Restaurant kitchens struggle to absorb double LPG shock

The price of liquefied petroleum gas (LPG) has risen twice in less than three weeks, piling pressure on restaurants already dealing with red-hot prices of rice, chicken and beef.

Owners say the increase in petroleum gas has come at a difficult time. High inflation has weighed on household spending for years, while shorter shopping hours and a fuel shortage have reduced customer footfall.

Many restaurants raised menu prices one or two months ago to offset rising ingredient costs. Now, as they struggle to steady their finances, back-to-back LPG hikes have thrown business plans into disarray.

For the moment, most are absorbing the extra costs to their profit margins and watching developments in the Middle East, hoping the conflict will end soon and energy markets will ease as a result.

“In the current situation, the biggest challenge is just to continue the business,” said Md Firoz Alam Sumon, first joint general secretary of the Bangladesh Restaurant Owners’ Association.

He said the price of Chinigura rice, used to prepare polao, has risen to Tk 160 per kg from Tk 115, while Basmati has climbed from Tk 160 to Tk 280 per kg. Broiler chicken now sells for Tk 250 per kg, up from Tk 180, and Sonali chicken has reached a record Tk 450 per kg. Beef costs Tk 850 per kg.

Sumon said the prices of almost all ingredients, including oil and sugar, have doubled. Only the prices of potatoes and onions are relatively low, while most vegetables now cost more than Tk 100 per kg.

“We have not yet increased food prices after the latest LPG price hike, as this will increase the pressure on the people. But it is not possible to run like this for long,” said Sumon, who is also chairman of Alkaderia Restaurant.

Ismail Hossain, manager of The Mughal Empire restaurant at Mohammadpur area of Dhaka, said higher LPG prices have lifted production costs by nearly 10 percent.

He said a 35kg gas cylinder, widely used in commercial kitchens, now costs around Tk 5,600, up from about Tk 3,500 a few months ago.

Rising ingredient costs have also forced the restaurant to revise some prices. A plate of Kacchi has increased from Tk 300 to Tk 320.

Even so, Hossain said profit margins have shrunk from about 30 percent to 15 percent as fuel and ingredient costs climb.

“We are absorbing the additional costs for now without increasing prices further, but we are closely monitoring the situation,” he said.

Dhaka has around 25,000 restaurants, both large and small. Hundreds have opened over the past decade to meet growing demand for fine dining. There are around 481,000 restaurants across the country employing 30 lakh people. Around 2 crore people depend on the sector directly or indirectly, according to the Bangladesh Restaurant Owners’ Association.

Golam Mostafa, general manager of Sky Lounge in Dhaka’s Mirpur-1 area, said higher LPG prices are severely affecting their profits.

Although gas costs have surged, the restaurant has not raised menu prices, he said, which has squeezed margins further.

Mostafa said the price of gas cylinders had risen from about Tk 3,500 to Tk 4,500, then to Tk 5,500, and now to as much as Tk 6,800, while consumption has remained unchanged.

As a result, operating costs have nearly doubled, he added. To cope, the restaurant is trying to use LPG more efficiently.

He said no decision has yet been taken on whether to revise menu prices. Management plans to review the situation over the next month. “If gas prices continue to rise, we may increase menu prices by 5 percent to 10 percent, but for now we are waiting to see how the situation develops.”

Faruk Ahmed, customer relationship manager at Skyfall restaurant in Mohakhali, said early closing hours have reduced their evening trade, cutting sales by about 50 percent compared with a few months ago.

Despite higher LPG costs, the restaurant has not raised prices, fearing it would drive away more customers, said Ahmed, adding their margins are under pressure.

An official at Mamagocho restaurant at Gulshan in Dhaka said it had maintained prices, quality and portion sizes, despite rising costs, which have reduced profits.

Now, any decision on price adjustments rests with management, the official added.