Yahoo Finance Wagamama owner warns food and drink inflation could hit 10%
The owner of Wagamama, Frankie & Benny’s and Chiquito expects food and drink inflation to reach as much as 10% this year, double the rate predicted just two months ago, as the war in Ukraine disrupts supply chains.
The Restaurant Group, which operates about 400 outlets, said it was working with its supply chain to offset the cost rises but warned “this remains a volatile inflationary market”.
The latest warning on costs came after TRG said in March that the soaring cost of gas and electricity would add £6m-£7m to its expenses this year.
The company also flagged rising wage costs as the economy nears full employment with well over 1m vacancies in the UK.
The update from TRG highlights the scale of inflation confronting businesses and families as it emerged a standoff between Boris Johnson and Rishi Sunak was delaying measures to help people through the cost of living crisis.
Brands such as bakery chain Greggs and bootmaker Dr Martens have said prices are on the up because of the rising cost of raw materials, energy and labour.
Despite the blows from higher costs, TRG said it continued to expect to meet full-year profit forecasts, as “robust” trading in its Wagamama restaurants and pubs and a better than expected recovery in its train station and airport outlets offset the higher than anticipated inflation.
Sales at established Wagamama outlets rose 11% in the six weeks to 15 May and 6% at pubs, although this marked a slowdown from the previous three months as prices rose to reflect a return to 20% VAT compared with a special pandemic rate of 12.5% before 1 April. Underlying sales at the group’s travel concessions slid 11% in the six weeks, but this was an improvement on a 26% decline in the previous three months.
The company, which permanently closed about 200 restaurants during the pandemic, said it planned at least eight new Wagamama restaurants this year and three specialist delivery kitchens as well as three new pubs.
“The continued strength of trading of these businesses has reinforced our belief in their long-term rollout potential,” the company said in a statement.
