Mitchells & Butlers, the company that owns Toby Carvery, Harvester, and All Bar One, has recently increased its menu prices due to anticipated higher costs. The company is preparing to absorb an extra £130 million in expenses for the upcoming year, a significant rise from the previous financial year’s additional £100 million outlay.
The cost escalation is primarily attributed to the recent increase in employer National Insurance rates and minimum wage, as well as soaring food prices. The government’s announcement of a 4.1% minimum wage hike from April further adds to the financial burden.
Phil Urban, the CEO of Mitchells & Butlers, highlighted that the projected £30 million increase in costs is primarily influenced by surging beef and steak prices. Despite a 30% surge in steak prices, the company hopes to see cost reductions in the near future. Urban mentioned that prices across menus and beverages 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, as excessively high prices could deter patrons. To mitigate the impact, Mitchells & Butlers has made strategic menu adjustments, such as reducing the number of steak and beef dishes or menu re-engineering, without compromising on quality or portion sizes.
Despite facing challenges, Mitchells & Butlers reported a 20% increase in pre-tax profits to £238 million for the year ending September 27, demonstrating resilience amidst rising costs. The company has implemented various cost-saving measures, including optimizing labor scheduling, auto-ordering to manage inventory efficiently, and energy-saving initiatives.
While like-for-like sales experienced a 4.3% growth over the year, the final quarter saw a slight dip to 3.2%, primarily due to subdued trading in London and premium brand segments. Sales growth for the initial eight weeks of the new financial year stood at 3.8%, indicating a positive start amid ongoing economic challenges.