Australian restaurants will struggle to absorb further price hikes or pass those costs to brunch diners, industry advocates say, as hospitality businesses respond to an avian influenza outbreak across several egg farms and a global shortage of oranges.
Agriculture Victoria says avian influenza has been detected in five egg farms across Meredith, Terang, and the Golden Plains Shire, necessitating the euthanisation of half a million chickens to prevent its spread to other farms.
The outbreak is likely to reduce short-term egg production by about 450,000 eggs a day, and supermarket giant Coles has imposed a two-carton purchase limit akin to the toilet paper limits grocers levelled during the COVID-19 pandemic.
While acknowledging the serious nature of the outbreak, the egg industry says national supplies remain strong, and that purchase limits are a strong reaction to a temporary and isolated shortage.
“We want consumers to know that only a small part of the industry has been impacted by [avian influenza] and other egg farms are working hard to ensure over 18 million eggs continue to be available every day,” Australian Eggs managing director Rowan McMonnies said Monday.
At the same time, a global shortage of oranges, driven by consecutive years of drought and disease spreading through citrus-growing powerhouse Brazil, is pushing orange juice prices worldwide.
Australia is a major orange producer in its own right, and the shortfall in orange juice concentrate imports could theoretically benefit local orchards capable of ramping up supply.
However, industry observers suspect the supply crunch may still lead consumers — including cafes and restaurants — to pay more for their orange supplies, or opt for cheaper juices blended with different fruits.
The full effect on costs is yet to be seen, but any uptick in prices will be deeply felt by the local hospitality sector.
Wes Lambert, chief executive of the newly-formed Australian Restaurant and Cafe Association (ARCA), said Australian hospitality businesses have very little capacity to absorb further price hikes.
“Restaurants and cafes on average earn less than 5% profit,” Lambert told SmartCompany on Tuesday.
“They are extremely sensitive to cost increases if they are unable to increase the menu prices.
“This will lead to either a drop in profits, or to portion size, or even the days and times of the week that they’re open.”
Simply passing on those prices to consumers is not a simple solution either, with Lambert noting there is a “ceiling” diners are willing to pay for a meal outside the home.
“Ultimately, when there are shortages in Australia or globally, there’s very little that can be done other than changing the items on the menu,” Lambert continued.
“As Australians enjoy their eggs benny and smashed avo on toast, that’s very difficult for many restaurants, and especially cafes that require those ingredients as primary ingredients.
“Unfortunately, the industry continues to get squeezed.”
Never miss a story: sign up to SmartCompany’s free daily newsletter and find our best stories on LinkedIn.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
Comments