Food Retail Market research on Café/Restaurant Industry in Australia


Eating out is an Australian tradition,and a good number of Australians are in the danger of forgetting how to cook. According to new figures, Australians are eating out and getting takeaways today more than ever before. Millennials and adults under the age of 34 are leading in this trend,and many are spending at least $100 each week eating at restaurants or ordering deliveries. This is indeed a 37% rise from the $73 spent some six years ago. The latest household survey by the Australian Bureau of Statistics shows that the average Australian spends $80 every week dining out. Though these statistics may portray a bad picture of Australians to the outside world, for business minded people the news is indeed mouthwatering. It is no wonder that cafes and bars are going upmarket and it is also comparatively easy for new establishments to find their way into this market. The fact that some over 24 million Australians eat an average of two or three times a week translates to 50 million meals each week or equivalently 2.5 billion in one year. There is no doubt that eating out is a big business in the country and in fact, this is one of the largest industries in the country. By way of comparison, this industry is much more valuable than Australia coal exports.

Though the industry is a big pie, it is split into numerous slices. There are more than 85,000 joints for Australians to eat out including some 22,000 restaurants and close to 7,000 pubs and bars, with their average annual income from meals being $480,000. A wise man can tell that itis not easy to make that money. The eating out industry is indeed competitive, has low costs of entry and comparatively little regulation. There is a high turnover of venues entering and leaving the industry and many difficulties such as finding, retaining and paying for good staff have to be dealt with.  These reports present the findings of some major surveys, reports,and findings that have been realized in the past ten years.

The average cost of goods and how they have changed in the last 10 years

The cost of ingredients used to make food varies over the years depending on many factors.Inconsistencies between the returns to suppliers and the final retail value can be attributed to various forces. For instance, the coincidence of poor world markets and severe drought has recently eroded returns to the total dairy industry. The world market for dairy products remains a driver of returns to the sector in the long term. In recent years, the share of margins in fresh whole milk products has changed substantially, reflecting the role of such products in the domestic retail market.

In the egg industry, animal welfare requirements for cage egg production drive significant reinvestment. The industry experiences a reduction in returns from the supermarket sector as it competes more effectively with the box market whilst cost factors increase with new regulations on food security. With greater fresh produce volumes being purchased by retailers directly, greater pressure will be placed on sectors of industry which do not enhance their product and varietal, differentiation, information and supply management systems. Whilst strong export factors drive farm gate prices in the beef and lamb sectors, the pork industry faces pressure from the effect of strong import competition in commodity use of meal and from the cost of feed grain. Pork faces a challenge to reposition its value proposition to the consumer and to develop more integrated value chains that enable maximization if carcass returns.

The farm gate price for packaged milk, cheddar cheese,and Dairy spreads varies with the location and is strongly influenced by average industry returns to major production regions of the industry. Another factor is the performance of dairy cooperatives in overall business activities and suitable margins to encourage stable year-round supplies. On top of this, the wholesale price depends on competitive bargaining for a share of chain retail market, range, brands, and volume costs. In less competitive channels, there are suitable margins when it comes to the cost.

As for beef products, the farm gate price depends on the average return to industry based on a mix of export and domestic market returns. However, the wholesale price for these products is dependent on the competitive pricing against other white and red meat categories, with differentiation according to eating quality, integrated supply chains with retailers reduce price volatility and thus stabilizing the market prices. It is good to note that the situation remains the same even for lamb products.

The farm gate cost for pork products depends on the prevailing average returns to the industry based on the mix of export and domestic market returns. However, string influence by seasonal returns which are affected by the prevalence of imported product into lower end processed meat market should be taken into consideration. As for the wholesale price, it is strongly influenced by the end use of cut and its retail positioning.

The prices of fresh fruit and vegetables do not change over wide margins due to the prevailing balance of supply and demand for fresh produce. Moreover, integrated supply chains with retailers reduce the wholesale price volatility.

The price of frozen potatoes and vegetables are affordable due to the influence of contractual incentives for season, quality, consistency and variety. However, it is good to note that the wholesale prices are affected by the competitive pricing from other sources of supply including the generic imported products.

Prices for fresh citrus juices, flour products, margarine and cooking oils, fresh citrus products, refined sugar,and rice depend on the prevailing world prices since many of these products have to be imported.

Other goods necessary for setting up a restaurant include furniture such as chairs, tables and other utensils such as plates, cups spoons,etc. the cost of many of these items varies depending on the brand, size,and quality.

The current cost of some of the necessary food products is shown below.

Drinks and alcohol

  • Imported beers such as Asahi 2,1 USD = 3 AUD of 0.33ml.
  • Cider 0.5l. 5,3 USD = 7.5 AUD
  • Wines from 9,9 USD = 14 AUD for 700ml.

Cost of fruits

  1. Grapes 2,8 USD = 4 AUD
  2. Peaches 6,4 USD = 9 AUD
  3. Oranges 2,1 – 4,3 USD = 3 – 6 AUD
  4. Strawberry 250g. 3,5 USD = 5 AUD

Meat and fish

  1. Beef 5,7 – 8,5 USD = 8 – 12 AUD
  2. Veal 9,2 USD = 13 AUD
  3. Lamb 7,8 USD = 11 AUD
  4. Pork 5 – 7,1 USD = 7 – 10 AUD
  5. Chicken breasts 5,7 – 9,9 USD = 8 – 14 AUD
  6. Chicken drumsticks, wings 1,4 – 2,8 USD = 2 – 4 AUD
  7. Chilled Fish 10,6 – 14,2 USD = 15 – 20 AUD
  8. Salmon fillet 24,1 USD = 34 AUD
  9. Shrimp 12,1 – 19,2 USD = 17 – 27 AUD

Average wage costs & how they’ve changed in the last 10 years

The rapport of any restaurant can be greatly affected by waiters and waitresses in terms of punctuality, multitasking, kindness and the ability to take directions clearly. They are usually trusted with the heavy task of maintaining table appearances, keeping stations clean taking food and beverage orders and presenting a check for payment as well as providing change as needed. The average wage for these members of staff is heavily dependent on their varying levels of experience. For instance, an entry-level waiter/waitress with less than five years of experience can expect to earn an average total compensation of $33,000 which is inclusive of tips, bonuses and overtime pay. A waiter/waitress with mid-career experience of 5 to 10 years of experience can expect to earn an average total compensation of $41,000 and for an experienced waiter/waitress with 10 to 20 years of experience, the total compensation may add up to $42,000 and if the experience surpasses 20 years, then such an employee may expect $44,000 total compensation on average. Speaking on hourly terms, the average waiter/waitress hourly pay is $16.37.

The kitchen staff also contributes greatly to the success of any restaurant business since the quality of food depends on their zeal and expertise. The average pay for the head chef/cook is $22.78 per hour and speaking on annual terms, such a member of staff may expect to receive $55, for a cook with late-career experience which includes employees with more than 20 years of experience can expect to earn average total compensation of $47,000. However, it is good to note that payment may vary depending on the location of the restaurants in terms of cities and states.

The average rate of staff turnover (staff leaving/the need to hire new staff) & how they’ve changed in the last 10 years

Australian companies report that 15% of their current staff are leaving. Two-thirds of the employees have seen an increase in staff turnover in the past three years,and at present, there are about 1.8 million Australian workers in the dire search of a new job. At present, the recruitment skills within human resource departments are damaging small-businesses culture, for recruitment skills are essential to ensure staff turnover rates is not systematic. According to a recent survey conducted by the Australian Human Resource Institute (AHRI), 16% is the average turnover rate across all small businesses and industries as from 2015. This rate has been up from 13% in 2012. Although the statistics portray these rates to be high, there must be some isolated cases where the turnover rate is low. For instance, workplaces that make effective use of the data gathered on why people leave are in a position to make informed decisions when coming up with retention strategies. In addition, businesses that implement effective management and leadership find it easy to retain their workforce.

The main reason as to why turnover of staff occurs in organizations is toxic environment and duties that have not been fully disclosed to the candidates. It is therefore evident that staff turnover is increasingly common because the advertised role rarely marries up with the actual position. Therefore, though the rates of staff turnover are increasing with each passing day, a determined business person has got nothing to worry about if he or she is a good leader and manager.

Availability/difficulty of finding skilled labor& how they’ve changed in the last 10 years.

The hospitality industry is already being pinched by a critical shortage of Chefs. There are indeed plenty of Chef Jobs in the market whose takers are not enough. The number of ads and vacancies for these job positions has been on the rise since 2015,and the rate of this rise has been estimated to be 8.1%. Furthermore, the number of cooks and chefs who have completed their apprenticeships successfully in the country has fallen by 15% in a span of three years. According to recent statistics, Australia has been suffering a chef shortage of 38,000 chefs,and the numbers are still on the rise. It is thus no surprise that the industry demands for long working hours and extremely few breaks amidst a stressful working environment.

Across the hospitality industry in general, low wages during training years, long working hours a shift in attitude and the desire for a social life has had its toll on the culinary world. Probably, the birth of reality cooking shows can also take some blame for this shortage. Young adults who harbor a dream of becoming chief chefs are disappointed by the reality on the ground since whatever takes place in a real kitchen is completely different from what they watch on television. In effect, no one is ready to undergo a slow internship program that is tinged with frustration and strife. Never the less, all hope is not lost for solutions exist.

A massive overhaul of the apprentice system could be a great starting point meant to keep chefs excited and engaged on the prospects of a promising career. Moreover, more mentoring and training by the heads as well as the executive chefs in the kitchen should become the order of the day.

The average rate of business closures/liquidations/bankruptcies of Cafes/Restaurants & how they’ve changed in the last 10 years

An average of 44 small businesses is being closed each day with many casting the blame on the skyrocketing electricity prices alongside escalating costs of labor. Cafes and restaurants are no exceptions and the major reason for this closureare penalty rates. Among those businesses trading in 2010 in the food and beverage service sector, ABS data shows that 70.3% survived to 2012 while 51.7% made it to 2014. In the later years, the survival rate dropped below the average for all industries by a whopping 10%. So for a certainty, the rates of closure in the restaurant sector are indeed high.

The change in average wage costs including the cost of superannuation & workers compensation

Labor costs in Australia have shot up to 102.20 index points in the third quarter of 2018 from 100.6 index points during the second quarter, but these costs have been averaging 77.18 index points in the last ten years. However, these costs have reached an all-time high of 102.5 index points in the third quarter of 2014.

The average rate of food poisoning cases

Food poisoning has proved to be a challenge in Australia. Foodborne diseases are quite common,and an estimated 4.1 million Australians are being affected every year. The symptoms can be unpleasant,and for some groups, they can be a bit more serious. According to a national Newspoll survey, conducted for food safety information council, close to one in five Australians have been taking risks by not handling uncooked foods that contain raw eggs properly. Results on food poisoning also show that on average, in 5.4 million cases a year, 120 people die, 1.2 million pay a visit to the doctors, 300,000 get prescriptions for antibiotics, and 2.1 million working days are lost. It is also estimated that the annual cost of food poisoning in Australia is $1.25.

Industry taxes/tax rates & how they’ve changed in the last 10 years The Australian tax rates have been varying over time. From 2015, “small business entities” with an aggregated annual turnover threshold of less than $2 million were eligible for a lower tax rate of 28.5%,and since 2016, businesses with an aggregated annual turnover that happens to be less than $10 million have enjoyed a reduced company tax of 27.5%. In addition, the government has declared that starting from 2017, entities eligible for lower tax rates will be known as “base rate entities.”