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Restaurants eye price revision as inflationary pressures mount

Both large and small restaurants Mint spoke to said they are dealing with inflation across edible oils, vegetables, transportation costs and in some cases, even manpower costs. Rents, on the other hand, have been stable thanks to landlords relenting on lower rentals in the post covid world. 

Cost of perishables such as tomatoes and raw chicken, for instance, have shot up over a year ago period in addition to nearly 50% price hikes taken by edible oil companies prompting restaurants to relook at their menu rates. 

Wow! Momo that operates close to 400 outlets is set to raise prices between 7 and 8% starting December. The chain last revised prices at the end of 2019 but high inflation is making the business unviable. By December, the chain will “definitely take a price across the board,” said Sagar Daryani, co-founder and CEO at Wow! Momo. 

Inflation is a hot topic in the industry currently, Daryani said, adding that suddenly tomato prices have jumped from ₹20 a kilo to ₹70 a kilo and chicken from Rs180-200 a kilo to 270 a kilo. “There’s a huge surge in the fuel cost, and, as a result, all the raw material costs go up as transportation cost goes up. Food inflation is high, fuel cost is high, raw material prices have gone up, and at the same time, our inherent pain point of not getting any GST input tax credit is quite challenging,” he added. 

While several restaurants have revised menu prices, others are contemplating hikes, said Daryani. 

Pizza chain Domino’s, operated by Jubilant Foodworks, took a “small” price hike earlier in the year on the back of rising inflationary pressures that the chain said played out in dairy, cooking oil, and packaging. Inflation over last year, on both petrol and diesel has impacted the pizza chain’s delivery costs, the company’s top management said in earnings call on 20 October.  The promoters of HT Media Ltd, which publishes Mint, and Jubilant Foodworks are closely related. There are, however, no promoter cross-holdings. 

It, however, said that moderating dairy prices have helped it mitigate the effect of inflation in other categories. 

Others are also reviewing prices after a gap of over two years when covid-19 induced lockdowns restricted restaurant operations. 

 “We haven’t had a price rise in at least three years now. We cannot escape the fact that we have to 100% do it at some point,” said Delhi-based restauranteur Thomas Fenn. Fenn, who runs Mahabelly, said manpower costs have also escalated post covid so price revision is a given soon. 

Rohit Aggarwal, director at Lite Bite Foods that operates a range of restaurants including Punjab Grill, You Mee, The Artful Baker, Zambar, among others, said rising commodity costs have become “difficult” to manage.  

The company will “wait and watch” before revising menu prices, said Aggarwal. Pricey imported foods are especially hurting the company.  

 “Cooking oil, for instance, which is the number one thing consumed in a kitchen, has increased substantially. Shipment costs are an issue and everything imported has become even more expensive as a result. When the price of petrol goes up, everything goes up,” said Aggarwal.  

Restaurants were among the worst hit as covid lockdowns impacted mobility and the government kept eateries shut for months. Though restaurants are recovering after the severe covid wave earlier this year, most eating joints are yet to hit pre-covid levels of business. 

In Mumbai, Riyaaz Amlani, CEO & MD, Impresario Entertainment & Hospitality Pvt that runs the popular Social cafe-bar, said it will take a call in December whether prices need to be tinkered with.  The food services company revises prices annually, typically in February-March.  

 “Prices have gone up very substantially but we’re seeing if we can absorb them this month and see if they start tapering off next month as is being promised by suppliers,” said Amlani. 

Others are treading with caution given a general slump in consumer sentiment. Zorawar Kalra, founder at Massive Restaurants that runs popular chains like Farzi Cafe and Louis Burger said it is not a good idea to raise prices when demand is compromised. “We have to absorb the cost for now in the larger interest of the industry, even though some of our restaurants are working on high costs of goods sold (CoGS),” Kalra told Mint. 

Kalra said while artisanal cheese prices are going up, some level of inflation will have to be absorbed. “I think everyone should have a measured approach toward increasing prices due to the very real price elasticity phenomena that exists in India, especially till the rebound is complete,” he added. 

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