Mitchells & Butlers, the parent company of popular dining chains Toby Carvery, Harvester, and All Bar One, has recently increased prices on its menus due to anticipated cost pressures. The company is preparing to cover an additional £130 million in expenses for the upcoming year, up from the £100 million spent in the previous financial period.
Factors contributing to these increased costs include the rise in employer National Insurance and minimum wage, along with higher food prices. The government’s recent announcement of a 4.1% minimum wage increase from April further adds to the financial burden.
CEO Phil Urban highlighted that a significant portion of the projected £30 million increase in costs is attributed to soaring beef and steak prices. Despite a 30% surge in steak prices, the company is optimistic that costs may stabilize in the coming year. In response to these challenges, Mitchells & Butlers has implemented a modest 3.2% price increase on average across its food and beverage offerings since early October.
Urban emphasized the difficulty of passing on the full extent of cost hikes to customers, acknowledging that excessively high prices could deter diners, particularly in the case of steak items. Some competitors have even removed steak from their menus entirely. To manage these challenges, Mitchells & Butlers has adjusted its menu by reducing the number of steak and beef dishes or redesigning offerings, without compromising on quality or portion sizes.
Despite the cost pressures, Mitchells & Butlers reported a 20% growth in pre-tax profits to £238 million for the year ending on September 27. The company has proactively implemented cost-saving measures, such as optimizing labor scheduling, auto-ordering to manage inventory efficiently, and energy-saving initiatives.
While achieving a 4.3% increase in like-for-like sales over the year, growth slightly dipped to 3.2% in the final quarter, primarily due to weaker performance in London and premium brand segments. The company recorded a 3.8% sales growth in the initial eight weeks of the new fiscal year.
