Your pizzas and burgers just got costlier! With inflationary pressure showing up constantly on margins, fast-food makers have resorted to a price hike to offset the costs.
Jubilant Foodworks, which sells Dominos Pizza in India, said the company had undertaken two price revisions in less than six months. “We undertook a 2-3 per cent price hike in November last year. Inflationary pressure has forced us to undertake a price hike and we revised our prices again in April this year,” Mr Ajay Kaul,CEO of Jubilant Foodworks, said. In April, the company had raised its prices by 5.5 per cent. Companies note that it is no longer possible to absorb costs as inputs such as cheese have been going up steadily. Despite vegetable prices softening, companies find that other factors like fuel add to the overall costs bringing down profitability.
Input cost rise
Quick service restaurant Kentucky Fried Chicken (KFC) too has undertaken a marginal price increase in specific products to mitigate the pressure of rising input costs. Mr Dhruv Kaul, Marketing Director, KFC said, “We have looked at certain products and all our strategies are strongly rooted in consumer insights. We have ensured that our pricing and quality remain on track”. While adjusting costs on some products, KFC has left its affordable Street-wise menu untouched.
“We are still offering Street-wise at the same prices at which it was launched earlier this year and have kept the pricing attractive. Our transactions are going up and repurchases assure us that customers still find value in our products,” he added.
Labour costs
According to survey by workplace solutions provider Regus, nearly 7 out of 10 (69 per cent) companies in India report that labour costs are increasing and 64 per cent of businesses also face rising logistics expenses. Rising raw material cost (54 per cent) was also highlighted as a major concern. An overall inflation rate of 8.82 per cent was reported in March 2011.
Mr Madhusudan Thakur, Regional Vice-President - South Asia, Regus, notes that, “With the Reserve Bank of India raising its benchmark interest rates by 50 basis points it is clear that the government is taking this issue seriously, and balancing economic growth with inflationary pressures will be a key challenge for policy-makers going forward.”
Mr Samir Kuckreja, CEO and Managing Director, Nirula's said, “At Nirula's, we purchase food materials on annual contract basis. Therefore, inflation does not cause any immediate change in our system. We revise our menu prices annually and the price revision for FY2011-12 has been done in April”.