Nourish Group adds Soul to the menu as restaurateurs face margin squeeze
By Paul McBeth
Jan. 16 (BusinessDesk) - Nourish Group has added Auckland's high-profile Soul Bar & Bistro to its stable in a market where restaurateurs are feeling the competitive pinch and facing rising food and labour costs.
Auckland-based Nourish will take ownership of Soul from March 1 for an undisclosed sum, buying it from restaurateur Judith Tabron and Eric Watson's Cullen Investments. Nourish chief executive Richard Sigley says the purchase gives the group the benefit of bigger scale when negotiating with suppliers and adds a fourth flagship brand that includes Euro in Auckland and Shed 5 and Pravda in Wellington.
"I've tried to look for gaps in the market and we've done that with Crabshack and the premium dining experience of Jervois Steak House," Sigley told BusinessDesk. "That's one of the reasons why we've purchased Soul - it's like Shed 5 in Wellington, it's one of those iconic brands that Wellingtonians and Aucklanders love."
Nourish tends to operate its 11 restaurants autonomously, and Sigley says it will be business as usual at Soul under new ownership: "We're not going to change Soul - it's an iconic brand run incredibly well by Judith and her team."
New Zealanders are spending more on hospitality than they used to, with some $10.34 billion spent on food and beverage services in the March 2017 year, amounting to 12.3 percent of total retail spending. Ten years earlier, some $6.21 billion spent on food and beverage service amounted to 10 percent of retail spending.
While record tourism and a growing appetite for eating out was helping the sector, Sigley said rising costs are the big issue facing hospitality this year with the looming minimum wage hike to $16.50 from April and official figures showing a 2.3 percent increase in food prices last year. At the same time, consumers' appetite for casual dining has kept a lid on prices.
"I was going through an old Euro menu - we had mains on five years ago that were higher priced than what we're currently offering and that's reflective of the Auckland market and that casual dining experience," he said. "That's one of the reasons why we're looking at getting more outlets, because it gives us scale of economies so we can negotiate better with our suppliers and we can get better food costs and beverage costs, otherwise it's a hard game if everything's going up every year and you have to maintain your prices."
Government data shows prices paid by food and beverage services for inputs rose 2.8 percent in the September quarter from a year earlier, outpacing the 2.6 percent gain in prices received for outputs, implying their gross margins were squeezed last year.
While Auckland faces growing competition, Sigley said Nourish's Shed 5, Pravda and Crab Shack in Wellington and Jervois Steak House in Queenstown were "going incredibly well".
The food and beverage group, which counts NZAX-listed Foley Family Wines as a shareholder, is still open to new acquisitions of profitable restaurants that Nourish can add value to, although Sigley said he prefers to build and create and will keep doing so when the opportunity arises.
The company will look at Christchurch for opportunities and is keeping tabs on Tauranga, but Sigley is also interested in Australia.
"I think we've got some pretty credible brands that could work really well internationally so that's the bigger picture and probably more Australia," he said. "Would a Crab Shack in Sydney work well? It'd have to go gangbusters wouldn't it if you found the right site and the produce that they've got as well and the population."