How Popular Chains Pret A Manger and Itsu Navigate Rising Costs

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Inflation has been a significant concern for businesses in the United Kingdom, with soaring prices impacting various industries, including restaurants. However, some companies have managed to weather the storm and adapt to the changing economic landscape. Among them are Pret A Manger and Itsu, two widely popular chains founded by Julian Metcalfe.

Metcalfe, the visionary behind these successful ventures, recalls even more challenging times when he first launched Pret in the late 1980s. During that era, interest rates were significantly higher, making the current situation appear less dire in comparison. Despite post-Brexit uncertainties, interest rates have stabilized at a relatively lower level, easing the burden on businesses.

While operating in the restaurant business has become increasingly difficult, especially after the COVID-19 pandemic, which brought rising costs, Metcalfe remains resilient. He acknowledges the rising expenses, attributing them to the high labor intensity and escalating ingredient costs. As a result, dining out has become “frighteningly expensive,” burdening both consumers and businesses alike.

Inflation in the UK has reached 7.9% in June, considerably higher than the Bank of England’s targeted rate of 2%. Grocery bills, in particular, have hit record highs, impacting the cost of living across the country. Naturally, restaurants have not been immune to these price hikes, making it more expensive for them to maintain the same dishes they offered before.

In response to the rising expenses, many companies in the food and beverage industry have opted to pass the cost burden onto consumers by increasing prices. Popular pizza chain Domino’s U.K. successfully implemented this strategy, while Heineken faced challenges when attempting the same with its beers. Even Pret, now led by Pano Christou, increased the prices of its coffee subscription by 20% earlier this year.

However, Itsu, the Asian food joint under Metcalfe’s leadership, chose a different path. The company aimed to steer clear from drastically increasing prices, unlike its competitors. Metcalfe explained that while some businesses with inefficiencies may resort to price hikes, Itsu managed to avoid such measures. They made minor adjustments to their prices, choosing to absorb some of the increased costs instead.

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Fortunately, there are early signs that inflation may be cooling off. In June, food prices rose by 17.3%, down from 18.3% in May, and restaurant inflation dropped from 10.3% to 9.5% during the same period. This shift in the economic landscape could bode well for companies in the restaurant business, leading to potentially lower ingredient prices. Although it’s uncertain if these companies will cut prices, it may prompt them to refrain from further price increases.

In conclusion, the roaring inflation in the UK has posed challenges for many businesses, especially in the restaurant industry. Yet, the experiences of Pret A Manger and Itsu show that adaptability and sound financial management can help companies navigate the storm. As the economic climate continues to evolve, businesses must remain vigilant, seeking innovative solutions to maintain customer satisfaction while tackling rising costs.

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