Mitchells & Butlers, the parent company of popular restaurant chains such as Toby Carvery, Harvester, and All Bar One, has recently raised prices on its menu items in response to anticipated cost pressures. The company is preparing to absorb an extra £130 million in expenses in the upcoming year, a significant increase from the £100 million additional costs incurred in the previous financial period.
This rise in costs is primarily attributed to the recent hike in employer National Insurance contributions and minimum wage rates, along with escalating food prices. The government’s announcement of a 4.1% increase in the minimum wage set for April further adds to the financial burden.
CEO Phil Urban revealed that a substantial portion of the projected £30 million increase in costs is driven by soaring prices of beef and steak products. Despite a 30% surge in steak prices, the company is optimistic that costs may stabilize in the near future. To offset some of these expenses, Mitchells & Butlers has implemented a modest 3.2% average price increase on its menu offerings and beverages since the beginning of October.
Urban emphasized the challenge of passing on the full extent of cost pressures to consumers, noting that excessively high prices could deter customers, particularly in regards to steak dishes. In response, the company has made strategic adjustments, including reducing the number of steak and beef options on the menu where necessary.
Despite the financial challenges, Mitchells & Butlers reported a 20% increase in pre-tax profits to £238 million for the year ending on September 27. The company has taken proactive measures to streamline operations and cut costs, such as implementing a labor scheduling system, optimizing stock levels through auto-ordering, and adopting energy-efficient practices.
While like-for-like sales grew by 4.3% over the year, the growth rate dipped to 3.2% in the final quarter, influenced by weaker performance in London and upscale brand segments. However, sales growth rebounded to 3.8% in the initial eight weeks of the new fiscal year.