Roaring inflation in the U.K. doesn’t spell need to spell doom—at least not for Julian Metcalfe, founder of the widely popular chains Pret A Manger and Itsu.
He has seen worse days—when Metcalfe first launched Pret in the late 1980s and before the era of free movement within Europe began, interest rates were much higher.
Now, years after Brexit has been formalized, interest rates are still considered high—and are expected to rise further—but they’re only a fraction of what the Itsu CEO witnessed before.
“Everyone’s complaining about 5% and it’s the end of the world,” Metcalfe said in a Bloomberg podcast released Thursday. “Back then I remember we paid 14%.”
Pret has since grown to over 600 stores worldwide—a quarter of which are outside the U.K., while Itsu, the Asian food joint, has around 80 locations in Europe.
The founder of the two companies said that operating in the restaurant business has gotten increasingly harder, especially since costs have gone up.
“Since COVID, when you go out to a restaurant, it’s frighteningly expensive now,” Metcalfe said. “That is all because it’s very, very labor-intensive and the ingredients’ costs have gone up.”
Passing on increased costs to the consumer
Prices in the U.K. have skyrocketed, with inflation standing at 7.9% in June compared to a year ago.
While that number is down from 8.7% in May, the rate is still well above the Bank of England’s 2% target.
Grocery bills have been among the hardest hit, creating new record highs in the price of consumer staple goods and compounding Britain’s cost-of-living crisis.
Those have also trickled down to restaurants, where it’s more expensive to make the same dishes they did before.
To cope with rising expenses, a number of companies in the food and beverage industry have tried to pass on costs to consumers by hiking prices.
Domino’s U.K. did so with its pizzas with great success, while Heineken ran into trouble when it tried the same with its beers.
Even Pret, now headed by Pano Christou, hiked the prices of its coffee subscription by 20% earlier this year.
But Itsu has tried to steer clear from increasing prices drastically, according to Metcalfe.
“If your business is inefficient, really inefficient, the only way to handle is to put your prices up,” he said. “At Itsu, we’ve managed not to do that. Our prices have gone up by a tiny bit, but not much.”
Experts are seeing early signs that prices are cooling—in June, food prices rose 17.3% compared to 18.3% in May, while restaurant inflation dropped from 10.3% to 9.5% during the same period.
This could be good news for companies in the restaurant business, too, as it would drive ingredient prices down. And while those companies may not cut prices, they may hold back from increasing them further.
