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Last Updated: Thursday, 1 November 2007, 21:59 GMT
Domino's warns of pricier pizzas
Domino's deluxe pizza
Domino's says it expects to hit profit forecasts despite rising costs
The price of pizzas looks set to rise after Domino's Pizza warned of "unprecedented" increases in the cost of cheese and flour ingredients.

The cost of dairy and wheat products has soared in recent months because of strong demand in China and extreme weather in Europe and Australia.

Domino's has absorbed some of the costs but warned that franchise store owners may choose to "adjust local pricing".

The company's shares ended 9.9% lower at 216p on the London Stock Exchange.

More dough needed

Domino's said that it would look to limit any price rises, making sure they were kept to "a minimal amount".

The company said it expects customers will only have to pay 40p or 50p more for a pizza that now costs 10.

"Some people may be thinking the price of pizza is going to go up to 50," a company spokesman said.

"That is not the case. It is a minimal amount."

Core ingredients such as mozzarella have soared in price this year due to surging Chinese demand for dairy produce.

The situation was exacerbated by the collapse of Domino's main dairy supplier in March, which forced it to renegotiate its contract at a time of spiralling prices.

Domino's warned that flour costs would rise "substantially" when it renews its existing contract in January as the severe drought in Australia and flooding in Europe this year have seen wheat prices escalate.

It is up to individual store owners - who run Domino's 480 UK and Irish outlets on a franchise basis - to set the price of their pizzas.

Domino's said most franchisees had not put prices up in the past few years, suggesting that increases could be around the corner.

Rugby hunger

Depsite the shadow of rising costs, the company was upbeat about its future.

Domino's has enjoyed an Indian summer thanks to the Rugby World Cup whose hungry fans helped boost like-for-like sales by 14% between July and October, the company said.

That has helped offset the higher costs.

Demand for pizzas remains strong with like-for-like sales, excluding trading at newly opened stores, rising 14% in the 39 weeks to 30 September

Online orders rose 49% over the same period.

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