Domino's Pizza UK and Ireland is to increase its prices to compensate for the soaring cost of mozzarella cheese and pizza base ingredients.
Domino's said sales were strong and Chief Executive Stephen Hemsley said the company would 'murder' forecasts for sales in the second half. But rising cheese and wheat costs would bite into margins, he added.
Mozzarella is the biggest cost in making a pizza and costs have rocketed because of a jump in milk prices.
Booming demand for dairy products in Asia coupled with droughts in Australia and summer floods in Europe also combined to send the price of mozzarella up by over 50% or more than £1,000 sterling a tonne since June.
Domino's has absorbed nearly £500,000 of the extra costs to give its franchises time to change their prices and menus but Hemsley still expects the firm to meet the full-year consensus pretax profit forecast of £17.5m.
Domino's, which has around 500 franchise outlets, will start passing on higher cheese costs to stores from today.
The company also expects a substantial increase in wheat costs for its pizza bases when it reviews its contract in January, because the price of wheat has doubled this year.
Meanwhile, the company said that third-quarter sales were up 14% in the 13 weeks to the end of September 30, better than some analysts had expected, although the cost concerns tempered sentiment.
