of changing suppliers, they look after us too and we have built a good relationship over many years,”
Maintain relationships
This is a view shared by Mark Poynton, chef patron at Restaurant MJP@The Shepherds in Cambridge. Switching suppliers isn’t the answer as they need support too.
“We all need to back each other in this amazing industry, sticking by our suppliers in these times, as they did to all of us over the last two years, which unfortunately means that customers will have to take a price increase,” he says. “But as a nation we have been undercharging for food in restaurants, which has led to bad farming, because everyone wants the cheapest product, and bad employment practices, because there is not enough money to pay staff. This needs to change and hopefully the situation we find ourselves in can be another catalyst for this.”
Poynton adds that it’s vital for restaurants to be open with customers and tell them that ‘it is not our fault, nor the producers fault, it’s because everything is going up and this is not going to magically go away’.
“Be honest, explain the situation to people and carry on being the best you can be, and hopefully your customers will understand and support you,” he says.
Industry support
Are there any tips for the curry industry from other food sectors? Andrew Crook, president of the National Federation of Fish Friers, the official body that represents the fish and chip industry, says customers will always pay for quality, so it’s vital that the industry keeps maintaining quality levels.
“We are putting workshops on to help members calculate their gross profit and reduce waste,” he says. “Businesses may have to operate reduced hours. They are also reducing the size of their menus too whilst offering smaller options and other species of fish to try to hit a price point. It is going to be really tough out there. This is a huge wake up call for the industry as we are so reliant on imports.”
Crook adds that every small business he has spoken to about the VAT return to 20% feels let down and abandoned.
“The spring statement is rather demotivating and that seems to be the consensus talking to other operators,” he says. “There is strong evidence that a lower rate of VAT not only encourages growth but also reduces fraud; this current system places a penalty on businesses who do everything they should and that cannot be fair. A VAT reduction isn’t a handout, it’s an investment. It would mean leaving more money for the hospitality industry to reinvest in their business, creating more jobs in businesses that supply and service our sector.”
Kate Nicholls, chief executive of UKHospitality said that prior to the conflict in Ukraine, the industry was already seeing inflation. Businesses are being faced with having to either further erode their margins, which is unviable for many independent businesses, or put up customer prices.
“Price increases are inevitable, they are inevitably going to be larger than businesses would like,” she says. “It’s that rock and a hard place, price versus demand. Businesses will look at every way they can to reduce costs and keep prices as low as possible for the customer. But I don’t think it will be possible to insulate customers from price increases, particularly with the rising cost of VAT.”
UKHospitality added that the return to 20% VAT is a real setback for thousands of UK hospitality businesses still suffering the devastating effects of Covid, and facing this tidal wave of rising costs.
“For many businesses, the removal of the lifeline of a lower rate of VAT might prove fatal,” said Nicholls.”For a heavily, disproportionately taxed sector a return to 20% dashes the hopes that many businesses could begin to recoup some of the losses of the last two years. Operators in the sector – large and small, have several hurdles to clear on the road to recovery: huge accumulated debts; unprecedented rising costs for energy and raw goods; a chronic shortage of staff; and a fundamentally unfair and crippling business rates regime we’re desperate to see reformed.”
