Two of Britain’s largest pubcos posted bumper sales figures in the past few days, but punters shouldn’t be surprised if the price of a pint and fish and chips skyrockets in the coming months.
Here’s the kicker: Sales growth doesn't seem to be matching wholesale inflation for Britain’s boozers, and price hikes are on the agenda.
Mitchells & Butlers, owner of the Harvester, All Bar One and Toby Carvery chains, today declared a top-line of £2.2bn, or around 1% ahead of pre-Covid levels.
Considering the doom and gloom that seems to have permeated sales predictions for the pub scene this year, that can only be seen as a strong reading.
But adjusted margins of 10.9% fell far short of the 14.2% enjoyed in 2019, or the 14.1% in 2018, for that matter.
The story was not too dissimilar from the 1,400-strong pub chain Marston’s earnings call on Tuesday.
Owner of a diverse portfolio including Pitcher & Piano, Generous George and Milestone Carvery, Marston’s raised its glass to a return to profit and 5% sales growth against pre-Covid levels.
Yet margins of 14.4% fell close to 1% below 2019 levels, and between 2% and 3% below margins from previous years.
Headwinds a bitter pill to swallow
It’s not just wholesale inflation taking a bite out of margins: Both pubcos have warned of soaring energy prices and staff costs, exasperated by the hike in statutory wages scheduled for April 2023, and an end to government energy subsidies.
And while neither company has explicitly come out and said it, the buck will inevitably be passed onto the customer to shore up these operating profits.
Marstons’ chief executive Andrew Andrea told shareholders: “We are working hard to mitigate as many of these cost pressures as possible and we expect to offset some of these higher levels of inflation through a combination of cost efficiencies and pricing strategies.”
Reading between the lines of this corporate talk should speak for itself.
Nearly verbatim were statements from M&B’s chief executive Phil Urban: “We continue to work very hard to mitigate as much of the impact of these cost increases as we can, both through driving sales growth and through identifying and implementing further cost efficiencies.”
Nobody is going to be shocked by paying an extra 20p for a pint at the local, but if pubcos are serious about returning to pre-Covid margins, those “cost efficiencies” could be no small beer.
Read more: £7 pints could be new norm as industry suffers a “perfect storm”
But will customers take the hit, or will staying in on a Friday night find favour?
Alan Mahon, founder of Edinburgh-based Brewgooder, recently predicted that a pint may become a “luxury” for many.
But if better-than-expected pubco revenues and the throngs of drinkers packing out city bars for the World Cup are anything to go by, Britons haven’t reached breaking point just yet.