Mitchells & Butlers (M&B), the Harvester and All Bar One operator, claimed that the rising cost of shopping for fresh food in supermarkets was persuading some consumers to eat out at its pubs.

The company said that its cheaper food-based outlets, notably Pub & Carvery and Sizzling Pub Co, were also benefiting from a trend by consumers to trade down from more expensive high street restaurants.

Tim Clarke, chief executive, said: “There is no doubt that the steep rise in the price of fresh food in supermarkets has made the value comparison with eating out in our pubs all the more powerful. It's encouraging more people to come out.” He added that there has been some trading down from urban casual dining chains, where the same food costs more

Mr Clarke said that the group's residential division had benefited from “some particularly powerful performances” from its value food concepts. He highlighted the performance of its Pub & Carvery format, where a main course costs an average of £3.96, and Sizzling Pub Co, where main meals average £4.94, although its Vintage Inns and Premium Country Dining concepts had also done well.

M&B, which sells more than 110 million meals a year, said a “value and volume sales strategy” was “enabling us to benefit from the increasing customer focus on value”.

The growth in M&B's food sales has allowed it to mitigate the impact of rising food costs. Mr Clarke estimated that while food commodity inflation was running at 7-8 per cent, M&B was using its growing purchasing power to limit the unit food cost increase to about 3 per cent.

M&B, which is seeking to put its recent hedging losses and strategic upheaval behind it, reported a 5.1 per cent jump in like-for-like food sales in the ten weeks to July 19 compared with a 0.2 per cent fall in drink sales.

Overall, like-for-like sales for the group rose by 1.1 per cent, a slowdown from the 3.4 per cent growth seen in the previous four weeks, but ahead of many competitors. Growth for the first 42 weeks rose by 0.8per cent.

Beer volumes, which account for a quarter of total sales, fell by 2-3 per cent over the ten weeks versus a market fall of 10 to 11 per cent. Mr Clarke said he expected that trend to carry on as food and related sales of wine, soft drinks and coffee continued to grow.

“When I joined the business, beer accounted for 75 per cent of sales,” he said. “Twenty years later that is 25 per cent and it's not obvious what's going to stop that from shrinking further.”

However, cask ales such as Timothy Taylor, London Pride and Marston's Pedigree were “bucking all the trends” as “middle-class, middle-income” consumers sought out high-quality British beers. “Middle England is drinking cask ale,” he said.

M&B said that although the second-half outlook for consumer spending and food and energy costs remained testing, it expected strong productivity gains and management measures to offset increasing input costs. Earnings, excluding exceptional items, would be in line with expectations.

M&B, in which Robert Tchenguiz, the property entrepreneur, has a 29 per cent stake, said its performance had generated strong cashflows which, together with £82 million of disposal proceeds, had enabled it to refinance its short-term borrowings into a three-year £600 million facility.

The company said that it continued to assess the feasibility of conversion to a tax-efficient real estate investment trust and was in talks with HM Revenue & Customs about the possibility of converting without having to demerge its operating arm or dismantle its debt securitisation. However, Mr Clarke said that the group would continue to consider a separation if it meant value for investors.

Shares in M&B rose 2p to 264p.

Cost of nosh

Sizzling Pub Co

Cost of 8oz rump steak, with chips, onions and half tomato £4.49

Tesco

8oz rump steak £2.99, 226g of chips 8p, Half tomato (45g) 8p, 70g of raw onions 5p

Total cost (excluding cooking) £3.20

Source: Times research

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