Mitchells & Butlers, the company behind Toby Carvery, Harvester, and All Bar One, has recently increased prices on its menu, citing upcoming cost pressures. The company anticipates facing an additional £130 million in costs for the upcoming year, up from the £100 million incurred in the previous financial year.
This increase is attributed to the rise in employer National Insurance and minimum wage rates in April, along with higher food prices. The government’s recent announcement of a 4.1% minimum wage hike from April has contributed to these cost challenges.
Phil Urban, the CEO of Mitchells & Butlers, highlighted that a significant portion of the expected £30 million increase in costs is driven by surging beef and steak prices. Despite a 30% spike in steak prices, the company is optimistic that costs will stabilize in the coming year. Urban mentioned that prices across their menus and drinks have been raised by an average of 3.2% since the beginning of October.
However, the company is cautious about passing on the full extent of cost pressures to customers, considering the potential impact on consumer behavior. Urban explained that customers might avoid steak if prices become too high, leading some competitors to remove steak dishes from their menus entirely. Mitchells & Butlers has adjusted its menu offerings by reducing the number of steak and beef dishes or re-engineering the menu, without compromising on meat quality or portion sizes.
Despite facing these challenges, Mitchells & Butlers reported a 20% increase in pre-tax profits to £238 million for the year ending on September 27, demonstrating resilience amid rising costs. The company has implemented cost-saving measures, such as a labor scheduling system, auto-ordering to manage stock levels efficiently, and energy-saving initiatives.
While like-for-like sales grew by 4.3% over the year, the growth rate dipped to 3.2% in the final quarter due to weaker trading in London and premium brand segments. Sales growth stood at 3.8% in the initial eight weeks of the new financial year.