Even though the food inflation has started moderating, the New Year has not brought much cheer to the fast food companies. While Dominos Pizza has increased its prices by over 10% across the menu, McDonalds has hiked prices of the ?Happy Price Menu? items. Some players like Costa Coffee which are holding on for now might also soon tweak prices. Restaurant players agree that inflation continues to hit their bottomline.
In the last one year fast food chains and restaurants have had more than one round of price hike as high inflation hit the profitability and showed no signs of cooling off. This year too is witnessing menu cards being tweaked. ?We had to hike prices because of inflation. But instead of touching the whole menu this time we just increased the prices of few items like the Pizza Mc Puff,? said the official spokesperson of McDonalds (North and East India).
The low margins at which McDonalds operates, it becomes difficult for it to absorb higher input costs, points out an industry analyst. Dominos Pizza CEO Ajay Kaul also confirmed the price hike. Yum! Restaurants chief marketing officer, Sandeep Kataria said that their last price hike was in November and they will be reviewing prices in March now. ?Inflation continues to be a challenge. Electricity and labour costs are also quite significant. Though I wouldn?t like to comment if we will increase prices next month,? he said. Yum! Restaurants operates Pizza Hut and KFC
in India.
All this even when the food inflation has been negative in last one month, owing mainly to the fall in the prices of vegetables especially onion and potatoes. ?The cooling off of inflation is yet to show an impact. For us labour costs and coffee costs are also quite high,? says Santhosh Unni, CEO, Costa Coffee, India. Costa Coffee will be revising its prices before the summer season sets in.
Restaurateur Zorawar Kalra who runs fast food chain Street Foods of India says that the lower food inflation will show its impact only next quarter, so for now its the wait and watch approach they are following instead of hiking rates. ?We are also trying to keep other costs under check meanwhile to tackle inflation,? he says.
Some others feel that passing on the burden to consumers is not the best thing to do in the price sensitive F&B business. ?No doubt the inflation continues to hit us but rampant price hike is not the solution. We are holding on to see how the inflation moves,? says Ashish Kapur, MD, Yo! China. According to Euromonitor and market-research firm RNCOS, India?s $13 billion fast-food market is growing at 30% per annum.