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Philippine restaurants try to cut corners as inflation takes a bite

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By Joseph L. Garcia, Senior Reporter

THIRTY-ONE-YEAR-OLD Filipino entrepreneur Pirkko Alcantara had gripes about the sisig he had for lunch recently. “The serving size used to be one cup, but now it feels like one spoonful spread thinly,” he said in Filipino.

Running a successful restaurant isn’t even about a few pesos; it’s all about the centavos — margins are slim, costs are high, and you don’t have to be an expert to know that many eateries don’t survive past their first or second year.

Successful restaurants are always looking for creative ways to protect the bottom line without giving the impression that quality is going down with it.

“Without dropping names, restaurants with multiple franchises in premium locations whether malls or high-traffic areas seem to be cutting costs in creative ways,” Mr. Alcantara said in a Facebook Messenger chat.

Some keep their prices but use smaller utensils to serve food, while others use a wide array of chemicals such as food coloring or enhancers to save on raw ingredients but present the same food customers have known, he added.

Philippine inflation slowed for a third straight month in April, as prices of food, transport, and utilities continued to ease.

Consumer prices rose by 6.6% from 7.6% in March but faster than 4.9% a year ago, according to the local statistics agency.

April marked the 13th straight month that inflation breached the central bank’s 2-4% target.

Prices of food and nonalcoholic beverages rose by 7.9%, easing from 9.3% in March though still above 3.8% in April 2022.

As price volatility continues, food and beverage establishments continue to adjust to changing prices to make money while serving their customers well.

Gabriel Tolentino took over his family’s catering company Tarlaqueña Catering last year amid a coronavirus pandemic. One of their business units is a small eatery in Quezon City near the Philippine capital.

“It’s difficult to make price adjustments,” he said by telephone in mixed English and Filipino.

Some of the dishes they offer at their carinderia cost P60. “If we raise prices on those, people will complain and many will look for cheaper food, even if it isn’t as good.”

“Small and independently run restaurants who put no regard in brand equity, much less know what the word equity means, do their best to give their clients and their patrons their money’s worth,” Mr. Alcantara said.

Joey Garcia, chief executive officer at Eight-8-Ate Holdings, Inc., a unit of Udenna Corp. that operates branches of Conti’s and the franchise of Wendy’s in the Philippines, was also reluctant to raise prices.

“We have to,” he said in an interview with BusinessWorld, while noting that they have only raised prices twice in the past year, compared with rivals who have increased prices four times.

“If your supplier increases prices by 10% or 20%, you can’t immediately pass that cost over because customers will shun you.”

‘DANGEROUS’
Mr. Tolentino said they could raise prices for their more luxurious catering operations as long as he and his clients could agree on a budget. “For a small business owner, quality and customer retention is more important. I have customers now that order almost every week because I can give the price and quality that they want.”

Both Mr. Tolentino and Mr. Garcia have recalibrated their supply chain and commissary to keep prices low.

Mr. Tolentino has started ordering frozen meats in bulk instead of shopping fresh from the market to save money.

The quality of the frozen meats he uses is sometimes better than those at his local market. He insists on using the same brands for his other ingredients because the prices of the cheaper ingredients he could buy were not that much lower, he said. “Everything’s a little bit expensive.”

Meanwhile, Mr. Garcia improved productivity and efficiency over at his commissary, while cutting costs including on utilities. They cut energy costs by as much as 20% after shifting to a different power supplier.

Their commissary has cut down workdays from seven to five days a week. “We’re using the same number of people but producing the same quantity in fewer days,” he said.

They also now buy supplies early. “Others buy when the price is high. We do forward-buying.”

“Once you get those efficiencies and cost management, you don’t have to push hard on your pricing,” Mr. Garcia said. “It’s very important for business leaders, especially in our industry, not to pass costs immediately to the customer.”

Neither entrepreneur thinks about cutting corners in their food.

“We’re more known for our food, instead of our event setups,” Mr. Tolentino said. “Food is what our clients return to.”

Instead, Mr. Tolentino cuts costs in some floral arrangements — with the client’s consent — at some of their catering events to stay on budget and keep the product quality.

They also save on electricity when they can, but don’t want to cut down on employee bonuses: “It’s hard to lower their pay as a form of cost cutting.”

“Your regular customers know exactly that you’ve done something, cut some recipes, or reduce something in your products,” Mr. Garcia said. “This is very dangerous for a food brand. I’ve always believed that your brand stands with the product that you serve… your priority is to keep the quality of the product.”

“When you cut corners, you will see a long-term impact. You might have small savings, but eventually, you’ll lose your customers.”



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