Max’s Group: Price hikes last option in mitigating headwinds

CASUAL dining restaurant group Max’s Group, Inc. is betting on its “creative” strategy to manage the impact of some “serious headwinds” on its operations, but price increases will be the last thing to go, the company’s president said.

“There are definitely serious headwinds that we are looking at… Headwinds come in the form of very sharp raw materials price hikes. They come in the form of fuel as everyone knows, and, of course, the mandatory wage increase,” Max’s Group President Ariel P. Fermin said during a briefing on May 20.

“What we are very clear on is that there is no one part of the value chain that can completely neutralize the headwinds. The commissary cannot absorb them in full, the stores cannot absorb them in full, and definitely the consumers cannot absorb them in full. So, what we’ve done was that we’ve been quite creative in mitigating those headwinds through operational excellence from our end,” he added.

He said the group has likewise harmonized its ingredients across its brands, a program that started prior to the public health crisis. “It’s now coming in full force.”

At the store level, the company is “revisiting” its bundles. “[We] identify based on analytics what sells most, what has the most margins and, obviously, design our product assortment in such a way that makes the consumers buy the profitable mix.”

“So, the last thing to go, at least from our end, would be consumer price increases, because we do want to be mindful of the transaction count that we are enjoying at this moment, which is, of course, critical to restaurant operations,” Mr. Fermin added.

At the same time, he said the company has done some forms of hedging. “We’ve identified some materials that are critically important for the brands that we are selling. Of course, we want to make sure that there is business continuity, and, you know, we get those materials in prices that are favorable to [us].”

Max’s Group saw its attributable net income for the first quarter fall 87.7% to P41.47 million from P335.98 million in the same period last year.

The company’s total revenues climbed 17.9% to P2.17 billion from P1.84 billion in the same period a year ago.

“Local sales were still tempered as a result of the strict lockdown in January due to the Omicron surge, while international business continues to flourish, surpassing even pre-COVID levels,” it said in an e-mailed statement.

“March demonstrated significant growth in sales with a 14% month-on-month increase as restrictions on dine-in were loosened further,” it said, adding that core brands Max’s Restaurant, Pancake House, Yellow Cab Pizza Co., and Krispy Kreme “all realized upsides with the relaxed restrictions and are expected to further realize gains as dine-in continues to surge amidst heightened mobility.”

Max’s Group shares closed 5.45% higher at P5.80 apiece on Friday. — Arjay L. Balinbin