Mitchells & Butlers, the company behind Toby Carvery, Harvester, and All Bar One, has implemented price increases across its menu due to anticipated additional costs of £130 million in the upcoming year. This is an increase from the £100 million extra expenses incurred in the previous financial year.
The rise in costs is primarily attributed to the recent hike in employer National Insurance and minimum wage, along with elevated food price inflation. The government’s announcement of a 4.1% minimum wage increase from April has further contributed to these financial pressures.
Phil Urban, the CEO of Mitchells & Butlers, highlighted that the expected £30 million cost surge is mainly driven by the escalation in beef and steak prices. Despite a 30% spike in steak prices, the company remains hopeful for cost reductions in the future. Urban mentioned that prices across menus and drinks have been raised by an average of 3.2% since October.
While the company has adjusted prices, it is cautious about passing on the full impact of cost increases to customers, as excessively high prices could deter them from purchasing certain items, like steak. Urban noted that some competitors have removed steak dishes from their menus entirely, whereas Mitchells & Butlers has either reduced the availability of steak and beef dishes or revamped the menu structure.
In the face of these challenges, Mitchells & Butlers reported a 20% increase in pre-tax profits to £238 million for the year ending on September 27, despite the added expenses from the April wage bill increments. The company has been actively implementing cost-saving measures, including optimizing labor schedules, adopting auto-ordering systems to manage inventory efficiently, and implementing energy-saving initiatives.
Although like-for-like sales rose by 4.3% over the year, growth decelerated to 3.2% in the final quarter, primarily due to weaker trading in and around London and in higher-end brands. However, sales growth rebounded to 3.8% in the initial eight weeks of the new financial year.
