Demand for meals is rising at pubs chain JD Wetherspoon, but food price inflation has become a serious concern.

Half-year pre-tax profit fell 13% to £28.5 million as trading was hit by the smoking ban. The longer-term impact of this regulation has yet to be seen but a sharp increase in raw materials for its meals has become an additional unwelcome distraction.

It has used its buying power to combat higher wheat and dairy costs, but chief executive John Hutson warned that this procurement strength may have reached its limits.

'If prices rise by a certain amount, you can renegotiate with the market because we buy so much. If they keep rising, however, it gets to a point where you can no longer offset inflation through better buying,' said Hutson.

Beef is the latest food group to see strong price increases. Wetherspoon has upgraded its burgers to a quality comparable to Clapham House's Gourmet Burger Kitchen products, claims Hutson.

Against the inflationary pressures, food continues to drive group earnings. It claims that 60% of all trade is from food and drinks associated with meals. Like-for-like food sales rose 9.7% in the six months to 27 January, compared to 6% drop each in bar and games machine takings.

It takes an average £8,600 per pub each week from meals. Coffee and tea sales have reached 514,000 per week. It has also seen record takings from cask ales and is now the world's biggest customer of Pimms, by sales volume.

Hutson said Wetherspoon continued to 'drive the commercial property market' for pubs. It is planning 23 new pubs this year and 30 in 2009 across large town and city centres and rural locations.

Operating margins have been declined slightly because of fees from pulling out of property deals. It has been particularly selective over new locations, but insisted it still has a strong pipeline of expansion opportunities, currently standing at 214 sites.

'The pub is not dead and Wetherspoon will thrive,' said stockbroker Blue Oar. 'The shares won't fall far and are likely to bounce.' By midday Friday, Wetherspoon had fallen 11% to 277.25p

Landsbanki analyst Kate Pettem said there were a few surprises in the results. She commented: “Surprises for us in the results were a slightly lower amount of expensed repairs, the inclusion in operating profits of a small loss on disposal, and a higher tax expense than we had forecast.

'Dividend growth, up 10%, was higher than we had forecast. We are still bullish on Wetherspoon given their unique prospects for growth from new sites being built in smaller towns,' added Pettem.