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Morning Briefing Strap Line
Fri 20th Jul 2012 - M&B, Diary and Friday Opinion

Story of the day:

Richards tipped as M&B favoured candidate: Industry sources have claimed that Novus chief executive Steve Richards is now the clear favourite for the chief executive job at Mitchells and Butlers. Yesterday, executive chairman Bob Ivell told analysts that the delay in filling the job was not necessarily on the company's side. “It’s just a case of getting to the right point,” he said. Ivell also told analysts that he had “got bored” of saying the same thing - a reference to the mantra of making “good progress” that the company has been using. Instead, yesterday the company flatly referred to the process continuing. One well-placed industry source said: “I would be very surprised indeed if the preferred candidate is not Novus chief executive Steve Richards and the interminable delay in naming the new chief executive is linked to the completion of the sale of Novus.” On Wednesday, Sky reported the sale of Novus could be completed within a week. Meanwhile, Ivell reported that the company had seen “interesting green shoots” of better performance from its value brands based on new ideas and initiatives - its value brands had been the most challenged part of its portfolio. “It’s early days but we are seeing some quite interesting results from those,” said Ivell. “The north-east and the north-west are producing the weakest results while Nicholsons and Castle pubs are producing the best performance year-on-year at the moment. Generally, pubs are out-performing restaurants at the moment,” added Ivell. Geof Collyer, analyst at Deutsche Bank, reported yesterday that Mitchells & Butlers had made “no apparent progress on a new chief executive or any new non-executive directors”. He added: “This remains the major impediment to recruiting new investors in our view.” On trading, he said: “London and south east exposure is helping to offset trading volatility caused by the weather. Around 40 per cent of M&B pubs are in the south east versus 55 per cent for Greene King. Overall, like-for-likes (are) still positive despite the weather though we have trimmed forecasts a little.”

Industry news:

Average pub pays £66,500 in beer taxes: British pubs are paying an average of £66,500 in taxes on beer, according to figures published in a joint exercise between the British Beer & Pub Association and the Campaign for Real Ale. The two organisations said the level of taxation (beer duty and VAT) had risen by “an astonishing £18,000 (up 38 per cent) since the government’s controversial beer duty escalator was introduced in March 2008”. BBPA chief executive Brigid Simmonds said: “These new figures show the unsustainable burden of this tax on pubs. Only public pressure will force the government to think again, as further increases above inflation are planned, every year – even though the government doesn’t expect to make any additional revenue from the policy.” The BBPA and CAMRA are urging people to support an e-petition to force a Parliamentary debate on the duty escalator. Currently 66,000 have signed the petition and another 34,000 are needed.

Distillers challenge minimum pricing: The Scottish government’s plan to introduce a minimum pricing policy for alcohol is set to face a legal challenge from whisky producers. The Scotch Whisky Association (SWA) is lodging a complaint with the European Commission and plans to take action through the Court of Session in Scotland to overturn the policy. SWA said it believed the policy, which was passed by SMPs in May and cleared the way for a minimum price of 50p per unit, is illegal, ineffective and will damage Scottish distillers. SWA’s chief executive Gavin Hewitt said the association’s action was backed by other UK and European Union wine, beer and spirits organisations. He said the complaint to the EC was based on the argument that minimum pricing breaches EU trade rules. SWA also believed minimum pricing would artificially distort trade in the alcoholic drinks market, contrary to EU law.

Company news:

Harrison Design to open TGI Friday’s site in Tennessee this week: A new generation TGI Friday’s site, designed by UK pub, restaurant and foodservice design company Harrison, headed by veteran Philip Harrison, has opened in Nashville, Tennessee this week. Harrison has been invited to evolve the TGI Friday’s brand in the US after successful overseeing the re-invention of the brand’s design in the UK.

Sir John Fitzgerald losses reduce: North-east managed operator Sir John Fitzgerald has reduced its losses for the most recent year. The company saw turnover drop to £17,832,004 in the year to 31 January 2012 from £18,564,874 the year before. Pre-tax losses reduced to £411,202 from £1,437,321 the year before when there was a £1,292,795 exceptional item. The company stated: “Based on business between February 2012 to date, we expect this coming financial year to be similar to the last. Our industry is affected by prosperity and our future will be determined by local prosperity.”

Joseph Holt grows turnover and profit: North-west brewer and retailer Joseph Holt grew turnover to £45,574,090 in the year to 31 December 2011 from £45,132,423 the year before. Pre-tax profit jumped to £3,762,136 from £2,905,532 the previous year. The profit figure was helped by a £473,209 profit on a disposal. The company stated: “The brewing industry continues to experience tough trading conditions. The company has made significant efforts in developing its managed estate, tenanted opportunities and free trade business but operating profit continues to be under pressure from cost increases and the general downturn in the economy and 2012 will prove no less challenging.”

Dorset Brewing Company takes on second pub: Dorset Brewing Company has taken on its second site – Punch Taverns’ Butchers Arms in Yeovil. The company aims to establish the pub as the best real ale pub in Yeovil, with a minimum selection of six real ales at any one time.

Orchid Pub Company reports Thai success: Managed operator Orchid Pub Company has reported its 12-strong Dragons pub – combining a pub with a Thai restaurant – is one of the company’s fastest growing segments. Commercial and people director Simon Dodd said: “They are a massive success story for us. They are a truly unique concept and not easy to replicate. The secret of our success lies in the fact Dragons are all about the people and authenticity. Our highly skilled and flexible teams can run fine fresh Thai dining one minute and a pub quiz and cask ale festival the other. There is nothing else like it.” Key marketing initiatives within the segment include: Thai Tuesdays - diners can enjoy a main meal, side order and a drink for just £7.95 every week. This offer is so popular, sales rise on average by 14 per cent each Tuesday; Sunday sharing – customers can bring a friend for free on Sundays means people can treat a pal or family member for free; Daily Lunch Club - weekday from noon to 6pm, customers have the choice of Thai main and side dish with drink or an English dish and drink for just £7.95; Thai takeaway – takeaway orders receive a ten per cent discount and 25 per cent of sales are accounted by takeaway trade. In the latest round of customer experience surveys, 87 per cent said they would be very likely to recommend Dragon pubs to a friend.

Robot Pub Group boosts turnover by 78 per cent with technology: Robot Pub Group has grown turnover by 78 per cent at its Thirsty Bear pub in London since opening six months ago thanks to new technology such as iPads at 15 tables, with 12 of them linked to self-serve taps. Customers can send text messages requesting waiter service, order songs from a connected Jukebox, and even update their Facebook profiles. A dedicated advertising channel on the tablets, meanwhile, lets the pub promote its latest special offers. The company is now licensing its technology for use by other pubs and restaurants. 

Punch calls time on flood-hit pubs in Hebden Bridge area: Punch Taverns has decided not to re-open two pubs that suffered severe damage in recent floods - The Railway in Hebden Bridge and The Dusty Miller in Mytholmroyd. A spokesperson from Punch Taverns told Hebden Bridge Times: “Three pubs - The Dusty Miller, The Railway and The Golden Lion - have been closed as a result of the recent flooding at Hebden Bridge. The Golden Lion has already been identified as a disposal site before the recent flooding and after detailed consideration we have taken the commercial decision to market the other two for sale as licensed premises as well.”

Antic plans pop-up bar: Antic, the London multiple closing in on 30 sites, is to open a pop-up bar at The Great Hall in Leyton’s High Road. The pop-up is expected to have a sports theme and will open in the next seven to ten days. The company is also recruiting for its next opening The Bohemia in North Finch.

£30m plan for Tolly Cobbold brewery in Ipswich: The restored Tolly Cobbold brewery in Ipswich is set to become the centre-piece of a £30 million re-development. Under the plan, the former Tolly Cobbold brewery would become a hub for the community with a variety of uses. A new medium-sized supermarket would be built nearby and there would also be new homes, a hotel, and a health and fitness club. An exhibition showing off the £30 million development has been held at The Brewery Tap pub next to the site.

Pret A Manger goes transparency route in the US: Pret A Manger has added information on saturated fat, sugar, and sodium levels to its product labels both in store and online. The brand has always listed nutritional information on its website and included calorie counts on its labels for the past few years but adding further information gives the brand greater transparency. Martin Bates, president of Pret US, said: “People are getting more discerning—and our customers are certainly getting more discerning—and they want to know more. We’ve always posted nutritionals on our website, so we just wanted to dig a bit deeper to allow our customers to make better-informed choices.”

Propel Diary:

Caring shows he cares: London-based restaurant entrepreneur Richard Caring owns some of London’s and the UK’s best restaurant brands. But it’s always worrying when something impressive and new pops up . So who could blame Caring for turning up at Brasserie Zedel, the new Rex Restaurants venue off Piccadilly Circus, to have what’s commonly known as a snoop. The lunchtime Diary was breaking bread at the site, Caring did a small circuit of the restaurant, seemingly counting heads, before making a swift exit stage left.

The danger of nightclubs: Last week’s ‘Back to the Floor’ featured Luminar chief executive Peter Marks doing the rounds at company venues. Suffice to say, he came across the odd customer suffering a slip or, er, trip. Unreported so far is a slightly nasty surprise awaiting administrator Ernst & Young when it took over the business. It had to pay a £250,000 insurance premium when it was running the business for a seven-week period last year. The premium was paid in the context of 75 outstanding personal injury claims totalling £1.2m from the trading period prior to its appointment. The administrator said: “Due to a large number of historic claims and a fatality at the Northampton club prior to the administration, the premium for the period was £250,000, which was considerably higher in proportion to the premium paid pre-appointment.” Last month Ernst & Young reported: “To date, nine claims have been received and investigated which relate to the administration trading period. The excess on the insurance policy is £15,000 per claim.” Stuff of nightmares, running nightclubs.

Papa John’s and the missed targets: Propel reported delivery pizza firm Papa John’s setting a target of 150 new openings in three years. A correspondent drops Propel a note: “Papa John’s are very good at setting large goals for themselves. In February 2009, Papa John’s said it was aiming to have 150 stores trading in the UK and Ireland by the year’s end. Papa John’s founder and chief executive John Schnatter said the company would look to add 30 to 35 new stores to the 118 it currently has in the region in 2009. Some 3.5 years on and they are at circa 180 outlets. So their expansion rate must have slipped - a lot.” And just to ram home the point, the correspondent adds: “ Why have they stopped talking about like-for-like sales for 18 months now?”

Behind the scenes in the fast-food sector: Social news website Reddit started a discussion on the subject of which menu item fast food workers would never eat. Within 24 hours, the conversation generated more than 6,000 comments from workers and ex-workers of some well-known brands. In a spirit of helpfulness, steer clear of the chicken options, be wary of ice machines and use ketchup bottles with caution.

Enterprise comes to Otley pub: The Black Horse in Otley was the subject of a war of words between Enterprise Inns and local MP Greg Mulholland – with the latter accusing the former of neglecting the site. Following a £400,000 refurbishment the site has been run for six months or so by Steve Harvey and Jo Kapowicz and the locals seem to love it. Now the enterprising couple have hired a top chef from The Royal Baths Chinese restaurant in Harrogate to run a Chinese food offer in a 32-seat under-used bistro area at the pub. Peter Jackson, chairman of Otley Pub Club, said: “We are pleased that after so many failed attempts to have The Black Horse Hotel back in use we are now celebrating the success of Jo and Steve who, with hard work and dedication, have transformed it into the flagship of Otley licensed premises.” Nice to have a happy ending. 

Twitter best- in-class: It could be that Byron boss Tom Byng is the sector’s most engaging chief executive when it comes to using Twitter – and he has been rewarded with a mighty 6,890 followers. With Byng, all life is there – from the profound to the less so. A tweet yesterday provides an example: “Currently chairing the weekly design meeting in my role as head of loo seats and mixer taps. Because no one else thinks it’s important.”

Friday Opinion:

Subjects: Brand longevity; fast casual adaptation
Authors: Paul Charity, Steve Haslam

Creating brand longevity by Paul Charity: The dire five-year performance of American sandwich chain Quiznos (sales have halved) and the performance of Pizza Hut in the UK (three years of losses) show that brands can stagnate and even decline. But equally, the performance of Starbucks in the US in the past few years proves that declines can be arrested and reversed. It seems to me that major brands – with historically high levels of customer satisfaction – are perfectly capable of re-inventing themselves. When sales start to slip it’s a sure sign that consumers are moving away to spend their hard-earned cash with rivals. But a sort of residual fondness means they are likely to give a brand a second chance if they see or hear of marked improvements. It’s why, of course, a seasoned sector investor like Luke Johnson has been tempted to buy the faded UK arm of Pizza Hut. He’s backing himself to re-invent the proposition in what is a very large market – the pizza segment of the eating out market is worth £1.85bn. No brand expands to a considerable size without hitting consumer buttons, but the challenge of creating sales momentum never disappears. When strong brands start to fade it’s a slow process, which provides a window to restore brand credentials. The UK market provides plenty of examples of brands successfully re-inventing themselves. The main levers are around re-investment to create better amenity levels, menu evolution and service standards. Here’s my list of eight UK brands that prove it’s perfectly possible to suffer a wobble, even an extended one, and recover to ensure brand longevity:

1. La Tasca: The tapas brand has always suffered from a relatively quiet lunchtime session. But newish chief executive Simon Wilkinson and his team are in the process of a turnaround thanks to an absolute focus on service standards, with current customer satisfaction levels currently placing the brand in the UK top ten on this key index.

2. Pitcher & Piano: The Marston’s brand trades in the ultra-competitive high street segment but is producing high single digit like-for-like sales thanks to three factors: a slightly better-positioned reduced estate, investment in amenity levels and a focus on premiumisation with a higher quality food and drinks offer.

3. Hungry Horse: The brand traces its history back to the 1990s when veteran entrepreneur Michal Cannon first trialed it. After some years of lacklustre performance, Greene King has turned into a blockbuster family dining brand with heavy investment in modernising pubs and their amenities, plus the creation of a compelling value menu.

4. JD Wetherspoon: A controversial selection, but the company has been in a holding pattern on like-for-likes in recent times, a sign that there’s not been enough innovation to draw new customers. The most recent like-for-like sales increase of 6.1 per cent suggests the company has proven again that, in the words of former Mitchells & Butlers chief executive Tim Clarke, you should “never underestimate JD Wetherspoon”. 

5. Chef & Brewer: It’s hard to believe that Chef & Brewer once occupied the market position of Mitchells & Butlers Premium County Dining Group. After years of chronic underinvestment and indecision over brand direction, Spirit Group has turned the tide on the brand with capital spend and menu evolution. Its current average food spend-per-head at £11.30 including VAT mean it sits above the Taylor Walker spend-per-head at £10.40. 

6. Harvester: The Mitchells & Butlers brand was idling for a number of years, but has been successfully re-invented in the past two years under brand director Steve Cash. Customer satisfaction scores suggest it has further to go, but it’s essentially back on track. 

7. TGI Friday’s: The all-American diner brand has rediscovered its mojo under chief executive Karen Forrester. Design has been modernised, menus up-dated, service improved. The current upwards like-for-like sales trajectory has further to play out as the brand continues to win back lapsed customers and attract new ones. 

8. Brewers Fayre: The Whitbread pub restaurant brand seemed lacking in fresh direction and innovation for a period, losing out to stronger, more individuated mass market offers. Right now, sales are moving in the right direction as customers respond to a broader offer and its buffet.

Paul Charity is managing director of Propel Info


Making the adaptation to fast casual by Steve Haslam: For all those people who know Jo and I or TLC Inns, they will naturally associate us with several quality pub venues. However, back in September 2011, an opportunity arose to take a complete sideways step into the fast casual American Bar & Grill market, a segment dominated by TGI Friday’s, Frankie & Benny’s et al. Many eyebrows could have been forgiven for raising a nervous twitch. The opportunity was a purpose-built retail park site that had been vacated by a now liquidated franchisee of Aussie-themed chain Outback. Securing a deal quickly, we were ready to create our own take on the classic American Bar & Grill – Grand Central. Luckily, we could draw on our previous experience and connections to Bennigans, Jeffersons, TJs and Exchange Bar Diners. Believe it or not, we had our vision loosely tucked away in the bottom drawer and within five weeks and for an investment of £250,000 we were up and running. Looking back, building Grand Central was the easy part! Despite all the training and pooling of our expertise, it was like operating in a parallel universe for us and our staff. Unlike our pub venues where we can have up to 80 per cent of our seating in our restaurant taken up by pre-booked guests, Grand Central threw us our biggest challenge to date. The bookings diary could be empty but then 200 guests would just turn up. Call it naivety, but the first thought was to just throw extra staff at the problem – not the answer. After several weeks and many sleepless nights, the answer was much simpler - Host and Hold! We had a full time host who communicated well with both guests and the team while we held our guests and filtered them through at a level where service wasn’t compromised. Trade has been great and is growing at a gentle and steady pace; perfect for us because it means our quality is being maintained at the right level. Grand Central is fun, quirky and, we believe, has its own fresh take on a concept dominated by large brands. We also adapted the Grand Central theme to discount in a way that seems right for the brand. On Trader Tuesdays, customers are invited bring in any voucher from any food outlet and our staff (or traders) have the freedom to trade vouchers for menu items. It’s fun, different and actually leads to up-selling on a discount voucher – a win win situation. With Wall St Wednesdays, we allow dishes that are ordered as regular size to be upgraded to large at no extra cost. What we didn’t want to do was to become an out-and-out discount-led experience and with our Grand Central Dollars, redeemable one dollar to one pound basis, and tie-up with our local cinema we believe we have got the balance right. Grand Central is still evolving and it’s good to see our off-the-wall ideas are proving their worth – such as our gallery of stars. Part of the refurbishment was to install a new tiled ceiling - not the best look in the world but we had a plan. With circa 900 tiles, it was to become our Hollywood Boulevard, each tile selling for £25 for a private message, £100 for a corporate one. We think it’s a magical idea: we get paid for each personalised tile, customers come for their visit to either see or surprise their guest with their own personal message. Even better, customers come back as they have their very own piece of Grand Central, a physical testament to an important celebration or occasion. Again, it’s win win. And talking of evolution, last Wednesday saw our first Independence Day so we had the Motown Sisters play a two-hour set. What a night - great atmosphere, guests loved it. We are now going to introduce regular music nights - this could be another great USP if it follows with as much success as our first. So learning curve – definitely. Roll out potential – without a doubt. Happy – couldn’t be happier. We are living the American Dream.
Steve Haslam is managing director of the award-winning TLC Inns, which operates five pubs and Grand Central

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