Discussions on pricing now will be key for this year and 2022

Ann Elliott, 2021

There are a number of conversations being held by operators at the moment that will play a key role in their performance not only for the balance of this year but for 2022 as well.

The first of these is discounts. No operator really wants to return the days of 30%, 40% or even 50% of covers being covered by discounts. No one. So everyone has to hold their nerve. This, though, is very unlikely to happen and, quite honestly, I haven’t seen it during my career in the sector. One brand usually breaks cover and then the floodgates open. Actually it’s rarely one brand, it’s a group of brands in the same situation. The moment covers slide behind budget marketers are then asked, usually with some urgency, to reinstall discounts even if the order comes with an instruction that it is “only for now”. It is rarely “just for now”. It just starts the whole drug-like, painful process all over again.

I have just had a quick look now and one operator I know is offering, at the time of writing, discounts through The Mail, The Telegraph, The Metro, NME, Vouchercloud, Tastecard and Tesco. Though that might sound like a lot of different discounts, it’s far fewer than I have known them to use in the past and they are being offered very tactically. It’s a real challenge and I know how difficult it is to break free but, from what I am hearing, many are absolutely intent on minimising their use of blanket discounts in the future. Tactical discounting rather than mass discounting has to be the way forward, surely?

The second discussion area is around spend per head and how long growth can last in this line. Depending on how discounts are treated, a lack of discount could be driving spend per head in some businesses. As could the increased percentage of sales going through delivery where spend per head is higher than in bricks and mortar sites. As could going cashless. Or it could be that consumers want to spend more post-covid. Or it could be a result of all of these happening at the same time. Operators are wary of course of spend per head flying high at the expense of covers but that doesn’t seem to be happening at the moment. They are watching it very closely though for any signs of this happening.

The third discussion area is around cost increases. These are coming through from every single part of the supply chain, including building materials (wood, steel, plasterboard), disposables, crockery, packaging, distribution and food (anything imported). The issues regarding lack of labour, especially back of house, are forcing GMs to offer ever-increasing hourly rates, to head chefs and sous chefs in particular, only to see them “stolen” by headhunting competitors for 50p more per hour before they even start. While product availability is a real issue, and is significantly impacting many businesses, many I know have been working hard with their suppliers and menu development teams to mitigate its impact. The same sort of work is happening now in terms of helping them cope with price increases across the board.

The fourth discussion area is around food and menu pricing. If food inflation is really likely to rise to 7% or above during 2022, prices need to be increased in the September/October 2021 menu but how far to take these increases is a real point of debate. Of course, VAT will return to normal levels in September but can menu prices stay as they are now when that happens or do they need to change to reflect this impact?

Just as in the discount scenario, some operators are going to see what their competitors are doing first before they move to ensure they aren’t at a competitive pricing disadvantage early on. Having flexibility on menu printing now versus pre-pandemic is proving a godsend.

So, while sales are looking positive, like-for-like growth versus 2019 is strong and cash flow is improving, operators are facing some real challenges from September onwards and no one I have spoken to is resting on their laurels at all.

First published in August 2021

Ann Elliott is a hospitality strategist, connector and adviser