Rising costs put pressure on food courts

Rising costs put pressure on food courts

In the current situation, with inflation pushing up the cost of living, shopping-mall food courts have become popular for their cheap prices and greater variety, compared with regular restaurants.

Published on January 8, 2008

A 56-year-old male financial worker in the Soi Asoke area who asked not to be named and his 30-year-old female colleague were having lunch at a food court in Robinson Department Store's Asoke branch.

"Now I spend less for meals at fine restaurants and turn more often to food courts, where I have meals about three times a month to save money."

His colleague said she had likewise changed her behaviour.

And yet food-court tenants cannot draw larger revenue from consumers, because increases in their food and beverage prices cannot keep pace with rising operational and material costs.

"Their costs have already increased more than 10 per cent, but their profit keeps going down to almost nothing from the usual 20 per cent. They've had bear this situation for six months already," said Pira Apirom, senior chief merchandising officer for supermarkets at The Mall Group. Pira was referring to what tenants in The Mall Group's food courts must suffer.

The major factors are constantly increasing oil prices, labour costs and prices for rice and other raw materials.

The Mall Group has nine food courts: seven in The Mall Department Store's seven branches in Bangkok and Nakhon Ratchasima, plus The Emporium and Siam Paragon shopping complexes.

Phattaraporn Phenpraphat, vice president for marketing and public relations at Central Food Retail, also said the overall costs of their tenants had also increased but at a lower rate of 3-5 per cent.

"Many of our tenants have told us about their financial suffering, but none has officially asked for a price adjustment yet. They actually don't want to increase their prices, but necessity may force them to do so soon, and if they do make such a request, we'll consider each one on a case-by-case basis," Pira said.

He predicts the first such action will take place during this first quarter. Meanwhile, an appropriate increase would not be more than Bt5 per dish.

Central Food Retail, which operates 40 food courts in Tops Supermarkets, Tops Markets and Central Food Halls, has also heard the same complaints about increasing costs from some of its tenants, but Phattaraporn said the company had asked them to absorb the increasing costs.

"We've talked to them, and they're still able to absorb rising costs of 3-5 per cent. We realise food and beverages sold in our food courts are also available in restaurants outside, especially cheap street stands. Therefore, we try to maintain the competitiveness of our tenants by avoiding an increase in prices," she said.

The company also has a project in conjunction with the Internal Trade Department's Blue Flag project to sell food at special prices of Bt20 a dish. It has asked all tenants to offer three items of Bt20 on all of their menus.

The company does not expect its tenants to raise prices anytime soon, yet it does not know how long they can continue selling at their current prices, because the situation, globally and in Thailand, is not stable and can affect financial costs at any time.

"If they really must do so, the most appropriate price increase should be at the same percentage as rising costs," he said.

MBK Co is in a different situation. It does not feel as many ill effects as The Mall Group and Central Food Retail, because its food court - The Fifth Food Avenue - is located in its MBK shopping centre and targets mainly foreigners.

"So far, I've not heard any complaints from tenants yet. They may or may not talk about that when MBK starts to review food and beverage menus mid-year during MBK's six-month schedule for review," said Satawas Laklaem, CEO of The Fifth Food Avenue.

However, if the shopping mall finds it necessary to increase prices, Satawas said it should not be more than 5-15 per cent a dish.

All three shopping malls understand very well that raising prices is not easy. If their direct competitors (food courts in other shopping malls) and indirect competitors (from fine dining restaurants to street restaurants) refuse to follow along, anyone who takes action first could lose.

And some consumers understand the situation very well, too.

The 56-year-old financial worker and his colleague said it was acceptable for tenants to adjust their prices. Meanwhile, Pimjan Harnluecha, another financial adviser at a life-assurance company and who eats her meals at food courts as often as four times a week, agrees with price increases as long as the higher prices and food-and-beverage portions and quality go together.

Sukrit Kampha, a shipping-company sales executive who regularly eats at food courts, said it was worth it to pay more for food and beverages that really promised good quality.

"Thais like to go to food courts, because of cheaper prices and a larger variety," he said. "However, prices and quality must be better than outside restaurants, or else consumers could easily turn to those alternatives instead," he said.

Therefore, Central's strategy is to focus on three key elements - quality, cleanliness and taste - to keep its food courts attractive, while The Mall Group will look at menu adjustment. MBK is concerned with food variety and portion size.

Nitida Asawanipont

The Nation