For those who prefer eating out, this is not an appetising piece of news. Rising food prices have compelled restaurant and fast-food players to increase prices or tweak their menus. So, while eating at Pizza Hut is set to turn 4-5% more expensive, your favorite cup at Costa Coffee will become costlier by 2-3% in a fortnight. Yo! China is rejigging its menu to factor in soaring input prices, while Kwality Group which has quick-service restaurant brands like Kwality Express, Chopsticks Express, bakery outlets Bread & More and outdoor catering services has also increased its product prices by 5-7%. Though McDonald?s is not looking at an increase in prices, its products have become ?tax-exclusive?, which means the consumer pays extra in the form of taxes.
Food inflation for the week ending June 19 was 12.92%.
All through an year of rising prices, food chains which feared losing their customers did not increase prices. However, holding on for long and absorbing the entire cost was becoming difficult. ?After absorbing food inflation for 18 months, we have decided to increase prices. Earlier, owing to the downturn, players did not hike prices,? says Anup Jain, marketing head, Pizza Hut.
Adds Virag Joshi, president of Devyani International, master franchisee of Costa Coffee in India: ?We are finetuning our menu by introducing products which will give us 2-3% higher margins. Since milk prices are constantly increasing, we will hike our beverage prices. In the last three months, our margins have been hit by 3%. Higher fuel prices have also led to cost escalation.?
Companies are busy revisiting menus. ?We will be reworking the whole menu to increase value for the consumer by introducing larger portions, so that we can justify the increase in product prices,? explains Ashish Kapur, MD, Yo! China.
Along with pricier menus, restaurants are reworking strategies as well. ?Since we position ourselves as a mass brand and consider affordability to be our forte, we will not be hiking our prices. However, to manage the situation, we have become tax-exclusive. Also, we are tackling inflation with bulk-buying and negotiating long-term vendor contracts,? says Vikram Bakshi, managing director, McDonald?s India (North and East). Long-term vendor contracts are a saving grace for many, but it?s not a permanent solution. ?Though we sign contracts for the financial year, vendors have started coming to us for re-negotiating prices,? says Dhruv Lamba, executive director, Kwality Group.
It?s not only standalone eating joints, restaurants located in hotels too are feeling the pinch.
?Input cost is going up and we have to transfer that increase to the customer. We have already increased F&B prices in some hotels and are looking at redoing menus in other properties,? says Ajay Bakaya, ED, Sarovar Hotels. The group also owns the Geoffrey?s brand in India. He says that while room rates will witness an annual increase of 10%, food rate will see a 15% annual increase.
Most restaurateurs are confident that higher product prices will not curtail eating out as such. ?Food inflation has made eating at home expensive too. So, the base effect of inflation will be felt uniformly by the consumer,? says Ashish Kapur of Yo! China.