Pub chain Wetherspoons is pushing to triple its coffee and breakfast trade in the next 18 months to compensate for lower sales elsewhere in the business.
The group saw profits down 1.1 per cent to £55.1m in the six months to January 25, despite revenue and like-for-like sales climbing.
Increased competition from supermarkets and higher pay and bonuses for pub staff were behind the fall in operating profit, the company said.
The chain, which operates 936 pubs, is repricing its morning products from Wednesday March 18, with Lavazza filter coffee 99p with free refills available in 880 stores.
JD Wetherspoon chief executive John Huston told The Yorkshire Post that chain hopes the prices are a “compelling offer”.
“The coffee shops are really expensive compared to what we’re going to be charging,” he added.
However, there are some uncertainties around the costing of the items and speed of growth, Mr Huston added.
Revenue climbed nine per cent to £744.4m in the first six months, while like-for-like sales rose 4.5 per cent.
Sales weakened from quarter two, Mr Huston said. This has continued into Q3, with like-for-like sales growth of 1.6 per cent weaker compared to recent years.
“We feel the competition amongst supermarkets at the moment has drawn us in.
“As prices are falling at supermarkets, it makes it even harder to get people to come out of their houses and go to the pub,” Mr Huston said.
The disparity between VAT for supermarkets and pubs is a further blow, he said.
“Pubs pay 20 per cent on everything and supermarkets pay nothing at all on food, which helps them subsidise the alcohol,” he said. “It makes it very difficult to compete against them.”
JD Wetherspoon chairman and founder Tim Martin said the tax treatment of supermarkets is the “biggest danger” to the pub industry.