Eating out pinches the pocket more as food prices spiral

Eating out pinches the pocket more as food prices spiral
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First Published: Thu, May 08 2008. 11 15 PM IST

Feeling the heat: Vendors selling on roadsides have also had to increase the prices of all goods, from samosa to sandwiches to chowmein. Fast food joints are especially affected as they operate on sma
Feeling the heat: Vendors selling on roadsides have also had to increase the prices of all goods, from samosa to sandwiches to chowmein. Fast food joints are especially affected as they operate on sma
Updated: Thu, May 08 2008. 11 15 PM IST
New Delhi: The sweat pouring down Manoj Gupta’s face as he deep fries samosas in front of the American Centre in central New Delhi isn’t only because of the heat.
It’s the mounting inflation that is making him perspire. Gupta has increased the price of his samosa by 25% to Rs5. A 30% rise in edible oil has pushed him to pass the burden on to his customers. And he isn’t alone.
From street food to fast food joints to fine dining restaurants, everyone is feeling the pinch of rising food costs. As inflation hit a 42-month high of 7.57% last week, many food establishments across the country have increased prices while others have revamped their menus, and some are simply hoping for the best.
For instance, Urban Pind, an upscale restaurant and bar in the city, has increased prices by 10-15% on all its items in recent weeks. “We realized that with rising costs, the kitchen was running into bad shape. We had to pass costs down to customers in both alcohol and food,” said Kashif Farooq, the restaurant’s owner.
Higher prices of rice, milk, vegetables and meat are causing concern. Farooq said his restaurant has been especially hit by the rising cost of meat. He recently cancelled a contract with his meat supplier and renegotiated with another.
Most restaurants, he explained, have a tie-up with a meat supplier for a year at a fixed price, but with meat costs soaring, his former supplier couldn’t keep up with the restaurant’s demand. For instance, Farooq said he would order 50kg of meat for a few days, but he would only be able to get 10-20kg.
Bangalore’s popular restobar, 13th Floor, is revising its menu and increasing the prices because of inflation. A Heineken that was once sold for Rs150 will now go for Rs170 this week. Its steak, which once went for Rs285, will now cost Rs305.
“Because of inflation, we have to look for another way to get the 10% we’re losing,” said J. Prakash, 13th Floor’s corporate food and beverage manager. “We’ll have to keep the menu for another three months, see how it goes and then maybe revise the prices.”
Some restaurants, such as Flavours, an Italian eating place in the capital, have not increased the price of menu items, but are instead looking for new ways to save money. Harinandan Singh, general manager of the restaurant, said the business is trying to reduce overhead costs instead of making customers shell out more.
Singh said Flavours has begun to buy items that spoil easily — like dairy and meat — in smaller quantities, but more frequently, to reduce potential wastage of food. He also said the restaurant is working on saving electricity by only using the AC on one side of the restaurant when business is slow.
Fast food joints are especially feeling the heat of rising food costs because they operate on smaller margins and, unlike finer restaurants, they are less likely to absorb inflation costs as easily.
McDonald’s Chicken McGrill, its cheapest non-vegetarian burger, is Rs10 more expensive at Rs30. The company says it increased prices in March, as food costs went up.
Feeling the heat: Vendors selling on roadsides have also had to increase the prices of all goods, from samosa to sandwiches to chowmein. Fast food joints are especially affected as they operate on smaller margins
“The cumulative increase in the cost of the ingredients caused by ongoing demand and supply gap has made this revision inevitable,” says Vikram Bakshi, managing director and joint venture partner at McDonald’s India.
At Wimpy’s, which belongs to a UK-based fast food firm, profit margins have shrunk from 50% to 30% in the past two months across India, said Wimpy International Ltd’s general manager in India A.K. Rai. Profit margins have shrunk on dishes containing wheat, pulses, rice and vegetables. The company said it has no choice but to absorb the loss for now.
The same is true for another New Delhi-based fast food chain, Slice of Italy. “As of now, we are absorbing the inflation with our own profits. It would be a really hasty decision to increase prices. So, we are cutting short our margins,” said Anurag Sharma, vice-president of Slice of Italy.
Back on Delhi’s roads, chaat seller Mahavir Singh has reduced his portion size, putting in fewer pieces of potato in aloo chaat.
Meanwhile, street vendor Kisan Chand has increased the price of everything, from sandwiches to the chowmein on his menu by Re1.
A customer Rohit Sharma, said he doesn’t mind the price rise but suspects the quantity has also reduced. “I think there is less cheese in my sandwich now. I have been buying one here almost every day for the last two years.”
Farooq, on the other hand, said there haven’t been many complaints about the price increases at Urban Pind because customers understand.
“So far, this is the first time we are forced to raise prices this much,” he said. “Inflation happens every year, but it’s the first time everyone is feeling it. It’s pinching everyone.”
mehak.k@livemint.com
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First Published: Thu, May 08 2008. 11 15 PM IST