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Price spikes predicted as 3/4 of hospitality prepare to pass on costs

Published:  23 September, 2021

Costs resulting from ongoing supply chain issues are likely to be passed onto the customer this autumn, CGA has predicted, with three-quarters of hospitality businesses admitting that they are likely to raise prices as a result.

Hospitality businesses face a storm of supply chain problems and rising costs, CGA and Fourth’s third quarter Business Confidence Survey has revealed, with supply issues driving inflation in many key cost areas, including drinks.

The poll of industry leaders found that 99% of hospitality businesses are currently experiencing supply chain issues, with 88% facing reduced product lines. More than four in five have seen deliveries of products delayed (82%) or failing to turn up completely (84%). Four in five are seeing higher costs in their supply chain (82%).

As well as the rising prices of food, cleaning supplies and disposables, 70% said they have seen increases in the costs of drinks. Access to products from Europe has been a particular issue, with 68% of leaders identifying it as a major area of concern, an increase of 27 percentage points since the second-quarter Business Confidence Survey.

“Brexit and Covid-19 have dealt two painful blows to the food and drink supply chain, and few hospitality businesses have escaped the impacts,” said Karl Chessell, CGA’s director for hospitality operators and food, EMEA.

“Delivery problems and cost pressures have come at the worst possible time, with thousands of pubs, bars and restaurants only just finding their feet after months of lockdown. This two-pronged crisis highlights the need for targeted government intervention and sustained support to protect thousands of businesses and jobs in the months ahead.”

Sebastien Sepierre, managing director for EMEA at Fourth, added: “The survey paints a very stark picture of the supply chain crisis that is severely impacting hospitality businesses right now. Many in the sector are concerned about how it will impact this year’s festive season, particularly in light of the fact last year’s Christmas trading was severely curtailed by Covid restrictions. We will be working very closely with our customers and their supply chain from a procurement, workforce and planning standpoint, to help them best prepare for and tackle these ongoing challenges in the weeks and months ahead.”

While some business leaders hope to absorb rising costs, the survey revealed that three in four (76%) say they will have no choice but to pass them on to consumers by increasing their prices. Analysts agreed that this could jeopardise sales just as trading conditions return towards pre-Covid-19 norms and consumer and business confidence mounts.