Brad Jacobs: Coffee Club Director on cafes continuing to see the profits squeezed

Cafes are continuing to see their profits squeezed.

Sales in the hospitality sector have increased 1.4% in the past year according to just-released figures from the Restaurant Association.

But sales for cafes and restaurants only rose 0.3%.

Coffee Club Director Brad Jacobs told Ryan Bridge they're having to absorb rising costs to remain competitive.

He says the minimum wage has gone up much faster than the price of coffee over the past decade.

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Episode Transcript

Speaker 1 (00:00):
Let's go to hospitality. The sectors hit record sales of
fifteen point nine billion dollars. Restaurant Association and your report
out takeaways with a big winners up three point two
percent to four point four billion. Cafes and restaurants barely
moved up up zero point three percent to seven point
eight billion. International visitor spending up nine point two percent,
now sitting at eighty six percent of pre COVID levels.

(00:21):
But revenue doesn't mean profit. Brad Jacobs is Franchise New
Zealand chairperson and coffee club co owner with me this morning. Brad,
Good morning, morning Ryan, so good, thank you, good to
have you on the show. So revenue is are but
costs are up too.

Speaker 2 (00:36):
Yeah, yeah, absolutely, I guess. You know, a big headline
number is nice and it's good to celebrate anywhere, I guess.
But yeah, when you think about food inflation at nearly
five percent general and inflation at two point seven percent now,
and of course you're also got to remember that there
was about two point three percent more outlets opened across

(00:56):
the country, So one point four percent todal growth is really,
unfortunately just not enough to keep people, to keep people
where they need to be.

Speaker 1 (01:05):
What about wages? Labor costs are forty percent of businesses.
Now that's the highest diva. Is that, you know, an
increase in the minimum wage having an effect? Or is
that a lack of skilled staff and you're having to
pay more?

Speaker 2 (01:15):
What's the story? Yeah, interesting, not in this report, but
I did see another report a couple of months ago,
and it was about the price of coffee versus labor
over the last ten years, and essentially the price of
coffee had gone up something like about twenty two percent
and ten years versus the minimum wage has gone up
sixty three percent over the last ten years. So you know,

(01:36):
the reality is I just we can't pass on pricing
that we need to to customers without running the risk
of putting ourselves out of market. So unfortunately, yes, minimum
wages has just grown faster than we can pass on
a cost, and we've had to absorb a lot. I
think there is still some shortage of labor. Not as
bad as it was certainly for us a couple of

(01:57):
years ago, eighteen months ago, it was a major problem
for everyone. It has relaxed a little, but I guess
once those those you know in that type period where
where labor costs grew quickly, you don't then come back
down from that. That's the new level then, So.

Speaker 1 (02:14):
How can we still have problems with labor shortages when
we've got all these people on job seeker you know what,
what's not computing?

Speaker 2 (02:23):
Yes, maybe some of it is the wrong people in
the wrong area. Maybe there's a few people that just
don't actually want to be employed. And of course it
is you know, I suppose it's it's a term that
gets thrown around regularly, but perhaps there's jobs out there
that qws just don't want to do that they see
that that they're above. So without without people on some

(02:47):
kind of eVisa, our industry falls apart. That's the reality
of it. You know, we have a lot of people
working in hospitality that are either here, studying, traveling new
to New Zealand and that has been as the same
for our business as long as I can ever remember.

Speaker 1 (03:02):
Bred Is there still a problem with working from home?
Is that still affecting business? I saw ACC this week
went from two days in the office to three.

Speaker 2 (03:14):
Is there? Yeah, it's still a problem. Absolutely. Yeah. If
you look at the report, you know, if you look
at Auckland, it performed below below the national average. And
then when you read further into the report, it says,
you know, of that one point two percent growth in Auckland,
most of it came from the suburban areas, not the CBD.
We still have four outlets in the city we had

(03:34):
we had six previously, and all four of those outlets
have never got back to anywhere near close to what
they used to be pre COVID. Unfortunately, this is Auckland city,
and yeah, the reality is it's just not as many
people in offices as there used to be, and that
part of that, I guess is working from home. I
think part of it is also, you know, some businesses

(03:56):
found that they just didn't need to be in the
city and so you see little subtle areas growing in Auckland,
people that are not needing to be right in the
city center anymore. The prestige of being in the city
center just isn't there.

Speaker 1 (04:09):
Bread appreciate your time this morning. Thank you. Brad Jacob's
franchise and he'szell On chairperson and.

Speaker 2 (04:14):
For more from early edition with Ryan Bridge.

Speaker 1 (04:16):
Listen live to news Talks it'd be from five am weekdays,
or follow the podcast on iHeartRadio.