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Morning Briefing Strap Line
Fri 14th Sep 2012 - Friday Opinion
Subjects: Alcohol problems, customer focus groups and the pubco narrative
Authors: Paul Chase, Ann Elliott and Peter Linacre

Alcohol solutions in search of a problem by Paul Chase

On Tuesday I attended the Westminster Policy Forum entitled ‘Alcohol: next steps for policy following the government’s new strategy’. The first session of the forum, chaired by Diane Abbot MP, featured a variety of public health professionals, researchers and others engaged in enforcing alcohol regulation. The second half, ably chaired by David Burrowes MP, had a more varied speaker list and included some drinks’ industry figures, but was still heavily weighted towards those who see alcohol use as a vice that needs suppressing.

I confess that at times I felt as a 19th century American saloon keeper might have felt if he wondered by mistake into a meeting of the local chapter of the Women’s Christian Temperance Union. It suddenly dawns on you that if you are discovered you might suffer death by preaching.

And there was no doubting the pursed-lip moral disapproval directed at the alcohol industry from the public health professionals who spoke. We were treated to a ritual recitation of the central beliefs of Medical Temperance ideology: the ‘whole population’ approach to alcohol-harm reduction; alcohol being “no ordinary product”; the twin tools of raising price and reducing availability and the immediate goal of minimum pricing – almost within their grasp!

If the ‘whole population approach’ is the religion of Medical Temperance then the Sheffield Report is their Holy Book. If cries of “Hallelujah!” and “Praise the Lord!” were not made at every mention of this report, it is only because we were sitting in the Royal Society and a certain middle class decorum had to be observed.

I wish that the 265 publicans who voted for minimum pricing in the BII’s recent survey could have been in the audience with me. Then they would have seen for themselves the true purpose of minimum pricing. The public health professionals at this Forum welcomed minimum pricing, but lamented the fact that it didn’t start at 70p per unit.

The Sheffield Report predicts that at 40p alcohol consumption per capita would fall by 2.4 per cent; at 50p the fall would be 6.7 per cent, but a 70p minimum price would lead to a fall in alcohol consumption per capita of 17.5 per cent. That added to the fact that we have already seen a 12 per cent fall in per capita consumption since 2004 - a fact they are well aware of even though they dismiss it as a temporary effect down to the recession – and you can see the direction this is heading. And once it reaches 70p for the off-trade, the next demand will be for a differential, higher minimum price for the on-trade – this will happen as surely as night follows day.

One of the many interesting features of the current state of heightened alarm about alcohol is how it bears comparison with previous moral panics, particularly the 19th century campaign that gave rise to the Temperance movement. What links the past with the present is the capacity of conflict over alcohol to mediate wider social anxieties.

In 19th century America concerns about excessive drinking mediated the conflict between Protestant, Nativist Americans and hard-drinking Catholic immigrants; in the UK, Temperance took the form of a genuine movement for working class self-improvement, notwithstanding the fact that it was underpinned by a middle class concern about the impact of alcohol on the work ethic. The real issue being contested was that whoever gained cultural ownership of the ‘alcohol issue’ got to define the parameters that underpinned long term processes of moral regulation in their society.

And there was no doubting the cultural hegemony of the public health utopianists at this Forum! Insofar as industry figures got the chance to make five-minute contributions to the discussion, it was on the implicit understanding that they accepted a shared definition of what constituted ‘the problem’.

Nick Bish, from the Association of Licensed Multiple Retailers, gave a spirited defence of the pub as the home of responsible drinking, the sub-text being “don’t blame us Guv’ it’s the supermarkets”. But for me the best contributions from the industry side came from Asda’s Paul Kelly and Diageo’s Mark Baird.

Paul Kelly, referring to the voluntary Industry Responsibility Deal, suggested that government understood the word ‘responsibility’ but had forgotten about the word ‘deal’. He then made the intriguing suggestion that having agreed to remove a billion units of alcohol from the market by 2015, we should offer another billion if the government agreed not to implement minimum pricing.

But Mark Baird deserves the prize for the most incisive and memorable sound-bites of the day: referring to minimum pricing and the demand for a ban on alcohol advertising, he defined both of these as “solutions in search of a problem”. In respect of minimum pricing and the evidence of the Sheffield Report, he commented that we needed “evidence-based policy, not policy-based evidence”. Straight-from the-shoulder stuff. And we need more of it.
Paul Chase is a director of CPL Training and leading on-trade alcohol policy commentator

What customer focus groups tell us about brands by Ann Elliott

I have been running focus groups this week for one of our restaurant clients. I love running focus groups as it’s always brilliant listening to what real customers think and feel about brands in our sector. They help build our expertise, too, in terms of understanding consumer behaviour (and attitudes) from a qualitative perspective and they bring depth to our insights. That’s useful when we work only in this sector and use this insight to help drive covers for our clients.

In our groups we usually start by asking about respondent’s eating (and drinking) habits - where do they eat out and how often? (We had some very interesting answers when I ran a number of focus groups recently to understand students and their attitudes to drinking and socialising. The government should run research like this instead of automatically blaming pubs for binge-drinking).

We then follow this up, usually, with questions about specific brands just to encourage respondents to think in depth about the brands they use when eating and drinking out - before we get to the central questions we need to ask. In this particular part of the research this week, one respondent said “the food there is quite rubbish” about a well-known high street restaurant (and not the one I was researching!) It’s always tempting to go back to those I know and give them feedback like this but it’s not always easy (or possible) when the research wasn’t done for them!

Earlier this week, before I asked my specific topic questions, I asked my group what they thought “made” a pub or restaurant quality as a brand. Of course we all know the answers but it’s quite good to be reminded from time to time what consumers think they are. Their answers confirmed for me that there is a tipping point when a concept / one off site starts to be considered as a brand by its customers. This is what they said this week:

1. Consistency: Customers said they want to recommend and return to a venue with confidence knowing that the experience they receive will be as good as, or better than, their last experience (or the experience of the person who may have recommended it). This applies to service just as much as it does to the food and drink offer. In their eyes it only needs one poor experience to spoil a perception of consistency.

2. Trust: This is linked with consistency. Great brands win and keep their trust by doing what they say they are going to do.

3. Customer understanding: Customers want to think that their chosen pub or restaurant understands them and therefore delivers an experience they know they want. This isn’t rocket science. It’s knowing when they want to have a quick meal (or a slow one), a quiet private experience or an ‘all singing and dancing’ extravaganza and then delivering that to them.

4. Brand confidence: Places with confidence tend to do the ‘little things’ almost unconsciously. The team are allowed (empowered in other words) to do what they want to do to ‘make customer’s days’ and to make them feel special. Brands with confidence deliver great hospitality as well as great service.

5. Strong team: They want to feel that the whole team (without exception) is working together and welcomes them as a customer. (We have picked this up in other research too). It’s not just about the person who serves them.

Purists of course will say that brands are more than this – and they are. One off concept owners, though, who aspire to building a brand and then maybe selling it, might want to use this consumer feedback as a starting point.
Ann Elliott is chief executive of Elliott Marketing and PR

The pubco narrative (and context) is changing by Peter Linacre

For so long both the narrative and the context of the pubco / tenant relationship was one primarily defined by grief and anger. Perhaps it began to change at the moment the 2007 financial crisis hit meaning that the pubco model had to change, but perhaps on the other side of the equation the character and ambitions of the tenants and lessees also began to change. New entrants with different backgrounds and expectations and more particularly with different skill sets emerged. Lots of pubs closed too!
Pub retailers talk more and more about the opportunities they see – not hidebound by an old wet led model – and in some cases turning even that model on its head and making a huge success at wet led pubs. From looking down at our feet and trembling we are perhaps now looking up to sunnier pastures with enthusiasm and optimism.
When we started out with the New Pub Company in January 2009 our revenues were £4.2m and we made site EBITDA of £300,000. We set up the business with no debt. In October 2010 we gave ourselves a three-year goal of doubling our revenues from our seven - SNPC tied leased – sites and improving our return on sales appropriately. And we would only invest from our own internally generated cash flow and not incur debt - even if we could have got it. No cash flow - no investment.
So far so good, we are on track – but we still have huge opportunities to improve further. We will make £1m of site EBITDA in the current year to March 2013 – and thanks to our like for like revenues of +13 per cent (after five months), we will hit revenues of circa £6m. We have got a year to get our revenues to £8m – and the truth is that will be a stretch but we should get to that milestone in 2014. Perhaps more importantly though our profit and free cash has grown more strongly than we had expected and we can now invest at higher levels than we had planned. We now expect to be well ahead of our profit and cash targets by September 2013.
Our focus at each site has been to improve and to invigorate our retailing skills at every level – and here I confess we are still miles off our potential. Breaking the mould and thinking outside the category takes effort, patience and discipline. Our training budget, at 0.75 per cent of revenues, will grow to one per cent of revenues in 2012/2013. We will take full advantage of the newly funded Level 2 and Level 3 Hospitality Apprenticeships – thereby underpinning our training efforts and hopefully producing some more stars for the future. We are spending more on mystery customer activity, marketing and social media. We are trying to apply the very highest levels of professionalism and take examples of brilliance from the very best retailers here in the UK and abroad and these will be the springboard for us to achieve our goals. 
What is increasingly clear is that even though the base of our model is seven tied leases – this is now pretty much irrelevant in terms of our journey. True – we had to get the right base for our rents at the start – and we have negotiated to be rewarded for growing volumes – but in every other respect our relationship with our pubco is of much less significance for us to achieve our goals.

If they were to ask I would gladly give them an opinion as to how they might improve their relationship with their customers. I’ve yet to be asked! All retailers are frantic about feedback, paranoid about the customer experience and focussed on daily improvement. If the pubcos were to embrace this sort of journey alongside their retailers – then those upland pastures might seem even sunnier and the relationship would be more profitable for everyone – and that would be a real change of context.
Peter Linacre is managing director of New Pub Company

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