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Fri 27th Jul 2012 - Atmosphere, Diary and Friday Opinion

Story of the day:

Atmosphere Bars and Clubs reports dramatic turn-around: Atmosphere Bars and Clubs, the company led by Paul Harbottle and backed by private equity firm Sun European Partners, has reported that a turn-around of the former Chicago Rock Café business is now under way. The company has achieved positive like-for-like sales growth of one per cent in the first quarter of the current financial year, which started in March. It is a dramatic transformation from the minus 24 per cent like-for-likes in the business when it was acquired in early 2010 out of the administration of 3D Entertainment. Ebitda in the first quarter of this financial year is £420,000, a £350,000 increase on the same period last year. Harbottle said: “We have effectively taken the business apart and re-built it again. Customers seem to like what they see, reflected in an improving sales performance. We’re very optimistic about the current year-end result.” The company reported Ebitda of £238,000 on turnover of £21,533,000 in the year to 26 February 2012. It saw underlying Ebitda of £1,141,000 on turnover of £24,203,000 the year before – three sites were closed in the most recent year. The company stated: “The late-night sector in which the company operates continues to remain very competitive with many businesses discounting pricing at unsustainable levels in order to attract customers. The company has maintained a premium policy during its key trading times and has implemented many enhancements to the customer offer. Furthermore, it has taken action to reduce costs in a large number of areas in order to ensure that it is able to withstand challenging trading periods.” Exceptional items led to a loss before tax of £4,065,000, down from £5,233,000 the year before. Atmosphere was formed when 31 sites, mostly trading as Chicago Rock Café, were bought out of the administration of 3D Entertainment. It currently runs 26 sites, including 18 Chicago’s, and will open a new Chicago’s in Stourbridge in September. 

Industry news:

Heineken joins Jacques Borel VAT Club: The UK’s largest brewer Heineken UK is the latest high profile company to join the Jacques Borel VAT Club, which is campaigning to reduce VAT to five per cent in the UK hospitality industry. Lawson Mounstevens, on trade managing director for Heineken, the UK's leading beer & cider business, said: “We are committed to the Great British Pub, both through our direct ownership of 1,300 houses and the circa 50,000 that we supply on a weekly basis. A reduced VAT rate on food and drinks offered by pubs, clubs and bars would provide a much-needed boost to the sector, stimulate investment and likely create jobs. The VAT club has already successfully put this campaign on the radar for many in the industry and Heineken is only too pleased to support Mr Borel in his very important work.” Jacques Borel: “I am delighted to welcome Heineken to membership of my VAT Club. As the UK’s largest beer and cider business, as well as the owner of 1,300 pubs, the company understands the huge employment benefits that would be achieved if the UK government follows the lead of countries across Europe and reduces VAT to create a powerful job creation stimulus.” The Jacques Borel VAT Club now has almost 40 members made up of companies from across the pub, restaurant, hotel, brewing and foodservice sectors. These include Pizza Hut, Mandarin Oriental, Road Chef, TGI Friday’s, JD Wetherspoon, Shepherd Neame, Fuller’s, Charles Wells, St Austell and Subway.

Panera Bread reports strong second quarter: Panera Bread, leader in the bakery cafés segment that is the best-performing category in the US marketplace, has reported like-for-like sales growth of 5.9 per cent in its second quarter. New stores saw average weekly sales of $48,484 versus $43,449 last year. The company introduced a 99 cent bakery item on offer for customers buying a beverage. It is also developing a “conversational ordering system” which is a less structured process aimed at improving order accuracy and guest interaction.

Company news:

Beds and Bars plans largest opening so far: Beds and Bars, the pan-European hostel provider headed by Keith Knowles, will open its largest site so far at the end of August – a 26 million Euros hostel in Barcelona that offers 400 beds. The new site has been funded by two Spanish banks, which will take a 20 per cent equity stake in the Barcelona venture. Bed and Bars’ Paris site is the next biggest in the estate with 370 beds. Knowles reported the company had seen 5.2 per cent like-for-like sales growth this year across the estate, with alcohol sales down but food and accommodation both in positive territory.

New Luminar owner makes £6m second stage payment: The new owner of 59-strong nightclub company Luminar has made a second stage payment of £6m to the administrator Ernst & Young. The business was sold in December last year by Ernst & Young for “up to” £33.9m - £15.9m was paid on completion in December with £14.2m to be paid on a deferred basis. A total of £2.21m has been payable on a monthly instalment basis of £240,000 per month ending in September this year. The balance of £12m payable in two equal instalments of £6m at the end of last month and in December 2012 – the first of these two £6m payments has now been made at the end of June. Luminar generated revenue of £11.7m and made a profit of £486,000 for the seven weeks it was in administration at the end of last year. The company, which was acquired by Peter Marks, now chief executive, Alex Geffert and Joe Heanen, has embarked on a £2m investment to improve sites. One of the first venues to see a refurbishment will be Gallery in York. At the start of 2012, the company appointed Colliers to undertake a £32m sale and leaseback of 15 freehold sites. Proceeds are expected to be spent on improving the estate.

Whiting & Hammond launches first estate-wide promotion: Whiting & Hammond, the seven-strong operator led by Brian Whiting, is launching its first estate-wide promotion to coincide with the Olympics. Customers who spend £10 in a site receive a loyalty card. If they visit three pubs they receive a free pint or glass of wine, five visits to Whiting & Hammond pubs earn a free meal up to £10 in value and free glass of wine or pint, and a full estate tour entitles customers to a meal worth £25 and a free drink. The promotion runs to end of the Paralympics. Said Whiting: “The idea came from the manager of our Old Mill pub in a managers’ meeting. My gut feeling is that not many people will visit all seven pubs but there is nothing to lose with a promotion like this.”

Former Von Essen hotel to become a pub with bedrooms: Washbourne Court in Gloucestershire, acquired by Brownsword Hotels out of the Von Essen administration, is to become a pub with bedrooms. The 30-bedroom venue will be re-named Slaughters Inn when it re-opens in September. Brownsword Hotels owns Lower Slaughter Manor, Amberley Castle and Buckland Manor.

SAB Miller investors protest over directors’ pay: Investors in SAB Miller have staged a protest over directors’ pay with 23 per cent voting against the company’s remuneration report. The brewer has been accused of being “less than transparent” on pay structures. 

Starbucks reports Europe sales flat, US sales slowing down: Starbucks has reported like-for-like sales in Europe were flat in the most recent quarter with sales slowing down in US in June, a trend which has continued into July. Sales at sites open for a year rose by six per cent but the news of the slow down and missing its earning per share target caused Starbucks shares to drop by nine per cent. “We’re dealing with significant global economic and consumer challenges,” President Howard Schultz said.

Corney & Barrow to open first C&B re-modeled site next month: Corney & Barrow will unveil its first site to be re-modeled as a C&B Bar in the middle of next month. Mason’s Avenue will be “less corporate” with more emphasis on food, open kitchens, provenance and cask ale. The company said its bars “will remain premium but more accessible”. C&B also plans to expand its Terrace offering in the coming year, following the success of its flagship restaurant, Devonshire Terrace, which has seen a 30 per cent increase in revenue since C&B purchased the site last year. Lucy Knowles, managing director of Corney & Barrow, said: “Last Autumn we took time to reflect on what’s been an unforgettable thirty years serving the City and felt it was time to move on. So we’ve had a makeover, but stayed true to ourselves.” Its new transport hub concept, The Cabin, opens next Tuesday in Waterloo.

Hakkasan sets out plans for San Francisco site: Hakkasan, the Michelin-starred Cantonese restaurant founded by Alan Yau in London, has released plans for a $7m 10,000-square-foot restaurant at One Kearny Street in San Francisco. Hakkasan already operates sites in New York and Miami.

Former Yates’s chief executive Mark Jones becomes chairman of Bingo Association: Mark Jones, former boss of Yates’s and Premium Bars and Restaurants, has become the new chairman of the Bingo Association. Jones originally joined the Rank Group in 2009 and will retain his position as head of its bingo division with Mecca while serving as chairman of the Bingo Association.

SA Brain’s pub to re-open after two-and-a-half years of closure: A SA Brain pub in Llangennech is to be re-opened two and a half years after it shut. Refurbishment work to bring The Smiths Arms in Llangennech back to life began on Monday and is expected to take six weeks. Simon Griffiths and his partner Victoria Davies have taken on the Brains-owned drinking hole and are hoping to reopen it as the Tafarn Morlais. Griffiths said: “We've got big plans for the pub and it will have a very different look and feel — which is why we made the decision to rename the pub.” Brains sales and marketing director Richard Davies said: “We've always known that the site has potential.”

Number Works Pub Company adds Enterprise site: Number Works Pub Company, which is headed by Martyn Hathaway and is pioneering a new-style value-food offer, is to open its seventh site today (27 July) - Enterprise Inns’ Greyhound in Bromsgrove. Hathaway told Morning Briefing: “It’s smaller with 70 covers than our usual 100 covers but the pub is surrounded by a lot of chimney pots.” The company is also in negotiations over its first franchise agreement with a party interested in sub-letting its Spirit site in Swindon, Ellingtons. “Spirit has agreed we can sub-let the site,” said Hathaway. Meanwhile, a plan to buy a pub in Ludlow from the Punch disposal estate, The Salway Arms, has been put on hold while Punch explore alternative property options. On trade in general, Hathaway said: “Trade has been good but a bit of sun makes a big difference.”

Morning Briefing Diary:

All The President’s pens: The pen can be more lucrative than the sword. The Fuller’s annual report reveals that Anthony Fuller, former chairman and now president, is in receipt on an annual royalty of £15,000 paid in recognition of the fact that he has “given the company ongoing exclusive permission to use his name and signature on any company product”. And probably mindful of how troublesome family shareholders can be, Sir James Fuller receives consultancy fees of £5,000 in relation to “his family shareholder liaison role”. Sounds like Sir James is doing the really hard graft.

All the Prime Minister’s friends: The Gunmakers in Clerkenwell, a Punch Taverns pub, makes exceptionally good use of its Twitter feed. Licensee Jeffrey Bell tweeted this week: “Just remembered. Last night my pal Charlie threw down a horrendously crass name drop: “As the PM said to me last week at No. 10.” Could this Charlie be Draft House’s Charlie McVeigh who is known to have friends in high places? Diary thinks we should be told. “I’ve no memory of the evening in question and have never met David Cameron at No. 10 although I know his wife,” says McVeigh.

Spam filter hits bottom: Spam filters can be terribly sensitive – and there’s often collateral damage involving the innocent. So it was that Hall and Woodhouse's highly regarded head of tenanted Matt Kearsey found himself asterisked out of one local newspaper story this week. It involved the H&W community pub of the year, The Sun Inn in Godalming, and a highly-sensitive spam filter that only allowed the use of the name Kearsey with the penultimate four letters obscured by asterisks. It’s becoming like those Victorians who insisted on demurely covering table legs. 

Domino’s UK talks the talk: Lord knows, company results announcements can be as dry and indigestible as sun-baked gravel. Good to see, then, Domino’s UK deciding that it’s perfectly possible to add a bit of the old demotic to its half-year screed on Wednesday. The company reported: “We had our biggest ever Tuesday when Valentine's Day fell on a Tuesday and the romantics decided to curl up at home with a couple of pizzas. We were expecting this to be usurped by the final England group match in the European Championships, which was also on a Tuesday, but no - it appears that the average British male prefers pizza with his missus, than with Wayne Rooney.” Nice to find ‘em talking our language 

Entrepreneurial Spirit steps into the limelight: Spirit Pub Company’s public relations department was a little denuded when both long-serving Sarah Perrins and Jo Mather headed for pastures new. The pair have not wasted time in setting up shop with the launch of their own PR agency Limegreen Communications and bagging a few clients, including Lean, a Birmingham based digital marketing agency focusing on the charity and social enterprise sectors, the Burton Breweries Charitable Trust (BBCT) and the European account for pneumatics company SMC. Perrins reports: “Jo and I have been in the industry for over 20 years and felt it was time to use our expertise to form a new consultancy with a twist. We have that rare combination of in-house and agency experience, together with knowledge of working with FTSE 250 companies and believe in developing reputations and brands from the inside out.” Sounds like proper PR talk, doesn’t it?

Taking all precautions: Did administrator Begbies Traynor feel the administration of 13-strong pub company Sarumdale, triggered by Barclays withdrawing support, might get a little fraught? Certainly every precaution was taken with staff from management company Convivial Management Service attending every site at 11am on the day of the administration to break the news simultaneously – and change the locks. In the event, the Begbies takeover passed peaceably. Begbies reports: “The majority of the pub managers have been co-operative and supportive of the administration strategy and therefore Convivial removed their staff from the individual pubs and appointed a number of area managers to oversee the trading with the existing pub managers remaining in place.” 

Seeking out Swiss neutrality: The congestion in London during the Olympics has prompted Beds and Bars boss Keith Knowles to take an extended summer break in Switzerland. When Diary caught up with him yesterday he was waiting for a flight at the airport with no plans to return to the capital before early September. He reflected (more in sadness than anger): “I hope team GB win as many golds as possible and I have to say there was a tear in my eye when I watched the Olympic torch procession this week. It’s just a shame that LOCOG has forgotten lots of people live in London and has excluded us.”

Friday Opinion:

Subjects: Under-performing brands, alcohol education
Authors: Paul Charity, John Foster

Brands that have under-performed by Paul Charity: The counterpoint to brand longevity, discussed in last week’s Friday Opinion, is brand fragility. What can we learn from those brands that fail to pass muster and disappear (or fail to realise their potential)? Nowhere in the market has witnessed more brand failures than the high street, with the high point of brand launches in the run-up to the Millennium. But there’s also fast-casual concepts that failed to pass the roll-out test. If a brand is to be expanded it must have a host of points-of-difference. And for longevity to be achieved, any brand must undertake an on-going process of renewal and evolution. It’s interesting to hear Domino’s place a target for new products to achieve 20 per cent of total sales, a sign that customers are actively engaged by, excited by, new menu products. Under-performing brands (and failed brands) tend to fall down on these essentials. Having provided my list of major brands that have had a wobble and recovered, I thought I’d provide a list of brands that didn’t turn out to have long distance legs (or failed, in my view, to realise their potential). 

1. Life: This all-day café bar concept was one of a number of brands launched by Luminar when it was talking about “owning the flow of the high street”. Despite high quality design by Harrison, the brand failed to achieve the kind of all-day trade it needed. Site selection may have been a problem with some venues located far too close to secondary location late-night venues.

2. Hogshead: Whitbread pushed hard to expand Hogshead across high streets in the late 1990s. The offer was traditional pub supplemented by a cask ale focus – early sites had barrels on show behind the bar. Perhaps the offer turned out to be straddling too wide a market position – the colonisation of most sites by younger drinkers seemed at odds with the needs of an older cask ale drinking crowd.

3. Old Orleans: In the years after its birth within the Scottish & Newcastle Retail empire, Old Orleans seemed to lose its way as more exciting and more credible food-led brands appeared. Hopes of a revival under Regent Inns proved to be a false dawn. Mitchells & Butlers finally bought the best sites last September – witness an Epping Forest gem now doing £50,000-a-week as a Miller & Carter. 

4. Bar Med: An early site in Beaconsfield went off like a rocket under SFI Group midwifery. Others appeared quickly, but the brand seemed to trade off a particularly narrow Young Person’s Venue platform and failed to make the necessary transition to trade through the day-parts.

5. Litten Tree: Another disappointment from the SFI Group stable, Litten Tree seemed, at first, to be well-placed to compete in the neutral mass market dominated by JD Wetherspoon. It lasted longer than a host of competitors but ultimately did not offer the differentiation required. Stonegate Pub Company has converted a couple of the survivors to its more dynamic Yates’s brand this year.

6. Samuel Cooper Freehouse: A Mitchells & Butlers brand hatched not long before the company bailed-out of the high street segment. Modeled to compete four-square with JD Wetherspoon, the early sites did provide more direction for under-performing larger-square-footage town venues. But contemplating its faults, as a Wetherspoon me-too, a M&B executive once told me: “It’s hard building a Ford if you’re not Ford.” 

7. Harry Ramsden’s: A national fish-and-chip brand sounds like it has plenty of potential – and this brand is the closest the market’s seen so far. But there was always something mechanical and lacking in authenticity about Harry Ramsden’s that meant it failed to win hearts and stomachs away from good independent chippies.

8. Wimpy: The pioneering burger offer was a family favourite and was an early and successful business venture in France for veteran VAT campaigner Jacques Borel. As quick service restaurants have improved quality and reduced price points, Wimpy was left in no-man’s-land, unreconstructed and unloved.

9. Taybarns: Whitbread’s brave foray into the mass-market buffet offer produced very large volumes indeed. But the cost of conversion was enormous and sales seemed to crater in the second year. Additionally, some customers were put off by the zoo-like environment. Whitbread seems to have applied buffet lessons learned to Brewer’s Fayre.

10. Que Pasa/Edwards: Occupying not dissimilar upscale market positions, both brands failed the test of time. Que Pasa passed through several hands before coming to rest at Marston’s after the Eldridge Pope acquisition and may have suffered from the loss of Tim Bird at the helm. You’d expect a few brand failures from a company the size of Mitchells & Butlers and Edwards, which looked great in styling terms, offered insufficient distinctiveness to shine in its competitor set.

Paul Charity is managing director of Propel Info


Alcohol Education by John Foster: Over the past weekend I was involved in a twitter conversation and I happen to make the observation that alcohol consumption was linked to price. The reply that came from people I know to be health professionals left me a little surprised. The link between alcohol and price was doubted and then a comment was made: How will this help the addict? Further conversation stressed the need for more education. Clearly there are evidential blind spots in operation here. Let’s deal with price first. As the alcohol industry will not tire of telling you, there is no proof of a causal relationship between alcohol consumption and price. In this the industry is correct, but what it won’t say is that when looking at wider population effects this is almost impossible to show. What we have is the very next best thing - a plethora of cross-cultural/international evidence that shows there is a strong relationship between greater levels of alcohol-related harms and low-priced alcohol. Paying a realistic price helps the addict because it means that alcohol is not so ingrained in our culture. Alcohol education is a panacea that is often beloved of health professionals and, certainly, the alcohol industry (largely because it makes barely a dent in its profits.) I support alcohol education so long as it is delivered in an evidence-based way, which, unfortunately, is rare. But even when delivered according to the evidence, behavioural change is minimal. The alcohol industry loves it because it gives the impression of doing something. But in reality has a minimal effect. The result of education is to increase knowledge but the evidence for behaviour change is very weak. Indeed, sometimes it has shown that it encourages, rather discourages, experimentation. So please let us have evidence-driven education programmes accompanied by measures that really will have an impact - increase in price and reduction of availability. Whenever representatives of the alcohol industry are asked to comment on consumption, the spectre of the responsible drinker is raised - ergo people who are not responsible are “spoiling the fun of the majority.” Alcohol is fun. I am a drinker and most of time I consume responsibly. But there will be occasions when I don’t and I think elements of “fun for the majority” need to be unpacked. It may be a bit po-faced but I despair of some of the attitudes that surround drinking. I have lost count of the number of times I have heard comments along the lines of when I get home “there will be a nice glass of something cold waiting for me.” Notwithstanding the inherent dangers of using alcohol as a reward, if the words “glass of something cold” was replaced with “a joint” “a valium”, “line of coke” “syringe of heroin” it does not quite have the same ring. This week I read something that threw into sharp relief the dysfunctional culture that surrounds drink. Devon and Cornwall police returned 27 sixteen-year-old youths, staying as a group without their parents in Newquay, who were “running riot”, having smashed up their rented accommodation whilst on drunken sprees with alcohol brought down from Bristol, Birmingham and Guildford respectively. For some on twitter, apparently, this was caused by a “lack of alcohol education.” If ever there is a case of the horse having bolted, this is it. I am less critical of the young people than their parents. Nice to give someone a rite of passage provided other people pick up the tab. No doubt most of the parents would regard themselves as responsible. I beg to differ. I shudder to think what messages they have been given, albeit not consciously, concerning how alcohol is fun. Education has no chance when it is undermined in such a manner by our wider culture. Now for some final thoughts about addiction. I welcome more treatment services but I also feel that wider society can help the addict by realising that an addiction is just the extension of an unhealthy habit and “there but for the grace of God go I.” I have worked with individuals who were addicted to alcohol for many years and understand from talking to many of them that the main challenge they face is relapsing on leaving treatment services. They will describe putting themselves in situations where eventually they are overwhelmed by cues - although they are unlikely to use such a word - usually in response to a stressful situation or wishing to test themselves. A cue is something that they associate with drinking, such as a pub, going back to areas where they drank, the smell of alcohol. I spoke to someone recently who had been drinking for many years and could provide a 30-year perspective. The main challenge he now faces is that alcohol is far easier to obtain and cheaper - he stressed the role of supermarkets in making alcohol easily available. The addict plays a vital role in helping to persuade ourselves that we are not like him or her for we use alcohol “responsibly”. I may be making a Utopian suggestion here, but if we paid a realistic price for alcohol, accepted some restrictions on its’ availability and examined some of our own beliefs and attitudes to alcohol we might be creating a healthy culture for us all and at the same time making recovery for those who have become addicted to alcohol just a little bit easier.
Dr John Foster is Principal Research Fellow at the University of Greenwich-School of Health and Social Care

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