How Pakistan’s teetering economy is impacting your favourite restaurants

In the face of high inflation and non-trade barriers, food businesses are in a state of flux.
Updated 23 Dec, 2019

Pakistanis take their food very seriously.

It's an understatement to say that our lives predominantly revolve around it. You want to celebrate? You treat your friends and family to food. You want to show people around your city? You take them out to the best eateries. You want to sulk? You round up your closest and meet at a cafe. You want a break from life? You head to your favourite dhaba.

One of the greatest privileges we splurge on is also the only form of entertainment in the country: think food festivals, new eateries, pop-up restaurants, home-based food businesses, roadside cafes and so on. The thriving food culture doesn't seem to be dying... yet.

Unless you've been living under a rock, Pakistan’s current economic situation should not come as a surprise. The rupee has plummeted to a record low; the concern has gone beyond living room talk and buying power has been affected. Pakistanis' woes now also include battling high inflation with stagnant wages.

D'alma's fish confit with crab and apple salad with polenta.
D'alma's fish confit with crab and apple salad with polenta.

During this crisis, I find that food businesses in Pakistan are also in a state of flux. Here's how.

In a bid to reduce food imports and boost the local industry, the government has slapped a sizable duty on import goods and as an added measure, so that nothing is exchanged under the table, the ministry has also amended import policies which now state that imports must come with ingredients printed in Urdu and accompanied with a Halal certificate.

In simple terms, the government has cracked its whip on import regulations due to which many restaurants that rely heavily on imported goods are now finding it hard to work under the new levies. Add inflation to the mix and you've landed yourself in a pickle.

From importer to consumer, the whole supply chain has been affected; prices have gone up considerably and suddenly, the safety net Pakistanis found in the country's food culture has snapped.

Imported vs local

"Everything is screwed up. Completely out of order," Sarah Aziz of Karachi's fine-dining eatery D'Alma tells me.

The restaurateur imports ingredients for special flavours in her Portuguese-inspired dishes, but due to the amended policies she's worried she won't be able to source from abroad for long.

"There will be a time when we will have to give them up [imported goods] and find local substitutes, but they won’t do justice to the food we serve."

D'alma's Hungarian chicken platter.
D'alma's Hungarian chicken platter.

Salman Naqi of Chop Chop Wok seconds Sarah. He feels the country's agriculture industry lacks the variety and quality of food products needed for his Pan Asian eatery. "Plus, we serve different international cuisines, particularly from countries from the Far East. In order for us to stay authentic and true to our cuisine, we have to rely on imports."

"We have localised a couple of ingredients, but we haven’t reached far," he adds.

The concern is a shared one as I speak with other restaurateurs and chefs in the country; import duties, though potentially beneficial in the long run, have presently confounded people in the food business.

The Thai beef salad at Chop Chop Wok.
The Thai beef salad at Chop Chop Wok.

"It's primarily due to imported food items that the industry uses, namely cheese, fries, sauces, etc [because of which prices] have gone up significantly," says Ammar Mohsin of Lahore's popular eatery Rina's Kitchenette.

Luckily for them, the switch to local materials has proved beneficial. "The mozzarella cheese we use in our pizzas is locally made and it's good cheese as the quality of buffalo milk in Pakistan is amazing. Shaan Foods launching Dipitt sauces has been a great addition. Overall, the significant move within the industry is to go local."

And owner of Karachi’s Kudu, Zaryan, is following suit, though the inflation hasn't been easy on the pocket either.

The winter sunflower salad at Kudu.
The winter sunflower salad at Kudu.

"Prices of all products have increased, including utility prices and the cost of goods that are transported, which is also why we are trying to work with 100 per cent local produce to support our industries."

Smaller businesses that operate from home are no strangers to the existing state of affairs, as Mirza Askari of the famous Shama's Bakery (the one behind the sinfully delicious Nando's chocolate cake) tells me that the company champions the use of local products, but shifting away from imported goods has not been smooth sailing.

Even dhabas are feeling the pressure. The Social Hub's partner Adil Anver says that going local has not been favourable, especially when it comes to replacing products like Nutella, which has a cult following. "A customer will never opt for a local chocolate spread paratha over a Nutella paratha."

(I second that.)

Raising the prices...

In the wake of import laws and inflation, food businesses are finding ways to cope; some have raised their prices, while others are trying to stay afloat with a dip in profits.

For instance, Chop Chop Wok has seen a minor price adjustment to protect margins. "We cannot increase prices much as the brand philosophy behind CCW is to serve quick, convenient food at affordable prices," Salman explains.

Has this affected footfall? Not in the least. "Our business is better than before. In fact, footfall has become much better." He does admit that profit margins have declined due to inflation; costs have not entirely been passed on to the consumer.

Shama's, however, is observing a decline in orders, "especially for [the number of] people going out to eat; the restaurants we work with have slowed down." Mirza says increasing prices has only caused more harm to the business than the customer as the raise has been minimal and barely enough to compensate for costs.

In the same vein, Marcel's owner Umair Khalili says that raising prices at his restaurant will not do any good as the cost of materials is ever-increasing. "We cannot translate that cost to the customer because it's weekly; we cannot reprint the menu every day or every week."

And Umair is not the only one. D'Alma's owner laments that staying true to her original prices has "reduced [profit] margins drastically."

In fact, the good 'ol reliable dhabas have also been forced to hike prices. “We've upped prices of select items on our menu, but that has only lessened the demand for those foods,” says Social Hub’s Adil.

However, he adds that business is still going well as dhabas remain the go-to place in the city for a cheap meal.

... and salaries

As a consequence, these trying times have led employees to request higher salaries, which the owners of some eateries are finding challenging to fulfill.

A few restaurant owners are considering the possibility of laying off employees. One of them is Zaryan of Kudu, who has been running his business for nine months now. "Our employees' salaries [are meant to] increase yearly, but requests have already started flowing in for an increase in pay. If it continues, we may have to downsize."

The Social Hub has already axed some employees and is holding off promotions for now "because it's really difficult to sustain in the industry with such high overheads."

But Shama's feels firing staff will do no favours to either party. "We do not feel laying off employees [in a small business such as ours] is the solution, nor is it fair to them." Though the salaries of their staff will remain the same, the owners feel it would be "unfair to reduce salaries or hold back promotions because of the current economic climate."

For others, however, the solution is not as clear-cut as they try to find a suitable balance. Umair of Marcel's tells me they couldn't afford to give all their employees yearly increments this year because of the expenses and recruiting employees is not an option due to the hiring costs. In short, "It's a struggle."

"I think we will have to increase salaries in the coming month or two," says Ammar, explaining that Rina's employees have started asking for increments due to the spike in utility bills, "so something will have to give."

Chop Chop Wok, however, was prompt with a pay boost. "Inflation has resulted in us increasing and adjusting staff salaries, especially after the increase in minimum wage and our staff finding it difficult to meet ends."

A ripple effect

The new circumstances have rocked the boat, and not just for the food service industry, importers are in disarray as they try to deal with the new levies.

I get in touch with food importer Omair Chawla for his take on the current events and he explains that though the call to go local is a move all governments should enforce, "putting a non-tariff barrier by asking all products coming into the country to have Urdu labelling is a wrong step, and the only objective seems to be to reduce imports" as the production of separate packaging for Pakistan has led to increased costs.

Additionally, he believes import tariffs will not have a major impact on the total import bill because finished food imports in Pakistan are predominantly for products which are not produced in the country, or the quality produced here is so poor that despite imported products being twice the price of local products, consumers still opt for the former.

Nutella caramel from Rina's Kitchenette.
Nutella caramel from Rina's Kitchenette.

In Chawla’s opinion, these policies will give the black market and smugglers an opportunity to bring those goods into the country. This puts his business directly at risk and adversely affects the supply chain.

In all this madness, I wonder how the mounting prices due to inflation have affected those who regularly eat out. I reach out to a few to see how they're faring and what their dining out habits look like now.

"The high prices have played quite a big role, to be honest. I avoid eating out as much as I can," says Shahzeb Khalid. "It's an easy expenditure of Rs1,500-2,000, and generally I don't feel the food or quality is worth it."

The transparent pear at Kudu.
The transparent pear at Kudu.

Another tells me that she wants to reduce her restaurant outings but it's yet to materialise. Fathima says, "When plans are made, we go out; when we go out, we eat out. I want to minimise these outings because everything else has become more expensive, so spare budget to eat out has gone down."

Asghar Jaffery has already started cutting down on dining out, "I try not to eat out as much as I used to as prices have shot up really high," he tells me.

There are also others like Uzair Baig who say that the price increase has not influenced their option to eat out. In fact, he adds that it has only increased irrespective of the circumstances. Saad Ahmad echoes his words with an, "I totally agree."

Nusrat Sami says, "Sadly, recreation options are extremely limited here. There's hardly anything to do in Karachi besides eat out, whether you're with your partner or friends. But now, with these sky-high prices, it's nearly impossible to go out for food. What is one expected to do?"

Sticking it out

At the moment, things aren't looking too good for food businesses. At best, they have to power through as respite seems nowhere in sight.

"In a nutshell, 'we're keeping calm and carrying on'," says Mirza of Shama's. "Ultimately, it is not sustainable for us to manage the business at the current cost of raw materials."

"Overall, I see a stagnation in the growth of the food industry in Lahore," Ammar adds. "I think in the coming years we'll see [fewer and fewer] restaurants opening."

As times get tough — and soon to get tougher — Umair suggests buckling up. "All restaurants and local businesses are struggling. We're in a caged box right now. I don't think any restaurant can make a lot of money, that's not possible. I think the key is to control costs, work on profits and become more efficient and just survive."

A spread from Rina's Kitchenette.
A spread from Rina's Kitchenette.

Zaryan believes there's hope for things to get better. "Thinking optimistically, this could be better for all businesses in the long run if the situation of Pakistan gets better."

And his words ring true. The market has essentially been regulated to assist in stabilising the heavy influx of imports in Pakistan, reduce the trade deficit and ultimately benefit the economy. However, there are a lot more factors at play here and the new policy’s effect on the food industry is only a tiny facet of the situation.

Nevertheless, the new policies could've seen a more gradual enforcement with food businesses being notified well in advance in order to find workable solutions rather than having to deal with an abrupt implementation.

At the very least, it would not have left people scrambling to get by.

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