Mother’s Day, which will be celebrated on the 12th, is encouraging entrepreneurs in the country’s bar and restaurant sector, after a worse moment, hit in February, when 31% of companies were in the red, with accumulated debts, and 69 % operated without profit.
“The sector is very excited because Mother’s Day is the second best day of the year. It’s second only to Valentine’s Day”, he confirmed to Brazil Agency the president of the Brazilian Association of Bars and Restaurants (Abrasel), Paulo Solmucci.
The first quarter was not as good as the sector expected, but there was a recovery from March onwards. “Now, companies are excited for Mother’s Day. Four out of five business owners are expecting a better year than last year. The majority, that is, 60%, already think that growth will be above 20% in relation to the same commemorative date of 2023. The group is very excited about Mother’s Day. The consequences of this are very positive. It reduces the difficult situation that everyone is facing,” said Solmucci.
As the expected movement is much higher than normal, there is an increase in hiring by establishments. According to a survey released by Abrasel and carried out with 3,069 businesspeople, between April 22nd and 29th, 77% of establishments are planning to open their doors on the second Sunday in May (12th). Of these, 78% expect to surpass the previous year’s revenue, with the majority (62%) projecting an increase of up to 20%. “Everyone wants to enjoy this day, which is very special”, commented Paulo Solmucci.
Recovery
The survey proves the gradual recovery of the sector, which experienced a reduction in losses and an improvement in sales last March. In February, 31% of companies were operating in the red; in March, this index fell to 25%. They made 35% profit and 40% remained balanced. The indicator of companies that did not make a profit fell from 69% to 65%. “The best thing is that it fell more on those who were making losses,” said Solmucci. The increase in sales was 5.2% in March, compared to February: 52% of companies confirmed that revenue was higher than in the previous month, against 22% who stated that sales fell.
The president of Abrasel stated that the bar and restaurant sector has difficulty passing on inflation prices “especially because the consumer is also tight”. According to the survey, around 57% of respondents were unable to keep up with the inflationary increase, which was 1.42% in the first quarter of this year. Of this total, 40% were unable to adjust their menu prices, 17% made adjustments below inflation, 34% managed to increase prices in line with inflation and only 9% adjusted above the index.
The sector recorded one of the biggest wage increases in real terms during the period, that is, discounting inflation, of around 4.7%. “The sector had to increase wages in real terms to attract and retain labor, at the same time that we are having difficulty passing on the price to the consumer. So (profit) margins are squeezing,” he explained.
Challenge
The biggest challenge, according to the president of Abrasel, concerns labor. “It’s very difficult. We promoted one of the biggest salary increases in the country last year, and we had a strong increase in food at the beginning of this year, in addition to enormous difficulty in passing on average inflation to the menu. This is compromising the profitability of the sector, which continues to look for the light at the end of the tunnel, but is very tight, this time due to real salary increases”. Solmucci highlighted that, when businesspeople are unable to pass on inflation and salary increases to prices initially, this ends up reducing the margin “in a sector that has a very tight margin”.
For the year, Paulo Solmucci believes that the sector will have real growth of 3%, which is at least 50% above what the country should grow. He highlighted that the big question for businesspeople is being able to pass on the price increase given the pressure on food and labor costs. From a revenue point of view, he reaffirmed the sector’s optimism. “The worst moment is over.”
Debt, however, remains at a high level, with 40% of companies showing late payments. Among these, 68% owe federal taxes, 46% owe state taxes, 38% have overdue bank loan installments, 29% owe labor or social security charges and 27% are in debt with public services such as water, gas or electricity.
