Inside New Zealand’s Shrinking Cafe Scene: ‘Things Have Probably Got Worse’ – CoffeeTalk

The number of cafes and restaurants in New Zealand is shrinking for the first time in decades due to tougher economic times and staff shortages. Stats NZ data shows that last year was the first time in more than 20 years that the number of cafes and restaurants shrank compared to the year before. Last year, there were 8958 cafe and restaurant businesses recorded, compared to 8964 the year before. Every other year in the data the number of enterprises recorded held stable or increased year-on-year. There are still twice as many as in 2000.

Economist Shamubeel Eaqub showed that the number of food and beverage and hospitality businesses in New Zealand had grown more than 30% since 2000, on a per capita basis. It has also grown as a share of the economy. However, it becomes a fight for stretched consumer dollars in a recession.

Centrix data shows there were 47 liquidations of cafes alone in the past 12 months, up 24% year-on-year. Cafes were three times more likely to fail than typical New Zealand businesses. In July, there were 83 cafe businesses for sale. The worst time of a recession is the winter, with the seasonal low and the recessionary low happening at the same time.

Hospital businesses are usually at the “bleeding edge” of downturns. Stats NZ said there was $17 million less spent in hospitality businesses in July compared to June, a drop of 1.4%. Eaqub said the inflation rate for cafes and restaurants was still relatively high, and if people were struggling with the cost of living, it would make sense they would cut down their spending. Restaurant meals and ready-to-eat food had an annual inflation rate of 3.7% in July, compared to 1.7% for groceries and a fall of 1.1% for meat, poultry, and fish.

Marisa Bidois, chief executive of the Restaurant Association, said that the small fall in the number of outlets in recent times reflected the environment the industry was facing

Infometrics chief forecaster Gareth Kiernan agreed that the hospitality sector had been hampered by lockdowns and social distancing requirements, so it was not clear that it had been too buoyant in recent years. Things had probably got worse since that data was last updated, and the latest year’s numbers are worse than the Global Financial Crisis (GFC).

The immediate impact of the GFC on the economy was much more heavily felt by businesses as financial markets tightened up and restricted business activity, as opposed to the current downturn which has been more led by households due to interest rates and other living costs. A mitigating factor for the economic downturn in 2008-2011 was the rapid shift to much lower mortgage rates, which effectively freed up more money for other purposes.

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