Two of the UK’s largest pub groups have warned that cost pressures are a “major challenge” to the industry and have forced them to cut discounts, reduce energy use and simplify their menus.
Mitchells & Butlers, the UK’s largest listed pub company, said on Wednesday that it expected costs for the full year to be up 11.5 per cent compared with 2019 and to rise 6 per cent again next year depending on the “high volatility” of energy prices.
It said it was focusing on “cost mitigating procurement strategies” and cutting its energy use as companies across the sector battle rising prices on all fronts including food, labour and fuel bills.
“Cost headwinds present a significant challenge to the industry, particularly those costs related to utilities, wages and food,” said chief executive Phil Urban.
Marston’s, which operates 1,482 pubs, said that it was phasing out a popular long standing ‘two for one’ food offer and that it had also overhauled and simplified its menu.
Hospitality businesses are at the centre of a whirlwind of price increases because of their reliance on ingredients that have been heavily impacted by the war in Ukraine and high energy requirements. Since starting to reopen following the 2021 lockdowns, many have also faced severe staffing shortages as workers left the industry after almost two years of unstable shifts.
Some pubs have flagged that energy bills have risen by more than 300 per cent and that energy companies have refused to give new contracts because the businesses are seen as too risky following the pandemic.
M&B said that its sales, however, had almost returned to pre-Covid levels. Total sales in the six months to April 9 were £1.16bn, 2.2 per cent below the same period in 2019, having recovered from a heavy hit to business from the Omicron variant during the normally lucrative Christmas period.
Pre-tax profits in the same period were £57mn, up from a loss of £200mn in the first half of 2021.
Marston’s reported total revenue of £397mn in the half year to April 2, more than five times what it made in the same period in 2021 but around a third below what it made in 2019. Pre-tax profits were £25.6mn, up from a £105.5mn loss in 2021.