Do F&B Businesses Still Make A Profit During Ramadhan?

Ramadan is the ninth month of the Islamic lunar calendar. It started on June 18 this year and is considered the most holy month for Muslims. During Ramadhan, Muslims cannot eat, drink, smoke or even chew gum during daylight hours.

People stay up later after they break their fast and rise in the early hours of the morning so they can eat before daybreak. This often results in shorter sleeping hours, which can consequently result in lethargy and moodiness later on in the day.

During fasting, some aspects of daily life can sometimes take a backseat – offices may close early, productivity tends to falter and major deals are put on hold. However, despite the impression that Ramadhan results in lower economic activity, the reality is more complex.

While things can get a little slow in the daytime, the hubbub of activity in the evening, particularly in eateries and restaurants, usually makes up for it. For certain sub-sectors of the food and beverage (F&B) industry, the Ramadhan season could actually mean “action time,” due to increased demand for prepared entrees and family-sized meals during buka puasa. For others, especially small-time food business owners, sales activities may decrease or quiet down during Ramadhan.

We take a glance at what the fasting month heralds for different facets of the F&B or servicing sectors:

The big break fast

As Ramadhan is a month of devotion and community, it is a custom for Muslims to share their evening meal – iftar – with family and friends. Ramadhan buffets, typically held in restaurants or in hotels, are a popular break fast option for many Malaysians.

Wilfred Yeo, group director of business development at Sunway Hotels and Resorts shared that they recorded an approximately 15% increase in business during buka puasa in the first week of Ramadhan this year compared to the same duration in 2014.

This is in spite of the recent implementation of the Goods and Services Tax (GST).  This figure is expected to rise further in subsequent weeks as buka puasa activities normally “peak” during the second and third weeks of Ramadhan, said Yeo.

“The first week (of Ramadhan) is normally slower as many people are breaking fast at home with their families during this period,” said Yeo.

However, he did note a slight decrease in overall activity within restaurants in the hotel, especially during lunch periods as meeting packages tend to slow down during this time of the year. On hotel occupancy rates, Yeo said they are not usually affected during Ramadhan unless one is heavily dependent on government travel.

Leveraging on the season

While Ramadan stimulates business for hotels and dining chains, smaller businesses can take a hit, especially if they cater toward a mostly Muslim clientele.

Didie Zubir, who runs Dear Azalea – a Petaling Jaya-based café – shared that they experienced an 80% drop in average sales during the Ramadhan period last year.

“The café was only open for a month, and fasting month had come after,” said Didie, adding that it was quiet even at iftar because they were still new and not many people had known about the café then.

Fortunately, Didie managed to even out the café’s losses from the events and catering side of the business, which has been in operation since 2009.

Despite last year’s debacle, Didie predicts there will be a minimal drop in sales this time around, with an estimated 1% to 2% decline in the café’s total sales.

The café owner said, “Our operation hours are as per usual from 10am to 10pm. This is because we are a neighbourhood café and we cater to clients of different races and religious backgrounds.”

“Currently, only about 15% of our clients are Muslims and I am confident that our regular (non-Muslim) clients will continue to support us during this period, so our business will not be too badly affected,” Didie shared.

However, Didie admits that the cafe has seen a decrease in patronage ever since the GST came into effect, though the effects have not been significant so far. “We do not charge for service charges,” she said.

While Dear Azalea is known for its selection of comfort food, which includes mac and cheese, spaghetti meatballs, and coffee and cakes, it has tweaked its menu to include Ramadhan specials like patin tempoyak, rendang ayam, and sambal sotong to leverage on the season.

Didie also foresees a slight decline in demand for catering throughout Ramadhan. However, the café owner is optimistic that business will pick up towards the end of the fasting month and with the advent of Hari Raya.

Lesser demand for caterers

The economic effects of the fasting month can seem particularly brutal for catering businesses, especially with lower lunch hour demands and fewer events during the period.

Kamarul Izzwan, founder and owner of Physique For You – a sports nutrition facility that provides personal training and catering services – shared that he recorded a 20% decline in catering sales during the Ramadhan period last year.

Physique For You, which began operations in late 2013, aims to help athletes and fitness enthusiasts achieve their goals by tailoring training programmes and/or meal plans that are specific for their needs.

Kamarul shared that their Muslim majority clientele (up to 80%) at the initial stages of the business has since ramified into a more “mixed race” base.

“We are not that worried because our non-Muslim clients will continue to place their orders for our meals,” said Kamarul.

“Also, many of our Muslim clients continue to maintain an active lifestyle during Ramadhan, and continue consuming the same amount of calories required every day. Many still place orders for meals because of that,” he said.

He shared that Physique For You has also managed to secure periodic catering contracts with a few resellers this time around and will not be as badly affected by the season’s slowdown. All their meals cost RM10 per unit.

While Ramadhan can herald a set of innate challenges for some F&B businesses, many business owners leverage on the experience by offering seasonal specials designed to pique consumer spending. Also, because Malaysia is a multi-cultural society, the drop in demand is often minimum.

For businesses that has not been doing too well during Ramadhan, there is always Hari Raya Aidilfitri to look forward to afterwards, and festivities always bring about a spending boom.