Whitbread is looking at more cost savings and menu changes to combat rising food ingredient prices at its Premier Inn, Costa Coffee and Beefeater brands.
However, despite the challenges posed by food inflation it said it would not abate from plans to double the size of both Costa and Premier Inn to 2,000 stores and 55,000 rooms respectively within five years.
Alan Parker, chief executive of Whitbread, told the Financial Times that although food and fuel prices showed double-digit percentage price increases, the group aimed to maintain operating profit margins in the current year through cost savings.
Earlier this month the company outsourced its food delivery to logistics company Kuehne & Nagel in a deal that will save Whitbread £25m a year from 2009.
Sales at Premier Inn for the year ending 28 February were up by 15.1% to £527.8m, with profits up at the budget chain by 14% to £178m. Its currently has 36,000 rooms in the UK.
Costa's 992 worldwide outlets increased its revenues by 23.5% to £216.3m and profits rose by 16.9% to £20.8m.
However sales in its pub restaurant business fell 14% to £446.1m. During the past year Whitbread has re-branded its 102 Brewers Fayre pubs as Table Table outlets targeted at adults aged 30 to 45 to reinvigorate sales.
Parker said that the pub-restaurants business had contained cost inflation during the past year but it would be a "significant challenge" throughout 2008 and into 2009.
Overall sales at Whitbread for the year were up by 11.3% to £1.2b. Pre-tax profit rose 26.3% to £210m.
Last week Costa opened its 700th outlet in the UK on London's Baker Street.
By Christopher Walton
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