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British Pub Groups Face Rising Costs From Ukraine War

Published on May 18 2022 3:29 PM in Pub/Bar/Nightclub tagged: Mitchells & Butlers / Marston's

British Pub Groups Face Rising Costs From Ukraine War

Two major British pub operators on Wednesday 18 May warned that expenses stemming from the Russia-Ukraine war and the cost of living crisis would crimp their profits, suggesting a tough year ahead for an industry still recovering from the COVID-19 pandemic.

The caution from Mitchells & Butlers MAB.L and Marston's MARS.L underscores challenges facing the hospitality and wider consumer sector as prices of everything from fuel to food ingredients are rising and consumers are limiting spending.

"Grain costs have gone through the roof, animal feed therefore is higher, therefore livestock costs are higher," Mitchells & Butlers chief executive Phil Urban told Reuters.

The price of whitefish, processed in Russian plants, had also soared, he said.

"We've taken the decision not to simply put up price to try and cover those costs because I think if you do that, we'll just lose volume through the door," he added.

Russia is a key energy supplier while Ukraine is a major grain producer and exporter.

The pressures, already voiced by Wetherspoon JDW.L this month, have left businesses scrambling to cut costs and still retain customers.

Mitchells & Butlers said on Wednesday it had already bought about 80% of its energy requirements for the year. The owner of All Bar One, Sizzling Pubs, Toby Carvery and Vintage Inns brands has also hedged roughly 10% its energy requirements for 2023.

Urban said his company had also been making technical changes like improving the efficiency of its boilers and ovens, switching to appliances which consume less electricity and limiting menu items for a brief period.

Smaller rival Marston's said that it was cutting costs and adjusting its pricing strategies.

Food producers and makers of other consumer products have said they will pass rising costs to customers. Britain's Premier Foods PFD.L, which makes Mr Kipling cakes and OXO cubes, said on Wednesday it would raise its product prices.

Despite the challenges, Marston's CEO Andrew Andrea said in a statement that "trading remains stable and we look forward to an uninterrupted summer."

Mitchells & Butlers and Marston's both posted an interim pre-tax profit compared with a year-ago loss as customers returned to pubs after COVID-19 curbs were eased.

But the boost came from a contrasting mix of food and drink sales. Beverage sales fell at Mitchells & Butlers but outperformed food sales at Marston's, the home of beer brands Pedigree, Hobgoblin and Lancaster Bomber.

British inflation in April leapt to its highest annual rate since 1982, while a survey said that millions of Britons skipped meals last month because they could not afford it.

Marston's Flags Earnings Hit From Rising Costs

The above news followed news that pub operator Marston's MARS.L said on Wednesday 18 May that it was cutting costs and switching up its pricing strategies to counter a surge in food and energy expenses brought by the Russia-Ukraine war and soaring inflation.

The group, which operates more than 1,400 pubs, breweries and inns across England, Scotland and Wales, said the crises would "inevitably" hurt its earnings for the current year.

The company reported a pre-tax profit for the 26 weeks ended 2 April, compared with a loss a year earlier.

Pub Group Mitchells & Butlers Warns Higher Costs Will Pressure Margins

All of the above news followed news that British pub group Mitchells & Butlers MAB.L on Wednesday 18 May warned that a jump in costs due to the Ukraine war and soaring inflation would squeeze its margins in the short-to-medium term.

The London-listed firm, which swung to a profit for the 28 weeks ended 9 April, said that the Russian invasion of Ukraine had driven up food and energy costs.

The company has, however, already bought approximately 80% of its energy requirements for the year in an effort to ease some of the pressure.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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