The current conflict has already resulted in fuel prices soaring and the Bank of England holding its main interest rate at 3.75%.
Lynx Purchasing managing director Rachel Dobson highlighted what this could mean for operators.
She said: “The sudden shock to the supply chain caused by the outbreak of hostilities in the Middle East has had an immediate impact on costs, because of the increase in the oil price has pushed up fuel prices at the pump.
“That means that even very local deliveries such as beer from the brewery or food from the nearest wholesale depot cost more. Suppliers will be looking to pass on those increased delivery costs where they can.
“The disruption to shipping in the area also has an immediate impact by delaying goods that are already in transit, while vessels are either stalled, or taking longer routes.”
“As delays continue, suppliers will put their prices up accordingly. For pubs, that’s likely to affect the cost of larger items such as catering equipment and furniture, which tend to be shipped globally. Pubs getting their outdoor areas ready for the Easter weekend may find items from suppliers such as branded garden umbrellas are delayed in transit.”
Inevitable increased costs
Specific ingredients are likely to be impacted such as fruit and vegetables as well as oil - a product that has seen volatility in its cost recently.
Dobson added: “While transport costs remain a relatively small part of the total cost of most goods, there’s also likely to be an impact on food costs. Particularly at this time of year, significant amounts of salad, fruit and veg come to the UK from southern Europe and north Africa. With disruption across a lot of the region, delays and increased costs seem inevitable.
“There’s also likely to be a knock-on impact from the shift in attention away from the conflict in Ukraine, which had seemed closer to a resolution until recently. The disruption to supplies of grain and sunflower oil from the region continues to have an impact on a wide range of food products, as well as the cost of animal feed. The price of cooking oil is particularly volatile, and so is likely to see a surge in price.”
Moreover, Dobson also advised if the conflict continues and affects international travel it could mean pubs that rely on non-domestic tourism may see a drop in trade however, coastal operators could benefit from a rise in staycations.
Parker Walsh insolvency expert Molly Monks echoed Dobson’s warning about a potential beer price increase as a result of utility costs rising.
She said: “Beer businesses are particularly vulnerable when oil and gas prices rise because the impact is felt at several different points in the chain.
“Breweries face higher production and distribution costs, while pubs and bars are then hit again through refrigeration, lighting, heating and other day-to-day running costs.”
Cash flow pressure
With many operators already working to tight margins, if fuel and energy prices remain high, they may have no choice but to absorb some of the costs, increase prices or cut back on stock, she outlined.
“Bigger operators may be better placed to negotiate supply contracts or spread costs across a larger estate,” Monks said.
“Independent pubs and brewers do not always have that protection, which means sudden cost increases can put immediate pressure on cash flow.”
The insolvency expert said this could result in a squeeze noticed by both businesses and customers.
“If the pressure continues, consumers may well start to see higher beer prices, less promotional activity and in some cases, a narrower range of products behind the bar,” Monks added.
“What begins as a geopolitical crisis can very quickly become a real issue for every day UK businesses and for the people using them.”
Lynx’s Dobson advised operators to keep talking to their suppliers and keep menu descriptions flexible where possible to help deal with changing availability.
