Passing Cost To Consumers Is A Last Resort – Cafe Owners Speak

Jeffery Koh, managing partner of cafe and bar 15 Minutes, recently received some bad news in a letter from a supplier: The price of Broccoli had almost doubled to $7 per kilo.

In normal circumstances, he would be horrified. But these days, Jeffery is no longer surprised because he is seeing two or three such letters coming in every month.

“We’re numb already,” he says half-jokingly, “so instead of feeling angsty over it, we’ve decided to embrace these problems and learn how to solve them.”

Fortunately, Broccoli is a sparingly-used item in the menu, which meant his business wasn’t affected so much. But that crunchy vegetable wasn’t his only problem.

“Nothing is spared. Prices have increased across the board by eight to 15 percent over the past year,” he says. It’s the same story for Danny Pang, founder of coffee chain Espressoul, and all the other entrepreneurs I spoke to.

For Danny, the price of chicken and vegetables like tomatoes and lettuce have ballooned by 30 to 40 percent.

Rising labour costs — as a result of the foreign worker levy — have put a further strain on their profits. Rent has also gone up. Danny is now feeling the heat: The F&B business is famously known for its brutal profit-margins, compared to other industries.

Which meant he had to sell more coffee or raise prices just to maintain the same profit margins.

“A business has to be more than just breaking even,” he says.

The situation faced by these F&B entrepreneurs is no accident. The global food crisis, like a gathering of small streams into one mighty river, has made its presence felt all around the world. While the poor and starved is feeling the pinch the most, no one in the supply chain is spared.

That’s the new reality.

Chow Penn Nee, an economist with the United Overseas Bank, says: “Long-term trend in global demand could be some of the factors pushing prices upwards, but in the short term, weather conditions and speculative activity would see further spikes in food prices.”

These long-term trends include the rise of the middle-class in India and China and the disruption of weather patterns by climate change, both of which put further pressure on food supply.

“We do it in subtle ways that is not too noticeable. Customers don’t complain because they don’t feel it,” he says.