Mitchells & Butlers, the company behind Toby Carvery, Harvester, and All Bar One, has increased prices on its menu due to anticipated additional costs of £130 million in the upcoming year, up from the £100 million extra incurred in the previous financial year.
The rise in costs is attributed to factors such as the recent increase in the employer National Insurance and minimum wage, along with higher food price inflation. The government’s decision to boost the minimum wage by 4.1% from April has further contributed to the anticipated financial burden.
CEO Phil Urban highlighted that the expected £30 million increase in costs is primarily driven by the surge in beef and steak prices. Despite a 30% spike in steak prices, the company is hopeful that costs will decrease in the coming year. To offset the impact of rising costs, the group has raised prices by an average of 3.2% on its menus and drinks since October.
However, Urban emphasized that the company cannot transfer the full extent of cost pressures to customers, as excessively high prices would deter them from purchasing steak dishes. Some competitors have even removed steak from their menus entirely, prompting Mitchells & Butlers to reduce the number of steak and beef offerings or revamp its menu offerings.
Despite the challenges, Mitchells & Butlers reported a 20% increase in pre-tax profits to £238 million for the year ending September 27, even with the added expenses from wage bill hikes in April. 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 rose by 4.3% over the year, growth slightly dipped to 3.2% in the final quarter due to weaker trading in London and surrounding areas, as well as in upscale brands. Sales growth stood at 3.8% in the initial eight weeks of the new financial year.