Bad Economy Torpedoes Moscow Restaurants

February 27,2015

MOSCOW— Moscow's casual dining scene has grown exponentially in the past decade, but Russia's economic decline, the drop in the value of the ruble and high inflation are taking a toll.

Igor Bukharov, president of the Russian Federation of Restaurateurs & Hoteliers, estimated that as many as 30 percent of restaurants in Moscow might be forced to close this year as Russians tighten their belts.

“The restaurants close down not only because of a high rent or low purchase power of the population, but because of our gastronomic culture," he said, "as people come to restaurants not just to dine, but they come for leisure time.”

Bukharov said midrange restaurants are suffering the most as Russians look to cheaper fast food to save money.

Many landlords peg restaurant space to U.S. dollars or euros, so the drop in the value of the Russian currency effectively doubled their rates.

Anton Lyalin, managing partner of steakhouse chain Torro Grills, said he had not choice but to cut costs at his business.

“Any crisis turns you to be more creative, to be more efficient," he said. "We have to see where we spend money in terms of labor. We have to see where our costs are and we have to cut them. To still survive, we have to renegotiate our deals about rent, which was a big deal for the last two months in the whole industry.”

Lyalin sources meat locally, so, unlike European-themed restaurants, his operation was not terribly hurt by Russia's ban on Western food imports.

But a newer seafood restaurant it opened, featuring lobster, had to switch to Russian crab after authorities put a stop to lobster imports.

For Muscovites who want to cook at home but may not be great at it, Katerina Cronstedt, a Swedish citizen born in Russia who is managing director of family-run Katerina Hotels, founded an online dinner kit delivery service.

“It's becomes too expensive to go to restaurants, but people still want high-quality food, which we can offer them," she said. "And, since we're based in a restaurant, an existing restaurant that has been around for 15 years, we have access to professionals, we have access to great quality meats and fish, which you cannot get in the shop.”

Cronstedt said that while occupancy rates in her hotel chain have gone down slightly, her dinner kit delivery service is booming.

Restaurant owners say that despite the pain of the economic downturn, the cost-cutting and competition will ultimately benefit consumers as their spending focuses on the best quality for the best price.