Mitchells & Butlers, the company behind Toby Carvery, Harvester, and All Bar One, has recently raised prices on its menu due to anticipated additional costs of £130 million in the upcoming year. This increase is higher than the £100 million in extra expenses incurred in the previous financial period.
The rise in costs is primarily attributed to the recent hike in employer National Insurance and minimum wage rates in April, coupled with an increase in food prices. The government’s announcement of a 4.1% minimum wage increase from April further contributes to the financial strain.
According to Phil Urban, the CEO of Mitchells & Butlers, the projected additional costs are mainly driven by a significant surge in beef and steak prices. Despite steak prices escalating by 30%, the company is hopeful that costs will stabilize in the coming year. To offset some of the impacts, prices across menus and beverages have been increased by an average of 3.2% since early October.
Urban emphasized the challenge of passing on the full extent of cost pressures to customers, noting that excessively high prices could deter patrons from ordering steak dishes. Consequently, the company has made strategic menu adjustments, such as reducing the number of steak and beef options or reconfiguring the offerings, rather than compromising on food quality or portion sizes.
Despite the financial challenges, Mitchells & Butlers reported a 20% increase in pre-tax profits to £238 million for the year ending September 27. The company has implemented cost-saving measures, including a streamlined labor scheduling system, auto-ordering processes, and energy-efficient practices, to mitigate financial constraints and optimize operational efficiency.
While like-for-like sales showed a 4.3% growth over the year, the final quarter saw a slight dip to 3.2% due to subdued trading in London and premium brand segments. However, sales growth rebounded to 3.8% in the initial eight weeks of the new fiscal year.