'Torrid' supply chain conditions force menu prices up by 9%

17 August 2022

Hospitality leaders have raised menu prices by an average of 9% and plan to raise them a further 6% amid warnings rising costs will mean firms “fall away”.

Rising energy costs, food inflation and food shortages have forced hospitality businesses to pass rising costs onto customers, according to a survey by data firms NielsenIQ and Fourth. 

It follows research which found one in four hospitality businesses are considering closing in the next year due to soaring energy costs.

The survey of hospitality leaders found 71% had seen significant increases in energy costs, while six in 10 (60%) had experienced significant food and drink price inflation.  

Eight in 10 (81%) businesses had experienced reduced product lines, while more than half have seen products not turning up (62%) or delays (51%).

Sebastien Sepierre, managing director for EMEA at Fourth, said: “The hospitality industry has had a torrid time over the last two-and-a-half years, and the ongoing supply chain disruption is the latest challenge that businesses have had to contend with.”

Karl Chessell, CGA’s business unit director, hospitality operators and food, EMEA, said “the double whammy” of cost increases and availability issues is “piling huge pressure” on operators’ margins. 

Chessell continued: “Combined with the growing cost-of-living crisis for consumers, it means trading conditions will be very tough over the remainder of 2022. Hospitality’s long-term future is bright, but for now leaders will have to find the right balance between absorbing soaring costs and passing them on to guests. The huge supply challenges also highlight the need for urgent and sustained government support for the sector.”

An analysis of 1,000 UK pubs, bars and restaurants by Fourth found average overall costs are up by 10% compared to 2019.

The hardest hit commodities were dairy (up 40%), grains (up 35%), meat (up 35%), fish (up 25%) and fruit and veg (up 20%).

Food costs were up by approximately 13%, while drink costs were up by 8% over the same period.

Kate Nicholls, chief executive of UKHospitality, said: “These stark figures highlight the extent of the damage that rising costs are having on the hospitality and leisure market, engulfing and suffocating businesses and consumers alike.

“After more than two years of unprecedented challenges due to Covid, cost inflation now poses a massive threat to our industry and the wider economy. The impacts of rising costs are being felt across every facet of running a hospitality business, including on jobs and recruitment, economic stability, business viability, consumer confidence and willingness to spend. 

“It’s absolutely crucial that the sector receives as much support it can get – without it, more and more businesses and jobs will fall away.”

The food sector has faced successive hits to supply chains, with the current droughts destroying crops and threatening to raise food prices further for the coming winter. 

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