Tortilla swings to loss after ‘unprecedented’ food and energy inflation
Burrito chain Tortilla Mexican Grill has revealed it swung to a loss last year as it came under pressure from “unprecedented” food and energy costs, and avoided raising its prices above inflation.
The fast-casual restaurant chain insisted its sales have benefited from consumers opting for value-for-money meals over dining out at restaurants.
Its revenues jumped by a fifth to a record-high £58m in 2022, after it opened 18 new restaurants across the UK.
But the company, which acquired rival Mexican chain Chilango last year, revealed that it made a pre-tax loss of £600k over the year, from a profit of £1.4 million in 2021.
It took a hit from food inflation, as protein costs jumped by some 30 per cent – the food group that accounts for about a third of its food costs.
Russia’s invasion of Ukraine in March came to “shape our year”, Tortilla said, worsening food and drink inflation following the pandemic and impacting the business and its customers.
The cost implications “inevitably” had an impact on profitability, the group said.
It added: “We see these issues as relatively short term in nature, although we expect that costs will remain at a higher level than before the Ukraine conflict over the longer term.”
Tortilla insisted that while it did increase its menu prices over the year, it kept price rises below inflation and remained competitive in the market.
Resisting passing on all the additional costs it faced to customers through price increases had an impact on its annual profits and margin, the group said.
Nevertheless, the company said food cost inflation rates had largely plateaued and that it had hedged its utilities from April to September, providing certainty over its electricity costs for the majority of the financial year.
It also assured investors that it was closely monitoring consumer buying behaviour, but that it was well placed to take advantage of people seeking value-for-money options amid heightened living costs.
Richard Morris, Tortilla’s chief executive, said: “More and more consumers are seeking out high-quality, healthy, customisable food at great value, and both of our brands – Tortilla and Chilango – sit at the heart of these exciting consumer trends.
“We know that restaurants that offer great, consistent food at competitive price points will always be the winners in our sector, and we are confident that we sit very comfortably in this space.
“We remain highly motivated and excited about Tortilla’s continued growth potential in the UK as well as our opportunities to build on our proven franchise operations to expand overseas.”
By Anna Wise, PA Business Reporter