Today, I would like to talk to you about increasing cost prices and should you pass these on?

 

Within unprecedented times. This year, we’ve seen a second price rise from the major breweries. 

 

Heineken put up 6% plus in September. 

Greene King have also put theirs up, that I have seen and others doing the same. 

 

At the same time, according to ONS figures, food and non-alcoholic beverage prices, cost prices, have seen a 42% increase year on year to September. 

 

DEFRA have reported a 35% rise in fruit with prices in the month to September 2022. 

 

So along with that, there is going to be a 10.1% increase in business rates in April next year. 

 

We’ve had minimum wage rise. 

 

The cost of cleaning materials as inflation rate on that has gone up nearly 30% 

 

So this is all affecting your bottom line. 

 

The immediate temptation is as the economy is slowing, customers have less disposable income perhaps not coming to the pub or restaurant or other hospitality business quite so often 

 

The temptation is to say you will swallow that price increase and you will keep your prices the same. I think this is a mistake. 

 

That way is the way to ruin!! 

 

You will not – by maintaining your margins you’re not even going to cover the increases in your cost base. 

 

So how should you do this? 

 

Over the years I’ve been a stock taker the usual thing is, when there’s an annual price rise clients say to me;  

 

Oh, we can’t put the price of beer up.

We’ll do spirits. 

We’ll do liqueurs. 

 

Hopefully you have regular some takes done with an extended report so you can see the percentage of sales from each of your sections. 

 

In most pubs and pub restaurants, you will see that your majority of your wet sales are on draught products. Draught ciders Beers, Cask Ales, etc Whilst liqueurs is probably down, at most 3% of sales. Your spirits is probably a little more. Is probably somewhere,, let’s say 15%? 

 

So if you’re only looking at increasing your price over those sections such as the spirits and liqueurs then you’re not going to manage to make a significant increase on your GP and you will be going backwards. 

 

You will be, as I saw one hospitality owner say, she was talking about the price of fish and chips, she was a fish and chip shop owner. Or that’s what her pub majored on. 

 

It should have been, let’s say, £25. with the current fish prices and the cost of oil and chip etc. and she was selling here for £15!

So she was saying basically that she’s paying her customers £10 to come and eat in her restaurant. 

 

You are not to charity. 

You really do need to be looking at your costs. 

 

If you’re a tied house you can’t do a lot about your costs of your good for sale. Your beers have to come from your landlord or your Pub Co. 

 

If you’re a freehouse, you’ve got a little bit of wiggle room. You can source new suppliers, but you seriously need to be looking at least maintaining your GP, with all the price rises coming through or else you won’t be in business that long. 

 

It’s very hard. 

 

It’s almost counter intuitive, putting your prices up. But if you put them up, you you probably will not see a significant. fall in customer footfall, if any. 

 

You’ll get a lot or moans and groans, but you’ve really got to look you putting it up and you got to remember any price increase that comes through from your suppliers, you’ve got to add your margin to that price rise and the VAT. 

 

That’s why when I worked with one client recently on his Grenne King increases, it was, generally across the draught products, forty pence per pint selling price increase to his customers. 

 

But he wants to survive. 

 

So my advice is you’ve got to look at it. 

You’ve got to put them up. 

You’re not to charity. 

You need to survive.