Pubs and restaurants battle to keep prices competitive amid ‘intense pressure’ on margins
The hospitality sector has warned of “intense pressure” on margins while shoppers have been told food prices could surge as much as 10 per cent.
Marks & Spencer chairman Archie Norman cautioned that shoppers could see an even pricey weekly shop amid historic levels of inflation.
Speaking to the BBC Radio 4’s Today programme on Tuesday morning, the grocery chief said further hikes were “very negative for consumer discretionary income.”
Norman placed grocery price inflation as “running towards eight per cent to 10 per cent.”
However, Norman stopped short of calling the rises “apocalyptic” after Bank of England governor Andrew Bailey said he risked sounding “rather apocalyptic” about food prices.
The bleak consumer warning comes as the hospitality sector has warned modest sales growth is being swallowed by high inflation.
Fresh data from the Coffer CGA Business Tracker revealed that restaurants saw like-for-like sales growth of five per cent from April 2019 while bars marked four per cent growth and pubs’ sales were flat.
“The worst of Covid-19 may be behind us now, but cost issues are going to put intense pressure on hospitality’s sales and margins for the foreseeable future,” CGA’s Karl Chessell added.
Businesses have been attempting to hold back a tide of dramatic price hikes as consumers themselves feel the pressure of household bills increasing.
London restauranter Charles Tyler, told CityA.M. the venue would likely be forced to increase prices when it switched to its summer menu in a few weeks time.
“You can only put prices up so much before you end up scaring people away,” according to Tyler, who owns Paladar in Elephant and Castle.
While destination venues will likely still enjoy customers celebrating special occasions and enjoying their post-pandemic freedoms, the casual dining sector may suffer in the coming months as Brits pull back from discretionary spending, Tyler added.
“I do fear a bit for the hospitality industry for the next year,” he warned.
Rising food and ingredient costs were a “hurdle” facing the whole of the hospitality sector, Sarah Willingham, chief executive of Tonight Josephine owner Nightcap told CityA.M.
However, bars were still ripe to reap the rewards of pent up demand after the easing of Covid lockdowns, the bar boss explained.
Willingham added: “We are currently seeing two types of customer – early millennials and gen Z who aren’t feeling pinch; some people are still revelling in the freedom of being out in bars and restaurants after the experience of the pandemic and other people are wanting to spend their money on treats such as our events and brunches.”
What’s more, bar group had been mitigating cost pressures with group purchasing after boosting its estate by 20 sites since last year.
Greggs warned on Monday that price rises on its cheap baked goods were inescapable, due to rising input costs.
“The big unknown is how consumers react to the rising costs and tightening of wallets,” Third Bridge analyst Ross Hindle, added.
However, he noted: “It is believed that there is an opportunity for Greggs to gain market share from ‘posh’ coffee shops and more expensive food-to-go operators as Britons cut back on their mealtime and beverage spend.”
It comes as the Office for National Statistics will release the latest inflation figures for April on Wednesday morning.