Smoked salmon could disappear from menus after minimum wage increase, rising costs hits cafes

As the food industry faces a “perfect storm” of challenges, industry insiders fear an increase to the minimum wage could force businesses to breaking point.

The director of a major food distributor has shared fears that growing struggles in the food and food service industry could cause popular items disappear from menus and price rises of at least 20 per cent, as the burden to absorb extra costs become too much for eateries.

After suffering the cumulative effects of Covid, followed by rising petrol and electricity costs, supply chain issues and food shortages as a result of the war in Ukraine and poor harvests, Wednesday’s increase to the minimum wage could complete the perfect storm.

This week, the Fair Work Commission announced a 5.2 per cent increase to the national minimum wage, bringing the hourly wage to $21.38 per hour or $812.60 per week. On a weekly basis, this is an increase of $40.
Modern award minimum rates will also go up by 4.6 per cent and subject to a minimum increase of $40 per week. The latter pay bump will apply to employers earning less than $870 a week.

Insiders believe the increase to the minimum wage could have a huge impact on the already hard hit hospitality industry. Picture: Josie Hayden.

Jeff Godden who runs Godden Food Group told news.com.au that the prices of basic food ingredients have increased exponentially.

On average, raw materials have gone up by 8 per cent, with imported ingredients up 25 per cent. Some of the major mark-ups include flour (rise of 20 per cent), salmon (a rise of 50 per cent) and cooking oil, which has skyrocketed by 80 per cent. This could also make a low-end menu item like chips or fries, cost considerably more to produce.

Seafood items, including smoked salmon and salmon-based dishes are particularly at risk of disappearing from menus. Although Australia produces a lot of these ingredients, Mr Godden says manufacturers largely export these goods, with many importers refusing to even offer the product.

“It’s not just going to be on the menu. You’re not going to have a salmon-on-centre-of-plate type meal.”

Smoked salmon bagels and the salmon eggs Benedict could be taken off menus as costs soar. Picture: Penny Stephens.

The impact of the Ukraine war has also caused a shortage of the packaging used to store these products.

“A lot of the packaging materials come out of the Ukraine. Timber, plastic bags – that sort of thing,” he adds.

He fears eventually, cafes and restaurants won’t be able to absorb the rising costs, which means prices will either be significantly increased, or the popular menu items will disappear all together.

As an estimate, Mr Godden believes cafe and restaurant prices could increase by 20 per cent, dubbing the mark-up as a “very real outcome of what we‘re dealing with right now”. On average this means the average $5 coffee could become $6, with a $20 brunch meal hitting the $24 mark.

Mr Godden believes cafe prices could increase by 20 per cent as a result of a ‘perfect storm’ of factors. Picture: Adam Head.

As for the timing, while Mr Godden says “it could happen very quickly,” but “it depends on how quickly the industry is prepared to pivot to be able to stay in business”.

“It could happen very quickly,” he says.

“Their input costs are hitting now and their food costs have definitely increased.”

An alternative scenario could also be that customers will limit or no longer dine out, a move that will “really put a constraint on the hospitality industry in general,” he adds.

‘Treading on very dangerous ground’

CEO of the Independent Food Distributors, Richard Forbes has similar fears for the food service industry and their suppliers.

“This is not going to help one bit. I think we’re treading on very dangerous ground. I just hope they are going to survive,” Mr Forbes told news.com.au.

Working to represent Australian food processors, suppliers and distributors, he has one question for the government and the Fair Work Commission: “Why did this have to happen at this time?”

Richard Forbes believes the wage increase will do more harm than good. Picture: Supplied.

“Of course low paid workers deserve a wage increase but the fact is that we have just come out of a one in one hundred year pandemic and the food and food service industry has been decimated,” Mr Forbes said.

“Wages are a big part of any small business operations and I wish there had been much more negotiation and consultation in the food service sector.”

While he backs a wage increase for workers, but he believes the industries hardest hit by the pandemic – hospitality and tourism – should have been consulted before the announcement.

“It would have been better to wait even just a few more months to see how the economy, or the industry was going to react.

“These are mainly family-owned, privately-owned, independent businesses.

“They were impacted to a degree that 70 to 90 per cent of their revenue was lost during Covid.”

minimum wage rise

‘We can’t afford that’

Mr Godden’s fears have also been expressed by food operators around Australia.

On Thursday, the owner of Appetite Cafe in the Sydney suburb of Five Dock, Phillip Salhab said he now faces the real possibility that he could lose his business.

“While we accept the increase in the minimum wage obviously for our team and others to keep up with cost of living pressures, we as a business cannot afford it,” he told Sky News’ Peter Stefanovic.

cafe owner

“We’re offering already 20 per cent more than the minimum wage but we’re being asked to pay at least $42 an hour depending on what the role is.

“That’s the going rate at the moment but we can’t afford that.”

Australian Retailers Association chief executive Paul Zahra also feared it “could send some businesses to the brink”.

“Whilst the ARA supported a fair and balanced increase to the minimum wage, we fear the scale of this increase could tip some businesses over the edge,” he said, speaking to The Australian.