F&B businesses up prices over rising overheads

By Hong Chau, Tat Dat   November 14, 2021 | 08:31 pm GMT+7
F&B businesses up prices over rising overheads
A noodle shop on Dang Dung Street in District 1, HCMC. Photo by VnExpress/Tat Dat
With gas, labor and other costs increasing beyond their absorption capacity, many eateries and other F&B businesses in HCMC have upped their prices.

Hoa, the owner of a vermicelli shop on Le Duc Tho Street, said that she has only reopened her shop for two weeks, but the continuous increase in gas prices and sharp increases in labor costs have forced her to increase her prices.

"Recently, I decided to increase the price of a bowl of vermicelli soup from VND17,000 to 20,000 ($0.75-0.88). The customers were not happy but if I didn't do it, I would lose money."

Linh, who runs an eatery on Le Van Tho Street, said she has increased the price of a bowl of beef noodles soup by VND10,000, also because her costs have surged.

"Previously, I sold a bowl of noodles at VND30,000-35,000, now it’s not less than VND40,000."

A night noodles shop on Nguyen Duy Trinh Street in Thu Duc City has also increased its price by VND5,000-7,000 a bowl. At another noodles shop on Dang Dung Street in District 1, the starting price of a bowl or dish has gone up from VND45,000 to VND50,000.

Promotion cutback

Fuel prices have risen by 40-50 percent this year to a seven-year high. The surging prices have increased the pressure on companies which were already struggling to cope with months of plunging revenues due to Covid-19-restrictions and social distancing.

Several F&B business chains, meanwhile, have not increased their prices immediately. Instead, they have chosen to cut down on promotions even though they need to attract more customers.

A representative of the Dau (tofu) Homemade restaurant chain who did not want to be named said they were cutting down on advertising and promotions to reduce the pressures from the hike in raw material costs. South Korean restaurant chain Hanuri has also announced a stop to its promotion of serving lunch at 10 percent off from 11 a.m. to 1 p.m.

Several restaurant chain owners said that if the cost of raw materials and other overheads including transportation, oil and gas keep increasing, they would have no choice but to increase prices because they cannot afford to lose more money.

Nguyen Hoai Phuong, CEO of beverage chain Gong Cha Vietnam, said that the company will increase prices starting next year.

Phuong said it was necessary because the milk tea chain has had to bear sharp increases in the prices of imported materials, international and local shipping fees.

"All of this is putting pressure on the company while the current business has only recovered to about 50-60 percent," Phuong said.

The Dau Homemade rep said: "Our chain of restaurants has a lot of ingredients that are shipped from Hanoi and northern provinces to Ho Chi Minh City. Another portion is transferred from our partners and the company's own farm in Lam Dong Province."

In addition, there were many problems with inter-provincial traffic at the moment. Covid-19 testing has also contributed to the hike in business costs, the rep said.

A VnExpress study found raw material costs had increased by 10-70 percent and transportation costs by 10-20 percent. Gas and petrol prices have continuously increased to record levels in recent times, causing more difficulties for F&B businesses.

Recently, many businesses have also suggested that in order to deal with the current situation, operators need to reduce the environmental protection fee to control the price of gasoline. At the same time, the government needs to provide tax support policies to make the situation less challenging for businesses, they’ve said.

 
 
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