Noe Valley Voice June 2008

Merchants Strive to Weather Bad Economy

By Joshua Brandt

The nation's economic malaise has hit Noe Valley merchants hard. And although residents of the neighborhood tend to be more affluent, and conscious of the benefits of shopping locally, few businesses have remained unscathed.

Perhaps no group of merchants has been impacted more than those selling or serving food.

Asked how the current recession--or, more accurately, stagflation--has affected his business, Bruce Ponte, proprietor of Café Ponte at the corner of 24th and Diamond streets, gave a pithy response.

"Sometimes a blueberry muffin isn't just a blueberry muffin," he said with a wry smile. "The price of a fifty-pound bag of flour has nearly doubled in the past four months," Ponte said, adding that the cost of a 200-count carton of eggs had almost tripled over the last two years, going from $12 to $30. In addition, he has been paying fuel surcharges for food deliveries to the cafe. Then there is the impact from the sharp decline across the United States in the bee population, which pollinates the flowers that make the blueberries.

Clearly, the price of producing muffins has risen in the past few years. The cost of muffins, however, has not.

"People have an idea of how much they want to pay for a muffin, and you really can't go above that price," said Ponte.

A Perfect Storm

Ponte's dilemma epitomizes the struggles faced by other local restaurants and food vendors.

"Our distributors used to raise their costs every several months, and now they raise their costs almost weekly," said Joshua Epple, the owner of Drewes Bros. Meats on Church Street. "Just when you think the prices are set, wham! you're hit with another increase."

While noting that his store has been a neighborhood institution for well over a century, which has helped it endure tough economic times, Epple said this one is different. "Some of it is media-driven, I think," Epple said. "But some of it is hard to deny. When our costs are going up by ten to thirty cents a pound on some items, it's hard to justify carrying them. People in the industry are taking a huge hit on Alaska king salmon. Our wholesalers ordered five hundred pounds recently, and were barely able to sell it with any margins."

With a plethora of economic, environmental, and political concerns swirling around them, many local business owners feel like they've encountered a "perfect storm."

"Sometimes I tell people I run a non-profit," said Paolo Dominici, who has owned Bacco Ristorante on Diamond Street for 15 years. "Local minimum-wage laws play a part, but the dollar is being killed by the euro right now. We import all of our olive oil, and we really are debating serving complimentary bread and oil at the table.

"If it weren't for all of our local customers who value small businesses so much, we would be in trouble. As is, with large parties that have a certain budget [and ask for a discount], we're sometimes forced to turn them away. In the past, we'd find a way to make it problem. But not now."

Smaller Seasonal Menus

Dominici's concerns are echoed by Deano Lovecchio, the chef at Kookez Café on 24th near Castro.

"I call it the trickle-down effect," Lovecchio said. "Because menu items cost more, people eat out less. So restaurants order less food. So the produce and delivery companies let go of employees. So guess what? Those employees eat out less.

"That's what's happening locally. Now magnify that a hundred times, and that's what's happening nationally. So you can see where we're in big trouble."

But Lovecchio, who commented on the skyrocketing price of rice by saying "rice is going to be the culinary equivalent of the gas crisis of the seventies," sees a little room for optimism.

"We've saved money by switching from linen to paper napkins, which are recyclable and better for the environment," he said. "That saved us about $400 per month. And we've had to change our menu to accommodate the times. Even though it was a popular item, we had to eliminate the rib-eye steak. Either we charged the same amount for half the steak, or twice as much for the same cut. It was a catch-22 that would leave our customers unhappy no matter what."

Lovecchio solved his conundrum by cooking more comfort food, such as macaroni and cheese, which has long been a kids' favorite at the restaurant but is now made for adults as well. "It's reasonably priced, and it's filling, and that's what people are looking for nowadays," Lovecchio said.

The chef is convinced that restaurants' salvation lies in seasonal produce.

"Seasonal produce is always cheaper, and because it's fresh it has more vitamins and nutrients. So you're not only helping people's wallets but their waistlines as well. More restaurants will be switching to smaller, seasonal menus. That's a better option than cutting back on staff, which we don't want to do."

Worst in 30 Years

That option, unfortunately, wasn't available for Denny Giovannoli, the owner of Tuggey's Hardware store. An icon of 24th Street for over a century, the store has felt the housing bust viscerally.

"We've had to let people go, and they were all good guys," said Giovannoli. "I hope we don't have to let any more people go, but it's hard to tell where things are going. This is by far the worst I've seen in my thirty years here.

"After a certain point, it really doesn't matter what you do to promote sales. We've had a loyal clientele for decades, but people are coming in less frequently, and buying less stuff when they do come in," added Giovannoli, whose father worked for Mr. Tuggey himself. "The bottom line is that we're living in a really weird time right now."

"It's not just Noe Valley that's ugly...the whole world is ugly," concurred Robert Ramsey, co-owner of Just for Fun gift store on 24th near Noe. "But that's tough to think about when you've had to cut back on staff, which we've had to do.

"In my 20 years here at this store, there's never been a time like this. There's just no comparison. None. Usually, if there's a slump, it will affect certain types of products. But we're down across the board in every department. Believe me I think about it daily," said Ramsey, pausing for emphasis. "And I mean daily."

'Spend Locally' the Mantra

Other merchants in the area take a more sanguine approach, or, conversely, believe that their business might be getting a little boost from the slump.

"We've been in the batten-down-the-hatches mode for years, so this is nothing new," said Tracy Wynne, co-owner of Cover to Cover Booksellers on Castro Street. "The independent book business has been under assault for years," Wynne added.

In fact, according to Wynne, whose business was bolstered by a loan from a consortium of local residents in 2003, this economic cycle wasn't as bad as the dot-com boom and bust.

"Back then, when the Internet was more of a novelty, more people were enthralled with ordering books online. Now people have become much more aware of how important it is to spend money locally."

"I think that having a business in Noe Valley is a huge asset," agreed Gwen Sanderson, this year's co-president of the Noe Valley Merchants and Professionals Association. Many local residents go out of their way to support neighborhood businesses, she said. "There's something unique about knowing the person that's serving you day in and day out," said Sanderson, who owns and operates Video Wave on Castro Street.

She feels her video business, which has been around for 20 years, also might be one of those that is less affected by economic downturns.

"In tough times, when people are looking to cut back, they'll be looking for more comfort items, and videos and DVDs certainly fall into that category. For example, if people want to cut back on a really high cable bill, they'll rent movies with us instead," added Sanderson.

Still, she and association co-president Donna Davis, of Forbeadin' on Church Street, have been busy shoring up their fellow shopkeepers by holding mixers and sidewalk sales and lobbying the city to protect small business.

Bucking the Trend

One merchant who said that he'd been receiving a tangible benefit from these turbulent times is Larry Kline, who's owned Noe Valley Cyclery since 1976.

"Well, gas prices are through the roof right now, so people are looking for an alternative means of transportation, and biking is a good one," said Kline. "That's especially true for people who are commuting to work, either within the city or taking a bike on Caltrain. I know that our sales of both folding bikes and electric bikes are higher than it's ever been.

"On the other hand," Kline added, "in tough economic times, people may decide to repair their old bike rather than buy a new one, so that helps the store as well."

The economy was the impetus for Lynn Ingham, the owner of Lynn's Antiques and Beautiful Things, to form the Church Street Professionals.

"Even though our business is in Noe Valley, the merchants on Church Street live in the shadow of 24th Street. People don't realize that this part of Noe Valley has a huge diversity of shops. There are over a hundred businesses on Church between 24th Street and 30th Street that don't get the foot traffic of 24th Street."

If geography inspired Ingham to reach out to her neighbors, the weak economy gave her added incentive.

"In times like these, it really helps to know your neighbors," said Ingham, who added that the group's inaugural cocktail party at Incanto two summers ago was a huge success. "I think there's something really psychologically helpful in knowing that your business neighbor has your back. In the past year, I've met so many of my neighbors and I've been able to recommend their businesses. And I know they've done the same for me."

If Ingham's group and others like it are the harbingers of the future, it might provide a silver lining in these gloomy economic times.

"I'm hunkering down, as they say," commented Just for Fun's Ramsey, as his dog Roscoe jumped on his lap.

"I'm not really depressed, but...well, what am I? I guess you could say that I'm just weathering the storm, and waiting for it to pass.

"Happy days will come again."