The Reality Of Your Everyday Living Bites With Covid-19 - A Push For Inflation

In a piece that the luvvie hospitality industry online are going goo-goo over, Sophie Gilmour has just put it out there that the New Zealand hospitality industry post-Covid isolation need to - wait for it:

Put up prices!

I trust the industry colleagues are all hitting "like" hoping she bravely goes first and they can snigger at the reaction of their regulars who are  currently adoring. This is because they have illusions that they will all have the same disposable incomes and jobs to go back to work on. Everyone is making an effort to "be kind" in the bubble.

My proposed solution? We need to reopen the profit margin that we have allowed to close by putting our menu prices up now.  If Jacinda’s team of five million can stamp out coronavirus, then I’m confident the hospitality industry can reclaim its margin together. We have more than 100,000 food outlets in New Zealand, and with sustainable margins, it’s a big contributor to our economy.  Let’s reinstate our profitability by adjusting menu prices to reflect a fair margin. Let’s be the change we want to see. 

Hmmm... the problem we start with is your mate "Jacinda" should be re-opening your restaurants right now, Covid-19 has been eliminated in New Zealand by the WHO definition as I have explained already in detail.   It is a travesty she has not. You need to be lobbying her to do that and should have been for the last month.

Gilmour is a hospitality consultant for Delicious Business, co-founder of Bird On a Wire and part-owner of Fatima’s.  If you are familiar with the Auckland scene you will know who the Gilmour sisters are and their mother Emerald and brands like Burger Burger and Mexico.

To be clear, what I’m proposing is the equivalent of a $1-3 price increase on a pita or chawarma at Fatima’s or a burger at Burger Burger.
I am proposing that we give our customers the benefit of the doubt – that they would be happy to pay a few dollars more for the same if they knew it meant fair wages, supporting local suppliers, reducing our footprint on the planet and survival of their local restaurants, caf├ęs and bars.  
Drawing from selective left-wing news sources such as the NYT and Guardian for quotes, her argument goes a little like this.

1. Pre-Covid we were all struggling to make a profit anyway.  Do not worry this is inevitable and we can sell it as such.
Strange since the  family seems to have made a decent living creating and selling their businesses....
2. The rents were too high for the overhead.  
Buckle up that is about to solve itself in the Covid-market. Commercial landlords will be begging for tenants.
3. So the solution is to form a cartel of minds, reduce licenses and jack up our prices while everyone is feeling desperately sorry for us.
Again no need to worry about license numbers. A lot of need to worry about disposable incomes of your punters who have been locked inside for a month and have discovered how much cash they save by not having take-out food every few days and buying wholesale for booze.

Gilmour writes with a strong Ponsonby tinge of wokeness hipster attached:
Covid-19 has shown me that the way we have been valuing work is all upside down. When the virus hit, it became evident quickly that the low-paid care workers, shelf-stackers, police officers, cleaners, nurses, truck drivers and food producers play an essential role in keeping our lives, our society and our supply chains ticking along. 
Yes and right now there is an excess supply of ALL of them.  The market has never been easier to attract staff and while we can give them warm hugs for their work, they have had no competition in their "essential" roles.  Why would you pay more than a minimum wage with double digit levels of unemployment for any staff right now as new hires?  
But I also feel strongly an obligation to minimise our footprint on the planet, and we made a commitment to quality that I intend to keep. I wish to support suppliers whose ethics are aligned with mine, so it is my preference to serve free-range meat, pay for eco-friendly cleaning products and to prepare our menu in store from scratch. It is impossible for me to lower my costs further without compromising my values, so our suppliers and producers take 35c of every dollar earned, and I have no qualms there either. 
Yes so in other words, other woke suppliers selling the dream of sustainability and purity at all costs.  Many of those suppliers of course will have an excess supply of meat and produce as restaurants go under so their prices should be falling as will the price paid to farmers.

Instead of being too critical I offer an environmentally and health-friendly solution to begging for general price increases:


A far better solution I have in mind for the Gilmour's burgers, pita, fries and roast chicken joints serving fries and calorific dressed vegetables masquerading as "healthy salads" is to frame it as reducing the gigantic NZ portions.  There is a very strong link between obesity and those actually dying with Covid-19.  Getting the population healthier by eliminating meals taking up 2-3 days of calorie intake would be a marvellous contribution to the general well-being.

But I am not going to criticise Gilmour's narrative. They are with her back-story and that of her sister part of their "brand" that differentiates them from McDonald's and KFC.  They are selling the "poor little old us" v The Giant fast-food joints.  They do it brilliantly and this piece in The Spinoff is entirely on brand, so much so she should have paid to publish it there.

I also do not need to criticise her  in order to prove my point and as I am not a customer of any of the Gilmour's businesses so it does not bother me what they charge.  The only time I eat fried chicken, burgers, middle eastern street food or bad slop they call Mexican food is at about 3am when I am hungry on my way home from ill-judged ventures to Lime Bar or Whiskey and none of their joints stay late enough to profit from my extreme errors of judgment.  The decidedly average-in-nutrition cuisine they offer punters is offset by their outstanding marketing and creative colouring in departments.  Their joints all have great PR and they have sold that with street hustle and grift so well done to them.


BUT

The point is, this is the START of inflationary pressure from New Zealand's businesses living in the bubble with you.  Without the foreign visitors and net migration into a city you will be now asked to pay MORE for things and not less to "keep your country working".

Pundits have picked some things to get cheaper. However.

Any dream of cheap holidays to Queenstown is an illusion despite the drop in oil to just the storage costs.  The flights will definitely not be, the restaurants there will not be dropping their current pricing, you may be able to get a Fergburger in half the hours you used to wait, but hotel deals will be minimal.  Hotels will simply mothball themselves than operate at continued losses.  Tourist attractions also will close until the overseas market comes back.  Around the country how many New Zealanders want to rock up to the Agrodome for example? Or have their photo taken doing a hongi?  Those going to the Hawkes Bay will drive there as they will to Tauranga.  Flights will disappear and become very expensive if there is a service.

Muldoon will not be rolling in his grave he will be revelling in it.  A Covid bubble is made for him.

Anyone thinking any of living will get cheaper for you living in this exclusive bubble need only read Gilmour's piece and apply it to every business in town now who will be explaining away price increases in their businesses.

All that cash that has been printed has to go somewhere and when you print money, Modern Monetary Theory requires you to tax it away else there is inflation.  The problem with it is that MMT confuses paper money with real capital and pushed hard enough we get this:


New Zealand is sort of, not quite, but really could be engaging in MMT.  Brian Fallow attempts to explain this.  Good luck.

In New Zealand we are more likely to see stagflation where there is rising prices, unemployment and declining gross domestic product.  This was last felt I think in 1970’s, caused by combining oil price shocks and poor monetary and fiscal policy of Muldoonism, waste of cash on "think big" Shane Jones style spends and ultimately is what led to the beauty that was Rogernomics.

A penny for your thoughts indeed and why it is ridiculous New Zealand with so few cases and a hospital system almost redundant right now to be at level 3 this week and why we need New Zealand to skip level 2 and just go to level 1 in two weeks where it should be if at all.  









Comments

  1. Agree with you, and I AM an independent hospitality consultant.
    The usual tenants of success in the hospitality business will remain.

    People will go to places that offer them a great experience(be it Food/drink or accommodation.
    I tell my clients that there are 3 thinks that define a business. Price, Quality, Service.(Time)
    But you can only choose 2 out of the 3. What will you choose.

    ReplyDelete
  2. It is truly bonkers that we are going to level 3.9999. I suspect it is because they needed 2 weeks minimum to get ready for 3.0. At level 4 surely they could have said what would happen at level 3? But no.At 1400 cases or there about your chances of running into someone with the virus after almost 4 weeks of home detention is near zero. Yes near zero.....

    As for putting prices up, go for it. Suffer the consequences. As an aside isn't this a breach of the Commerce Act? Looks like collusion to me.

    ReplyDelete
    Replies
    1. You may say that but I didn't wish to point it out. The article is more I think a discussion document than a formal call to arms!

      And the reason NZ is at 3.99999 is pretty simple - the Health Ministry has been bloody hopeless with its contact tracing and sat on its ass.

      Delete
  3. If she is so keen to up her prices, why doesn't she and see how long she lasts with competition from the other 100000 food outlets. Or is she suggesting they all do it? That may be ok until the first think they can make a killing by dropping their prices to get the punters in the door, then there will be a huge rush for them all to follow. With the lack of overseas tourists, this time next year there will not be 100000 food outlets in NZ

    ReplyDelete

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