Booze boon may be too late for restaurants

Financial strain of past curbs leaves many unable to restock

07 February 2021 - 00:07 By NICK WILSON
Chef James Diack, who owns Il Contadino in Parktown North, Johannesburg, ran several successful restaurants before lockdown. Picture: SEBABATSO MOSAMO
Chef James Diack, who owns Il Contadino in Parktown North, Johannesburg, ran several successful restaurants before lockdown. Picture: SEBABATSO MOSAMO

The lifting of the third alcohol ban and relaxation of the curfew may be too little too late for restaurants, with many experiencing a cash-flow crunch that could hamper their ability to restock alcohol and food.

Mike Said, who runs restaurant consultancy MikeSaidWhat, says there are an estimated 30,000 eating establishments across SA that provide direct and indirect employment for about 1-million people and that there is "undoubtedly blood on the streets".

He says owners are "under severe financial strain" and this could negatively affect their ability to restock with food and alcohol.

Celebrity chef and restaurant owner Reuben Riffel says the "reality is the damage has been done already", adding that "we are all scrambling to keep our heads above water".

Riffel, who had to permanently close his restaurant, Reuben's@The Capital, in Sandton, as a result of the lockdown, says he "hopes the fact that people can now come to restaurants and enjoy a glass of wine will bring more people out" and help his other eateries, Reuben's Restaurant in Franschhoek, and R and Co at Val de Vie in Paarl.

Chef James Diack, who before the lockdown was running four successful restaurants in Johannesburg - Il Contadino, Coobs, La Stalla and Douglas + Hale - says that at the moment he is "down to one operational restaurant", namely Il Contadino in Parktown North.

The damage has
been done already ...
we ’re all scrambling
to keep our heads
above water
Celebrity chef Reuben Riffel

Douglas + Hale, also situated in Parktown North, has been closed permanently because of the economic fallout due to Covid-19 restrictions.

Diack says because he also received "zero relief" from his landlords in Melville and Parkhurst, where La Stalla and Coobs were originally situated, he was forced to temporarily close them after the first lockdown.

He then moved them to the same building in Parktown North that houses Il Contadino, saying the landlord there had been "amazing", offering him full rent relief.

Diack says he managed to open Coobs for a month before the latest alcohol ban and strict curfew of 9pm but has temporarily closed it with a view to reopening in the middle of this month.

"We will open it then exactly because of the cash-flow issue. We have moved all the stock we had at Coobs across so we could trade Il Contadino as a fully fledged restaurant and hopefully garner capital and restart Coobs."

He says La Stalla will remain in its new format as a deli.

"We've tried to keep as many jobs as we could. We used to employ 109. Currently we are down to 28 and when Coobs comes back we will be back to a complement of 60."

Steve Maresch, co-owner of The Local Grill, also in Parktown North, took to Facebook earlier this week to highlight the challenge facing the industry, saying it had "on the one hand the great news of booze restrictions lifted but on the other zero cash flow to buy stock".

Maresch says he has received a lot of helpful feedback to his Facebook post, from customers and other restaurant players suggesting that establishments charge corkage and allow people to bring their own wine to restaurants.

Saul Mervis, owner of The Grillhouse, in Rosebank, Johannesburg.
Saul Mervis, owner of The Grillhouse, in Rosebank, Johannesburg.
Image: SEBABATSO MOSAMO

This would help improve cash flow and assist them in restocking in the future.

Maresch says his restaurant will be "collaborating with suppliers to find a way forward".

This could entail agreeing to offer exclusive stocking of certain wine brands in return for more favourable purchase rates.

Saul Mervis, owner of The Grillhouse, in Rosebank, Johannesburg, says as far as the restaurant's alcohol stock levels are concerned it has found itself in the fortunate position of sitting on a lot of stock.

"We will use that stock to generate income, and from that income buy more stock," says Mervis.

He says when restaurants have built up relationships with suppliers over the years there is also a "level of trust as well" as "they [suppliers] know that the only way they can liquidate their stock is by us liquidating our stock".

He says it's also important for restaurants to be as innovative as they can to keep drawing customers back.

"We ran a special during lockdown with one of our suppliers where we said to customers for every R500 they spend at The Grillhouse while they couldn't drink alcohol, bring us your bill when you can drink alcohol and we will give you a free bottle of wine. Of course that's our catch to bring them [customers] back."

But he says The Grillhouse has been hit hard by the pandemic and resultant lockdown, saying his restaurant "ticks all the wrong boxes in terms of the pandemic".

"We are aimed very much at corporates and they are not really back in the offices, and if they are, they are not entertaining.

30,000

The estimated number of
eating establishments in SA

"We are also aimed at foreigners and, as we know, there are no foreigners in the country.

"Our clients are also usually mature, older clientele who are now being cautious about going out and, of course, we are very much geared around the sale of alcohol and evenings. But having said that, we have noticed that there is definitely still a huge appetite for eating out."

He says whenever curfew restrictions have been lifted the restaurant has seen a "big spike in business", adding that he thinks "people have just had enough of being at home".

Meanwhile, the Sunday Times Daily reported that South African Breweries (SAB), owned by AB InBev, is pressing ahead with its court challenge to the government's alcohol ban.

The brewer's lawyers say it is "in the interests of legal certainty and ... to ensure that its continued business operations are not interrupted unnecessarily by further unlawful and unconstitutional prohibitions".

It reported that the government had filed more than 1,000 pages of papers in the Western Cape High Court in response to SAB's court challenge.

SAB, the maker of Carling Black Label and Castle Lager, says it "welcomes" the lifting of the alcohol ban, adding that the "three bans have had a devastating impact on the beer and broader alcohol value chain".

"The accumulated effects severely threatened thousands of livelihoods - from farmers, suppliers, retailers, restaurants, small businesses and our valued employees.

"The loss of 165,000 jobs from previous bans is a stark reminder of the dire unintended consequences of prohibition."

As far as SAB's operations are concerned, the group says it has "incurred a 30% production loss thus far during the course of the last three bans".

Distell could not comment because it is in a closed period but referred Business Times to a trading statement it released this week for the first half of its 2021 financial year which said the group was able to recover to "near flat revenues" in the six months ended December 31.

The maker of Hunter's Dry and Klipdrift, however, told Business Times that the three bans still negatively affected the full 2020 financial year with an 18% revenue decline in SA overall.

The group said in its trading statement it remained "cautious as it trades into the second half of the current period where a full month's trading has already been lost and potential implementation of future alcohol bans in SA remain unpredictable".

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