Drinks sales up, inflation rises, calls to scrap duty hikes

By Rebecca Weller

- Last updated on GMT

News overview: what happened in the hospitality sector in June? (Credit: Getty/MediaProduction)
News overview: what happened in the hospitality sector in June? (Credit: Getty/MediaProduction)

Related tags Government Legislation Finance

June saw a variety of ups and downs for the sector, from year-on-year growth in drinks sales to rising food inflation, to DRS delay's and pleas to scrap alcohol duty hikes and pubcos "named and shamed".

The month started positively, with average drinks sales in managed venues hitting double-digit growth several weeks in a row.

Data from CGA by NIQ’s Drinks Recovery Tracker​ showed sales finished 15% and 7% ahead of 2022 levels in the seven days to Saturday 10 and 17 June respectively.

However, figures released later on in the month in CGA’s Prestige Foodservice Price Index​ showed food inflation had reached 21.6% in May, just below the record high of 22.9% in December 2022, resulting in a 34% rise in menu prices compared with May 2021.

Food categories under particular strain included vegetables, meat, poultry, sugar, jam, syrups and chocolate while the Office for National Statistics (ONS) also estimated the average cost of a pint of draught lager​ in a pub had increased by 11% for the second month in a row. 

CGA by NIQ client director James Ashurst said the 34% hike in prices in just two years had been “very harmful” for hospitality.

He said: “Restaurants, pubs and bars have had no choice but to raise menu prices, which in turn risks a drop in visits.

“As we move into the second half of 2023, businesses and individuals alike will be hoping for long overdue respite.”

Stagnant inflation  

Furthermore, the Wine and Spirits Trade Association (WSTA​) urged the Government to consider scrapping the “crippling” alcohol duty hikes planned for August, stating it’s “not too late” and that SMEs would be “most at risk” when the price increases come into force.

In addition, firms reported an 80% upswing in energy costs​, according to data from UKHospitality, prompting the trade body’s chief executive Kate Nicholls to implore the Government to urgently “step in” to tackle onerous energy contracts for the sector.

“If the Government is to achieve its aim of halving inflation, it simply must tackle the ever-growing cost of doing business.

“The severity of the situation facing hospitality businesses requires far more urgency from the energy regulator and this inaction has resulted in business failure, which we have continuously warned of”, she said.

Meanwhile, the unchanging headline rate to inflation​, which remained at 8.7%, caused concern regarding consumer confidence for the trade body British Beer & Pub Association (BBPA​).

BBPA chief executive Emma McClarkin said: “Warmer weather has been driving sales for pubs and breweries, but the fact remains that without inflation falling profits are wiped out and our sector has little to no opportunity for growth.

“These figures are worrying because whilst the public have been supporting British pubs and breweries it’s clear that purse strings will be tightened once again in the coming months and UK businesses will be impacted.

“Our industry supports jobs, livelihoods and communities in every single part of the country, but stagnant inflation is holding us back from our full potential.”

June also saw the Bank of England raise interest rates​ from 4.5% to 5%, the highest level for 15 years, which UKH predicted could potentially contract the value of the hospitality economy by £4bn within four years.

Nicholls said: “Combined with other cost pressures across energy, food and drink, this is quickly becoming a ticking time-bomb that needs urgent attention.”

Economic outlook

Additional rail strikes were also announced this month, with the Associated Society of Locomotive Engineers and Firemen (ASLEF​) and The National Union of Rail, Maritime and Transport Workers (RMT​) both declaring industrial action would take place next month in what UKH deemed a “hammer blow” for hospitality firms.

The culmination of pressure on the sector saw some 200 pubs close in the first three months of the year​, data from accountancy firm Price Bailey revealed this month, with 620 pubs in England, Scotland and Wales also having entered insolvency in the past 12 months.

Head of the insolvency and recovery team at Price Bailey Matt Howard said: “While there are early signs of an improvement in trading conditions for pubs, insolvencies in Q1 reached the highest quarterly level in more than a decade.

“The improving economic outlook may come too late for many pub businesses that have accumulated unmanageable levels of debt over a testing few years.”

BBPA’s McClarkin also raised questions over the success of Scotland’s Minimum Unit Pricing initiative​ (MUP), claiming industry action had also contributed.

“While the reduction in health harms is rightly celebrated, we question if this can be directly attributed to MUP.

“It also comes after over a decade of investment from industry in responsibility messaging, substantial growth of low and no products through innovation and advertising, as well as a host of regulatory interventions such as discount bans, happy hour bans, restrictions to the hours of off-sales and much more”, she said.

Also in Scotland, the SLTA (Scottish Licensed Trade Association) welcomed the news country’s Deposit Return Scheme (DRS) would be delayed​ until at least October 2025 but warned politics must be left out of it in future.

The trade body added the delay would give hospitality businesses the “breathing space they need to concentrate on the more pressing issues”.

Remarkable efforts 

SLTA managing director Colin Wilkinson said: “We have always said we will support a DRS that is workable and practicable for both businesses and consumers – the DRS proposed by the Scottish Government was not.”

Meanwhile the Government “named and shamed” more than 200 companies for failing to pay their lowest paid staff the minimum wage​, a number of which were pubcos, for instances between 2017 and 2019.

Brunning & Price, Hall & Woodhouse, Hickory’s, Bar Lounge, Few Inns and Whitbread were all cited by the Department for Business and Trade and Kevin Hollinrake MP.

Hollinrake said: “Most businesses do the right thing and look after their employees, but we’re sending a clear message to the minority who ignore the law: pay your staff properly or you’ll face the consequences.

“The businesses named in today’s list have since paid back what they owe to their staff and have also faced financial penalties.”

June also saw the British Institute of Innkeeping (BII) crown its Licensee of the Year​, Joe Buckley and Flo Pearce from the Tollemache Arms in Harrington, Northampton.

Additionally, the Institution announced the launch of a new sustainability award​ recognising “exceptional” leadership, innovation and dedication to implementing sustainable practices.

BII CEO Steve Alton said: "This award will not only acknowledge the remarkable efforts of pub professionals in driving sustainable​ change but also inspire others to adopt environmentally conscious practices, critically reducing costs and waste whilst contributing to a greener future.”

Related topics Rebuilding the Pub Sector

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