The latest restaurant pricing analysis conducted by M&C Allegra Foodservice has highlighted an ongoing reluctance by consumers to trade up.
For the year to May 2015, mains prices rose across entry (lowest price), typical and exit (highest price) levels for all types of operator but with only a modest increase at the top end. In casual restaurants, mains exit prices decreased slightly year-on-year by 0.2%, showing how operators are responding to a continuing consumer reluctance to trade up at exit level.
The highest increase in both entry and exit prices came in the pub sector with major menu redesigns driving a 7% rise in the most expensive dishes.
Our latest pricing analysis, which looks at 120 leading brands across casual restaurants, fast food and pubs, reveals entry prices showed the strongest growth – 2.7% across all operators, compared to a 1.7% hike in the year May 2013 to 2014. The growth was driven by a 4.1% rise in the pub restaurant brands category. Fast-food outlets saw the smallest entry price growth at 1.4%.
Typical mains prices grew more modestly and consistently with every sector, showing growth of 1.4%. Last year, the overall figure was 0.6% up.
The exit segment saw overall growth of 0.5% with fast-food restaurants sitting between the two extremes of pubs and casual restaurants with 1.6% rise. Last year, exit prices grew across all operators by 3.8%.
Drilling down into the performance of casual restaurants, the research shows operators added more expensive mid-range mains options, including PizzaExpress, which added new pasta and risotto dishes, creating a 6.5% increase, from £9.95 to £10.60, in its typical price point. Casual restaurant brands scaled back on the most premium options, including Frankie & Benny’s, removing the 10oz thick cut rib eye from its menu, bringing its mains exit price down by 5.8%.
The price consciousness of the fast- food segment is further emphasised by the majority of operators keeping mains prices below a price ceiling of £8, and lower at McDonald’s and KFC.
Pub segment prices were driven by bold new menu additions, including Mitchells & Butlers brands Sizzling Pubs’ and O’Neill’s new ranges of ‘unfinishable’ mains. Entry level prices also rose by 4.1%, again influenced by major menu redesigns, including Grand Union and Walkabout restructuring their menus and food offer.
Steve Gotham, director of insight for M&C Allegra Foodservice, said he expected a cautionary approach to trading up to continue, with confidence growing in 2016.
He said: “During the past few years, operators have increased exit prices to make up for lost margins at entry and typical levels. Exit prices are now being kept virtually flat or even lowered at some operators, as consumer trading up remains on hold. M&C expects price increases to accelerate in the second half of 2015, as inflation pushes up input prices, with most cautious increases continuing at exit level. During 2016, strengthening disposable income will emerge and operators need to time exit price increases correctly to avoid missing profit potential.”
An analysis of the cheapest items on the menus shows pub companies competing with fast-food chains on low prices with a tuna mayo & cheese melt at Hungry Horse on at the same price (£2.99) as a 6-inch sub at Subway. The cheapest items on the menu were a McDonald’s hamburger at 99p, followed by the Burger King equivalent for £1.79.
Steaks and lobsters monopolised the highest mains prices, featuring as an element in nine out of 10 of the most expensive dishes. Gaucho topped the table with its 700g chateaubriand for £84.95 (although the dish could be shared between two), followed by Black & Blue’s £36 côte de boeuf (600g) and a native lobster for £35 at The Restaurant Bar & Grill.
In casual restaurants, the highest rise on mains was at Coast to Coast, with typical cost up 26.3% from £10.25 to £12.95. Banana Tree recorded a 23.3% rise and Garfunkel’s 20.1%.
In fast-food outlets, all operators, apart from Wimpy, increased prices only slightly, by typically about 3%. At McDonald’s, a Big Mac increased from £2.79 to £2.89 between 2014 and 2015. Wimpy experienced the highest price rise of 14.1%. In the pub sector, following a new simplified menu with set pricing categories, typical prices at Grand Union rose by 50%, with hot dog prices up from £6 to £9. Walkabout’s revamp of its menu during the same period resulted in a 14% increase in typical prices.
