Cheap as chips: why pub grub's bucking the inflation trend

Food is the new battleground in the pub price war, amid over-saturation and tough trading conditions. John Harrington reports

Price inflation in food has rarely been higher, but you wouldn't know it to look at some of the deals on offer at pubs and bars.

Fish and chips for £2.99, £5 pizza-and-drink deals and half-price meals are increasingly becoming the norm. Away from the circuit, rock-bottom deals such as £3.50 roasts mean the dining-out pound stretches even further. Trade experts say the challenging trading conditions, combined with saturation in the casual dining market, are to blame.

"We can see over-supply in the food-led side of the business, just as there was over-supply on the high street in the 1990s," says CGA Strategy chief executive Jon Collins.

He says there's been a "really significant" increase in wet-led bars upping their food offer to cope with the post-smoking ban fallout.

"We encouraged retailers in the run-up to the smoking ban to think long and hard about food. We said everybody wants to do food and you don't want to be the fifth best option in the market place.

"Operators were saying they had a grim summer and autumn, while January is always quiet so we can't expect salvation there, so what are we going to do to drive footfall in quieter times of the year?"

The social responsibility agenda also explains why operators are increasingly choosing food rather than alcohol for discounts.

"Pub companies are 'allowed' to beat each other up on price for food but if they do so with drinks they face a political backlash," says analyst Mark Brumby of Blue Oar Securities.

The price war was arguably started after major operators slashed food prices at the end of 2007.

Mitchells & Butlers (M&B) reported a "huge upswing" in food volumes after new menus offering better quality were introduced in October. The moves were in response to falling sales; like-for-like sales at its Vintage Inns pub restaurants fell 4% in the year to September 2007.

Ironically, the trend for discounting food is growing as wholesale prices rocket.

Last month food-price inflation reached an average of 8.4%, with many pub favourites, such as beef, chips and rice, hit particularly hard.

"Profits are being cut to the bone. Suppliers are being pushed to deliver the most competitive prices possible," adds Collins. "There's huge pressure to keep prices as low as possible. I'm not sure that's extended to loss leading yet. There may be a few items where there's little or no profit."

Brumby says: "We are told M&B makes money on £3 and £4 meals and maybe it does, but it has a damaging impact [on margins]."

So how can operators afford to offer these deals?

Premium Bars & Restaurants chairman Mark Jones says value-for-money food offers are available at his outlets. Buy-one-get-one-free (BOGOF) is the company's preferred route; two roasts for £6.95 are especially popular. Jones says "BOGOF" means an automatic spend of £10 or £11 with drinks included.

He points out that most offers apply during the day, when the low profits on food are mitigated by big mark-ups on soft drinks. "On the face of it these prices seem to offer low gross profit, but if the drinks are added that's probably not the case."

But Jones warns against discounting too far. "Customers start to worry about the quality," he says. "It's not our intention to run deep discounting food promotions. We are focusing on upgrading quality and get better experience."

Jones adds: "It's a very competitive market out there for food. The days of easy and rapid expansion on the high street are probably gone."

Brighton bargains

A walk around popular nightspots in the seaside city found the following:

Bright Helm (JD Wetherspoon)

l Fish and chips served with a cup of tea, £2.99

l Curry and a drink £3.99.

O'Neills

Six classic Irish dishes

for £2.95 each

Old Orleans

l Two adult meals for £6.25

l Lunch served within 15 minutes or there's no charge

l Two-for-one on fajitas (Monday to Friday)

Heist

Pizza and a pint for £5

Other meal deals:

Pub & Carvery

Full carvery for £3.50

La Tasca

50% off food bills with a newspaper voucher

Tayburns, Swansea

All-you-can eat on Monday to Friday, for £5.95 before 5.30pm and £7.95 afterwards. Covers a number of styles including grill, carvery, pizza and pasta.