1 Menu prices have risen…
Inflationary pressures on energy, food, drink, labour and other key inputs have put huge strain on pricing. While operators have been able to absorb some of the extra costs, they have to be passed on to consumers to some extent. CGA’s market measurement data suggests the price of many core drinks has risen by between 7% and 9%—and although most consumers understand the reasons for the increases, it doesn’t make them any easier to swallow.
2 … And more hikes will have to follow
CGA’s last Business Confidence Survey with Fourth found that operators had increased their food and drinks menu prices by 13% and 11% respectively in the last 12 months—and more rises will have to follow in 2023. With so much uncertainty over big economic factors like interest rates and global supply it’s hard to forecast too far ahead, but while inflation should ease over the next 12 months, proper respite is still some way off.
3 Price pressures have caused thousands of closures
Inflation, the cost of living crisis and COVID-related upheaval have left many pubs, bars and restaurants extremely vulnerable, especially in the independent sector. CGA’s latest Hospitality Market Monitor with AlixPartners shows a net decline of around 4,800 licensed premises in 2022, and with 1,600 closures in the fourth quarter alone—as big a drop as at the peak of the COVID-19 crisis. Without urgent help from the government, thousands more businesses and jobs are in jeopardy.
4 Experience is key
With less money in their pockets, consumers are more choosey and demanding than ever when they go out. They want good value for their extra spend, which means not just high quality food and drink but memorable all-round experiences. Venues that can’t deliver experiences over and above what consumers can get at home will be at risk.
5 People still want to go out
The Coffer CGA Business Tracker has shown that although sales remain well below pre-COVID-19 levels in real terms, managed groups have consistently achieved modest year-in-year growth over the last 12 months. This indicates that while some consumers are reigning in their spending because of cost pressures, they are still eager to eat and drink out and support their local pubs, bars and restaurants. The short-term future for hospitality is rocky, but the long-term outlook remains good.
Click here to listen to the Morning Advertiser’s Lock In Podcast in full.
