Pubs and bars look to premiumisation to navigate higher prices

By Katie Prowse, senior insight manager at Lumina Intelligence

- Last updated on GMT

Higher spends: Lumina Intelligence senior insights manager Katie Prowse looks at where operators can raise prices
Higher spends: Lumina Intelligence senior insights manager Katie Prowse looks at where operators can raise prices

Related tags: Food, Gastropub, Multi-site pub operators, Pubco + head office, Tenanted + leased

Insights expert GFK announced last week that consumer confidence had hit minus 40 – the lowest figure since records began some 40 years ago.

The rising cost of living and decade-high inflation is already impacting consumer behaviour, with the proportion of UK adults having an eating or drinking-out occasion in the four weeks ending 15 May 2022 falling by 2 percentage points to 54%, its lowest point since January.

Pub and bar operators are inevitably having to increase prices, with the average price of food and drink across menus increasing by 3.1% from February to March 2022. Menu price rises, at a time when value scrutiny from customers is increasing, are challenging to navigate but pub and bar operators are developing creative solutions.

Starters and sides

Menu price inflation across pub and bar menus was largely driven by starter (up 6.5%, up 42p) and side (up 9.1%, up 26p) courses. Starters including loaded nachos featuring beef, chicken wings and tempura prawns were among the group seeing the highest price inflation. Excluding sharing platters, the average price of a pub and bar starter remains down 8% behind restaurant prices, offering operators more wriggle room as consumer expectations of pubs to deliver restaurant-quality food increases. Within sides, pub and bar operators are introducing a wider range of options to tempt consumers into trading up, with sauces growing share of menus in Q1 2022.

New product development is a key tool for engineering higher prices across menus, with operators able to introduce more premium alternatives, dishes with better margins as well as trend-led favourites that will attract customers. Pubs and bars increased the number of new dishes on menus in April 2022, beginning to introduce spring/summer menus. Of new dishes, more than a third were tagged with a customisation. A way of delivering a more personal experience, customisation gives consumers the ability to pick and choose to suit their personal preferences. Customisation is a brilliant angle for operators to take in a bid to offer more premium alternatives, with smaller changes to dishes more manageable for kitchen staff. 

Customisation adds up

With customisation – including a free swap or an additional upsell – these dishes are, on average, 25% more expensive than total new dishes, with operators tempting customers to trade up to more premium toppings and sauces. Customisable items including ‘build your own burger’ and ‘build your own salad’ from Brewer’s Fayre’s new spring menu, allow for consumers to personalise dishes while increasing spend per head. The spring Brewer’s Fayre menu also features dishes that are designed to be cost effective and reduce labour for kitchens. Dishes including Ploughman’s platters have been designed to feature items that require relatively small amounts of prep including crisps, salads and cooked meats and cheeses.

In the four weeks ending 15 May 2022, although participation was down, spend and frequency increased by 0.6% and 1.2%, respectively, highlighting that though some consumers are cutting out eating out, for others, the good weather and freedom are tempting more occasions and higher spends.

In recent weeks, Stonegate Group announced the launch of its first site under its new food-led premium division, which will be known internally as the Chapter Collection and Marston’s announced its intentions to exit its 2-4-1 value food brand, in favour of a more premium Signature format. The proportion of consumers able to save across the pandemic who are now happy to be spending are a demographic that many pub groups are looking to tap into, through more premium propositions that offer higher spends.

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