Restaurants and bars have been hit by an 11% rise in food inflation in June, putting even greater pressure on operating margins. The new research by hospitality analyst Horizons found that food costs increased by 9.3% last month, with the restaurant sector the worst impacted due to its dependence on fresh produce. The figures represented a 2% increase on the previous month, with prices for eggs up 37% over the past year, butter rising 32% and oils and fats up 24%. Horizons said that the study highlighted the growing pressure on the margins of food operators, who were finding it difficult to raise prices in the current economic climate, and warned of further rises still to come. Peter Backman, market analyst at Horizons, said: “Because consumers are also feeling the pinch in the current climate, food operators are having to take a hit on their margins rather than raising prices to mitigate costs. For many this potentially wipes out profits altogether. “Already we have seen operators, particularly pub companies, announcing a slowdown in like-for-like sales. Consumers are reining in their spending, often opting for a takeaway rather than a meal out, or choosing a cheaper restaurant than they otherwise would. We are unlikely to see any uplift in trading for the rest of 2008.” The analyst said that the data pointed towards a longer-term issue, rather than a temporary blip, with months of price rises in the pipeline. Backman said: “The rise in the cost of labour, fuel and other expenses is squeezing margins. While it is possible to bear this for a short period, the extent of the large rise in costs over the past three months indicates that rather than a temporary blip, this represents a wholesale drop in profitability. “Food commodity prices have grown by 40% over the past year. This takes several months to be reflected in the prices paid by foodservice operators, so there are still months of prices rises in the pipeline. The good news is that food commodity prices have stabilised over the last few months, so some relief is in sight for operators in the longer term.”