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LONGREAD: Aus hospitality has a drinking problem

What’s the biggest trend in eating out today? Share plates? No. Kale? No. Burgers?

It’s none of the above. The biggest trend in eating out today is drinking out - with a few bites alongside.

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This is how it goes: you kick off with drinks after work at one of those achingly cool new joints which blurs the line between bar and restaurant (brestaurant, anyone?). Maybe with an Aperol spritz or a Negroni, made with Maidenii vermouth from the on-message handcrafted cocktail menu (love those botanicals!) while your friends get stuck into the craft beers on tap.

Then it’s on to dinner at one of those new-wave eateries where the bar/dining space takes up half the room and the drinks list is long on natural wines, craft ciders and premium sakes. And more cocktails. Making a night of it? There’s a great little wine bar opened up just around the corner, licensed to 2am …

" From New York to NZ restaurants are keener than ever to promote their carefully curated ‘beverage programs’." Necia Wilden

Congratulations. You’re the bullseye in the contemporary big-city restaurateur’s dart board: your night out is more about the drinking than eating. Whether you realise it or not.

A potent cocktail of socio-economic factors in Australia puts the nation at the forefront of the trend towards much greater liquidity in what’s consumed – and it comes down to improving the liquidity in the cash registers.

These days – aided and abetted by new restaurant business models - we’re keener on premium spirits than mass-produced beer. And we’re drinking at all hours of the day and night (even, in some more-adventurous cafes in Sydney, at breakfast time).

Consequence

Why? Our freewheeling lifestyles are perhaps less cause than consequence. The fact is competition in the restaurant industry is now so high and profit margins so low operators have no choice but to seek to higher margins – which means drinks. Not food, which comes saddled with much higher costs.

This shift in business emphasis is not endemic to Australia. From New York to New Zealand, restaurants are keener than ever to promote their carefully curated ‘beverage programs’, encouraging a party atmosphere by dedicating a large part of the dining space to the bar. However, it’s a matter of degree.

Stuart Robertson is general manager for NZ chef Al Brown’s leading Auckland restaurants Depot and Federal Delicatessen, as well as their four Best Ugly’s bagel bars.

The group goes through 250 to 300 kilograms of coffee a week across six businesses and is planning to start selling alcohol in its bagel venues.

“Sure, our drinks program is as important as the food - but it’s always been like that,” says Robertson, adding New Zealand’s different labour laws means cost pressures on restaurateurs are less acute than they are across the ditch.

Let’s look at the numbers: Restaurant & Catering Australia estimates total staffing costs can represent on average up to 44 per cent of overall expenses for a typical restaurant or café (compared with the Auckland average of 26 per cent to 28 per cent), based on its 2015-16 survey.

At a fine diner, that figure would likely rise. Food costs account for 31.6 per cent on average, more at a restaurant buying luxury ingredients.

Melbourne restaurant consultant Tony Eldred divides business inputs into controllable costs (eg linen) and non-controllable costs (eg rent). He advises operators to keep the former between 12 per cent and 15 per cent of turnover and rent to 6 per cent - rising to 10 per cent for a high-profile CBD restaurant that wouldn’t need to allocate marketing dollars.

Eldred says the market is now so “oversubscribed” with venues that operators are being forced to keep their menu prices at unsustainably low levels.

Hence, in the face of soaring food costs and continuing high labour costs, clever operators are exploring new ways to make the drinks side of their business pay.

“Why are there suddenly so many wine bars around?” asks Eldred. “Operators don’t want to run a kitchen – which would require hiring kitchen staff - so they open a wine bar with simple dishes such as charcuterie that don’t need a chef to produce them.”

“So their labour costs are lower and they have a more flexible business model that emphasises the drinks.”

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Persuasion

According to Ferrier Hodgson’s Hospitality Insights Report 2017, more than 50 small bars have opened in the past four years in the Sydney CBD alone and the trend is showing no signs of slowing.

Persuading your customers to part with more bucks on the booze is a multipronged approach. Not every operator can open a wine bar – or a big, modern, multi-function space designed to turn over the maximum number of thirsty punters in the fastest time – but most can turn their attention to the wine list.

In case you hadn’t noticed, mark-ups have gone through the roof in the past few years. As one industry commentator and frequent restaurant-goer put it, “I’m drinking the same amount [when I go out] as ever but it’s costing so much more than it did a couple of years ago.

“You get sticker shock when you get the bill.”

Mark Protheroe, former head sommelier at Melbourne’s Grossi Florentino and now  partner at North Fitzroy bottle shop and bistro Recreation says mark-ups of between 250 and 300 per cent (on what the restaurant pays for the wine) are now standard – indeed, necessary for business survival - at high-profile city venues. Or to put it another way, the bottle the restaurant buys for $A20 goes on the list for $A72 plus GST.

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It’s not just wines, either. That $A20 cocktail from the restaurant’s creative and tightly curated list, so beloved of the food critics? It represents an even greater profit margin, of 300 to 400 per cent on the base spirit. Coffee? Up to 500 per cent.

“I’d reckon that at an average city restaurant, a minimum of 35 per cent of the bill will be on drinks,” says Protheroe. That could rise to 40 to 50 per cent or more in some places, particularly if the staff were highly skilled.

“With some bills, 80 per cent will be drinks,” says Protheroe. “The food is the milk. The drinks are the cream.”

Sydney restaurateurs Nick Hildebrandt and Brent Savage opened their Potts Point wine bar Monopole in 2013 as a more casual complement to their existing high-profile, wine-focused restaurant Bentley (since joined by Yellow and Cirrus).

“We always wanted it to be a drop-in sort of place where you could get a glass of wine and a bite,” says sommelier Hildebrandt.

Now, with Yellow just down the road, it’s easy to compare the different business models; the restaurant with bar attached versus the wine bar with food.

“In one night (at Monopole), we can do the same amount of covers (as at Yellow) and double the revenue,” says Hildebrandt. “You can get a group coming in and racking up a $1500 drinks bill in one-and-a-half hours.”

The shift to a drinking, rather than dining, culture extends to the concept and design of new venues.  

Return

It’s not just alcohol operators encouraging us to imbibe. Newly opened Craft & Co in Melbourne’s Collingwood is a restaurant and bar in a warehouse with microbrewery, distillery and coffee micro-roastery on site.

In Sydney, all-day café/bistro The Grounds of the City has a cocktail bar – where you can get an espresso martini at 10am - and barista bar among other zones designed to encourage the maximum flow of customers for the maximum return.

So with all this promiscuous drinking going on, are Aussies really turning into a nation of dipsos?

Paradoxically, no. In fact, quite the opposite: IBISWorld reports national alcohol consumption is at its lowest in 55 years and we’re also drinking more booze at home than when we go out.

That’s good for liquor retailers, not so good for restaurateurs. And therein lies the rub: it’s one thing to have a wine list full of big mark-ups, quite another to have a customer base happy to pay them.

As Eldred points out, diners today are savvy, educated and increasingly focused on value. So you want to calculate the mark-up on a bottle of Yabby Lake chardonnay? You look it up on your smartphone, don’t you?

Indeed, some more cynical types have suggested the main reason for the proliferation of obscure foreign wines in some very on-trend establishments is less to do with the sommelier’s current passion project than the need for a certain level of obfuscation on the mark-ups: it’s much harder to do your sums on a bottle of Long Island chardonnay, for example.

Options

There are other options for restaurateurs.

“An increasing number of operators are importing wines directly, thus cutting out the distributor (and associated costs),” says Eldred. “They’re going overseas and picking up really good wines for under $10. Or they’re avoiding branded wines altogether, buying cleanskins and house-branding the bottles themselves.”

Anecdotal evidence supports the facts on the increase in home drinking. Our frequent diner cited above? He’s not alone in choosing to have pre-dinner drinks at home before going out – “pre-loading”, as he calls it - thus avoiding a hefty bill on aperitifs.

With the arrival of home-delivery booze from the likes of Uber Eats and Deliveroo, it’s easier than ever to save money by eating at home and avoiding licensed restaurants altogether.

This trend is even more evident in New Zealand, where a combination of stricter licensing and drink-driving laws have led to a surge in home drinking at the expense of licensed establishments.

Wellington-based restaurant consultant Martin Bosley says one consequence of the laws has been a rise in backyard bars.

“Going to a bar or restaurant for after-work drinks has become a thing of the past,” he says.

Back in Australia, there’s always the BYO option, even if – for obvious reasons – BYO restaurants are increasingly hard to find.

At Recreation, Mark Protheroe goes against the trend by allowing customers to BYO to his fully licensed establishment.

“It’s brought in a lot of influencers that would likely not have come in otherwise,” he says. “It’s (still) all about revenue creation.”

Interestingly, his model has a parallel in Hong Kong and mainland China. Melbourne restaurateur and frequent HK visitor Gilbert Lau of Flower Drum fame says it’s common for mid- to upper-level restaurants in the city to permit customers to BYO – for a price (usually around $HK500 a bottle).

Lau says rising rents in Hong Kong are forcing restaurant prices up across the board and there are “no bargains” on wine lists, where mark-ups of 250 to 300 per cent “and more” are standard.

“If you ask a restaurant – even in a big hotel – whether you can bring in a bottle, I’d say 90 per cent of them will say yes,” he says.

Jeffrey Van Vorsselen, general manager at The Langham Shenzhen, says the practice is common in mainland China as well, and advises Australian and NZ restaurateurs to follow suit.

“I’d say to restaurateurs here, if you’re serious about enticing affluent Chinese to your establishment and make it clear they are welcome to bring their own wine.

“In China, BYO is an important way for restaurateurs to build relationships with their guests.”

At Recreation, Protheroe has been observing a new pattern of behaviour from commitment-shy modern diners.

“A lot of our customers are coming in and having a drink and a couple of plates and then moving to the next bar and doing the same,” he says. “It’s the modern version of the progressive dinner.”

Just a little more liquid.

Necia Wilden is a career writer and editor

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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