Cafes : Raw material costs on boil, restaurants and cafes put price hikes on the menu

Fine-dining and quick service restaurants, bars and cafes are increasing prices by up to 15% to deal with steep food inflation caused by global supply disruptions even as there is a surge in travel, close to a dozen industry executives told ET.

Many chains are undertaking a combination of reducing discounts and increasing prices as their raw material costs have shot up by anywhere between 7% and 30% over the past three months, they said, adding that the price hikes are happening after two-to-three years in most cases.

“We are increasing prices by at least 5% now after three years,” said Anjan Chatterjee, chairman of Speciality Restaurants that operates multiple brands including Mainland China, Asia Kitchen and Sigree Global Grill. “We didn’t expect the impact of the Ukraine-Russia war to impact prices of raw materials such as sunflower oil and fuel to such a huge extent.”

He said suppliers are no longer willing to renew their annual contracts on the existing terms. “So, we have no choice but to increase consumer prices, even if it can hurt demand.”

Some restaurateurs said they are passing on only a part of their cost increase to customers. “We can’t increase menu prices overnight in sync with inflation, but we are taking up pricing by 4-5%, that too for our top selling products,” said Raymond Andrews, founder of Biryani Blues. “That is the only way we will be able to offset some of the inflation, though we will still end up taking a hit.”

He said costs of key ingredients including chicken, oil and dairy products have all shot up in recent times, adding that the QSR chain has increased prices after a gap of one and a half years.

Impact on Spending

Jasper Reid, chief executive of Sierra Nevada Restaurants that operates multiple restaurants including QSR chain Wendy’s, said he would be cautious about increasing prices too steeply. “Certainly, there’s inflation where the input price includes transport and so reflects the price of oil,” he said. “But we believe it’s important not to pass too much cost on to consumers who have their own pressures right now.”

Some restaurateurs are hopeful that there won’t be much pushback on consumer demand.

“We are hopeful consumers won’t curtail spending. They (consumers) are seeing the way grocery inflation has increased, so we expect them to stay with us,” said Priyank Sukhija, promoter of First Fiddle Restaurants that operates bars and fine-dine restaurants such as Lord of the Drinks and Tamasha.

He said all his brands are increasing prices by 7-8%. “All these years, we have increased menu prices by about 5% every year, or at times in 15 months. But now, we have to take increases by 7-8%, which will be the steepest for us. But we have no choice – inflation of all raw material and packaging has hit the roof,” Sukhija said.

There are some positives for the industry – travel and vacations in the country are on the rise, regular international flights have resumed, and most pandemic-related restrictions have been lifted. The surge in prices is as much among fine-dining as it is for quick service restaurants (QSRs) that operate on entry-level mass prices.

Jubilant FoodWorks, which operates Domino’s Pizza, has increased prices by 5% this month, its second increase in five months after a 4-5% price hike late last year. Franchisee operators of Yum! Brands-owned Pizza Hut and KFC, too, have increased prices. Sapphire Foods, for example, has increased KFC prices by up to 10% and Pizza Hut prices by up to 3%. For KFC, the last price hike was 1.5% in November last year. In the case of Pizza Hut, the last price hike was back in April 2019.