Three quarters of hospitality businesses likely to raise prices as supply chain challenges intensify

By James McAllister

- Last updated on GMT

Three quarters of hospitality businesses likely to raise prices as supply chain challenges intensify

Related tags: Supply chain, Coronavirus, brexit

Hospitality businesses face a storm of supply chain problems and rising costs with three quarters of them are likely to raise prices for consumers as a result, new research shows.

According to the third-quarter Business Confidence Survey from CGA and Fourth, 99% of businesses are currently experiencing supply chain issues, with nearly nine in 10  (88%) facing reduced product lines. More than four in five have seen deliveries of products delayed (82%) or failing to turn up completely (84%).

Supply issues have driving inflation in many key cost areas, with more than four in five seeing higher costs in their supply chain (82%). Nearly three quarters (73%) of leaders say their food costs have risen — 39% of leaders state food costs have significantly increased — while nearly as many have faced increases in the costs of drinks (70%).

Access to products from Europe has been a particular issue, with 68% of leaders identifying it as a major area of concern — up by 27 percentage points since the second-quarter Business Confidence Survey.
Costs are also spiking in other areas, with a similar proportion (72%) of leaders reporting increases in sundries like cleaning supplies and disposables. Around two thirds have seen rises in the costs of sub-contracted services like builders, cleaners or entertainment (68%), and of utilities (64%).
 
While some business leaders hope to absorb rising costs, three in four (76%) say they will have no choice but to pass them on to consumers by increasing their prices—jeopardising sales just as trading conditions return towards pre-Covid-19 norms and consumer and business confidence mounts.
 
“Brexit and Covid-19 have dealt two painful blows to the food and drink supply chain, and few hospitality businesses have escaped the impacts,” says Karl Chessell, CGA’s director for hospitality operators and food, EMEA.
“Delivery problems and cost pressures have come at the worst possible time, with thousands of pubs, bars and restaurants only just finding their feet after months of lockdown. This two-pronged crisis highlights the need for targeted government intervention and sustained support to protect thousands of businesses and jobs in the months ahead.”
 
Sebastien Sepierre, managing director – EMEA for Fourth, adds that many industry leaders are concerned about how the supply chain issues will impact business in the run up to Christmas.

“The survey paints a very stark picture of the supply chain crisis that is severely impacting hospitality businesses right now," he says.

"Many in the sector are concerned about how it will impact this year’s festive season, particularly in light of the fact last year’s Christmas trading was severely curtailed by Covid restrictions.

"We will be working very closely with our customers and their supply chain from a procurement, workforce and planning standpoint, to help them best prepare for and tackle these ongoing challenges in the weeks and months ahead.”

Related topics: Trends & Reports

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