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Morning Briefing Strap Line
Thu 4th Oct 2012 - Grand Union, KFC and Harvester

Story of the day:

Panorama apologises for getting minimum pricing death prevention figures completely wrong: humiliating and embarrassing climbdown by “leading authority” Sheffield University: TV programme Panorama has apologised for claiming 50,000 deaths a year in the over-65s would be prevented by a 50p minimum price per unit on alcohol. The apology has been posted on the BBC website after the University of Sheffield, the source for most statistics on the effect of minimum pricing, admitted it had miscalculated completely – the actual figure of 11,500 is less than quarter of the 50,000 figure stated on Panorama. The BBC website apology states: “The School of Health and Related Research at the University of Sheffield has confirmed to Panorama that, unfortunately, due to human error, figures they produced specifically for the programme ‘Old, Drunk and Disorderly?’ broadcast on 10 September 2012 were incorrect. The figures are in fact four to five times lower than those originally given to Panorama. The university emphasised the human error was wholly on their part and has apologised unreservedly to the BBC. The programme has been temporarily removed from iPlayer and is being re-edited to reflect the correct figures.” Leading author Christopher Snowdon, who wrote The Art of Suppression: Pleasure, Panic and Prohibition since 1800, stated: “The estimate has now been reduced to less than a quarter of the original (11,500 rather than 50,000), making it merely implausible rather than wholly unbelievable. The BBC’s decision to re-edit the film is welcome, but most of the programme’s original viewers will never be any the wiser. So what’s 38,500 lives between friends when the worst that can happen is a three-week-old news story has to be amended? The take-home message for the public will still be that minimum pricing is a life-saving policy, but the fact remains that no one has the foggiest idea what will happen if the EU allows this act of glorified price-fixing to take place (which seems increasingly unlikely). All the Sheffield figures are based on questionable assumptions about the relationship between price and alcohol-related harm, which are only occasionally borne out by real-world evidence. The Sheffield team’s current estimate is based on the belief that a 50 pence minimum unit price will reduce alcohol consumption by 6.7 per cent and that significant health benefits will ensue. Perhaps they will, but alcohol consumption has already fallen by 20 per cent since 2005, which is a bigger drop than the Sheffield team would expect to see from a wallet-busting 70 pence-per-unit price. According to the team’s methodology, such a decline in consumption should lead to alcohol-related deaths falling by 29 per cent at first, and by a whopping 67 per cent after a few years. In fact, no such miracle has occurred since alcohol consumption began its unaided descent a few years ago. If you want a realistic idea of how much difference a 50 pence-per-unit price will make to drinking and alcohol-related harm, consider the difference in the health and safety of the nation between 2005 and today. And then halve it. If that doesn’t seem a very impressive outcome, prepare to be underwhelmed and overcharged by minimum pricing.”

Did you know there are no fewer than 14 family regional brewers in the Propel Turnover list Top 100 UK businesses? The Propel Info Hospitality Sector Turnover and Profits Blue Book ranks the 200 leading pub, restaurant and foodservice companies in the UK by turnover and profit, provides a five-year overview of performance and lists directors’ salaries. To buy a copy e-mail Jo Charity or Sharon Dickinson on jo.charity@propelinfo.com or sharon.dickinson@propelinfo.com

Industry news:

Tim Martin – industry VAT campaign is “going well”: JD Wetherspoon founder Tim Martin has argued that the Jacques Borel campaign to reduce VAT in the hospitality sector to create jobs is making good progress. Martin told Morning Briefing: “My feeling is that it’s going well overall. This is because the message is clearly getting across to the media and the public, slowly but surely. Whereas initial requests for VAT reductions were often met with disbelief by journalists, for example, the more recent attitude is “we understand your point, and it seems reasonable, but is the government listening?”. That’s quite a big, if subtle, change. We will eventually win since what we say is right, and it will bring more tax and jobs to the government eventually. My personal view is that it’s right to try and end the duty escalator, but it’s a very unambitious target since, even if we win, we’ll still have the highest duty in Europe and a huge tax disparity with supermarkets.” Last week, Borel and ALMR strategic affairs director Kate Nichols visited the Treasury to make the case for lower VAT as a way of stimulating job creation quickly. Borel, whose VAT club has around 40 members among high profile pub, restaurant and hotel operators, as well as Heineken UK, is also meeting MPs at the three major party political conferences.

Luke Johnson – tenacity and intuition key attributes of entrepreneurial spirit: Private equity investor Luke Johnson, who backed Pizza Express in the 1990s and currently invests in Patisserie Valerie and Draft House, has argued that a “strong emotional quotient” is key to successful entrepreneurial spirit. In his Financial Times column he stated: “The very essence of entrepreneurship involves rebellion against the status quo, ignoring irrelevant rituals and judging priorities by instinct rather than by received wisdom. I have found that ever more due diligence does not necessarily lead to better decision-making when it comes to acquisitions. One can get lost in the hundreds of pages of verbiage and spreadsheets, and forget about critical issues such as culture and the big picture. When I bought Patisserie Valerie it was barely profitable, but the brand and business model felt valuable. On strict criteria it was hard to justify the purchase price. Yet it has turned into one of the best investments I’ve ever made. The most successful entrepreneurs are frequently unreasonable people who refuse to give up, even when the evidence and odds are very much against them.”

Fast food children end up with lower IQ: A study of 4,000 Scottish children aged three to five has found that those who have given more fast food meals grow up to have a lower IQ than those who regularly eat fresh-cooked food. Dr Sophie von Stumm, from the department of psychology at Goldsmiths, said: “It’s common sense that the type of food we eat will affect brain development.”

Company news:

Douglas Jack – here’s the key points I picked up from M&B site visits: Numis Securities analyst Douglas Jack has issued a note detailing the key points he picked up from a Mitchells & Butlers-organised visit to Harvester, Miller & Carter, All Bar One and Browns sites. He stated: “Browns has improved its cocktail range (now 26 per cent of bar sales); introduced a lobster night on Thursday; improved its afternoon teas; increased its database by 65,000 people through temporarily linking up with Tesco Clubcard; and started trialling a Sunday food offer for children. It will soon introduce a privilege card that will enable it to track customer behaviour, leading eventually to one-to-one smart marketing. Most of Brown’s expansion is expected to be in contemporary (parks) rather than town sites. A total of 48 of Harvester’s 204 sites are in leisure/retail parks. These sites have a similar offer, but are more contemporary than the residential sites. Older residential restaurants will gradually be remodelled to become more modern. Very recent openings have performed strongly due to stronger management and the brand targeting mixed use leisure/retail parks. Harvester’s nearest competitor is Frankie & Benny’s, Pizza Hut and Nando’s in management’s opinion. Harvester’s main courses are typically £2 cheaper than Frankie & Benny’s, but the latter does more discounting. Ways of Working (WOW) are being rolled out following successful trials that have taken administration away from area and general managers, providing them with more time to look after customers and train managers. The 50 per cent of managers that are coping with greater accountability/empowerment have increased like-for-like sales by an average of two per cent in a few months since rolling out scorecards. 30 per cent of managers should adapt with training; the other 20 per cent will exit. WOW should be rolled out into Harvester, Vintage and Sizzling by November with full company roll out completing in mid-2014.

Kentucky Fried Chicken ups employee communication in the UK: Kentucky Fried Chicken, part of Yum! Brands, is rolling out total reward statements (TRS) to its weekly-paid employees as part of plans to promote its employee value proposition (EVP) internally. Craig Truter, total reward manager, at KFC, said: “Internal communications is something we wrestle with. It has traditionally been cascaded down from managers.” The restaurant chain has typically handed out annual paper-based statements only to its salaried employees. As it launches an online benefits intranet site next year, KFC will send the statements out to all 23,000 UK staff, including weekly-paid employees for the first time. The EVP includes training and development, a recognition scheme, corporate social responsibility (CSR) initiatives, and benefits and reward. “The EVP is an affirmation of the efforts employees are putting into the organisation,” said Truter. “It also benefits the business. What’s happening behind the counter will transfer across the counter to the customer.”

Tesco pulls out of Enterprise pub plan: Supermarket business Tesco has pulled out of a controversial plan to convert an Enterprise pub in Weston-super-Mare into a convenience store. The move comes just days after residents wrote to the company asking it to scrap plans to turn the former Bristol House pub in Milton, which closed in July, into a Tesco Express. A planning application by Enterprise Inns to expand the pub – which campaigners believed was an attempt to increase the size of the site ready for it to be handed to Tesco – was unanimously rejected last month by councillors. The application prompted 160 letters of objection and a 2,300-name petition from residents who said they wanted to see the pub reopened.

Domino’s takes a indirect tilt at Pizza Hut in the US: Domino’s has launched an advertising campaign that is widely being seen as an indirect attack on Pizza Hut and chief executive Patrick Doyle says to camera: “Want to know a dirty little secret about the pizza business? A lot of pan pizza starts out as frozen dough.” Pizza Hut is synonymous with pan pizza in the US and Papa John’s don’t have pan pizzas. “We’re not mentioning any brand by name, but what we’re saying is it would have been easier to do this with frozen dough,” said Domino’s chief marketing officer, Russell Weiner. “If you freeze something, it’s that much easier to make the product taste good, but we took the time to make it right. Faster isn’t always better.”

Simon French reiterates Marston’s buy recommendation: Panmure Gordon leisure analyst Simon French has reiterated his buy recommendation on Marston’s shares with a Target Price of 130p for the shares. He said: “Marston’s has announced 2.2 per cent like-for-like sales growth in managed pubs, circa three per cent profit growth in leased, tenanted and franchised pubs and two per cent growth in own brewed beer volumes for the 2012 financial year , all in line with the 42 week update. We make minor profit downgrades to reflect slightly lower than anticipated profit growth in leased, tenanted and franchised pubs and forecast £88.0m (12.3p EPS) for FY 2012E compared to consensus estimates of £87.7m PBT (12.3p EPS). Marston’s yields 5.9 per cent making it one of the least expensive pub stocks with the highest yield. Hence we reiterate our Buy recommendation and 130p target price, implying circa 13 per cent upside potential.

Molson Coors names Simon Cox as new UK boss: Simon Cox has been named as the new boss of Molson Coors in the UK and Ireland after current chief executive Stewart Glendenning was appointed to head the company’s Canadian business after just four months in the job. Cox is currently managing director for independent on-trade and wholesale with the company. The moves comes in the wake of the creation this week of Molson Coors Europe, a new business unit combining the UK and Ireland business with recently-acquired Starbev breweries in nine central European countries. Cox will report to Mark Hunter, the head of the UK division before Glendenning who left to oversee the integration of the Starbev acquisitions.

Titanic Brewery scoops Taste of Staffordshire award: Six-strong Titanic Brewery has scooped the Taste of Staffordshire Special Award for a British Heritage Pub for its Roebuck Hotel in Leek. The award comes a year after a £100,000 refurbishment programme that took six months. Judges described the pub as ‘an establishment that embodies all that is best about the simple British pub’. Titanic director Dave Bott said: “It is a wonderful building, steeped in history, and we took great care to restore it in a sympathetic manner.” The pub boasts a range of draught products including ten ales, three ciders, five lagers and a stout.

Pemble raises eyebrows with plan for sports bar in Royal Tunbridge Wells: Entrepreneur James Pemble is planning to open a second Players Coyote Bar in Royal Tunbridge Wells. He already operates Players Coyote Bar in Maidstone where, on Thursday, Friday and Saturday evenings, scantily clad barmaids jump on the bar and dance provocatively every 15 minutes. Pemble describes it as a “sports bar and not a lap-dancing club”. Mayor of Royal Tunbridge Wells John Smith has described the venue as not “part of our vision for the town”. 

Award-winning chef re-opens gastro-pub: Award-wining chef Andrew West-Letford and his partner Reka have re-opened the Normandy Arms gastro-pub in Blackawton, Dartmouth six months after it closed. West-Letford has worked in Michelin-starred and AA rosette restaurants across the South East. He said: “Devon has such a wealth of delicious fresh ingredients to choose from it’s a dream come true to have it all on our doorstep. We’re having great fun coming up with new ideas for the menu.” As well as concentrating on seasonal ingredients, all the restaurant’s bread, chutneys and ice-creams are made on the premises. 

JD Wetherspoon snaps up Honiton site: Managed pub company J D Wetherspoon has exchanged contracts to buy the former Star, in Honiton’s New Street, a town with a population of 11,822. Spokesman Eddie Gershon says the deal will be completed when Wetherspoon has secured a license to operate from the site. Planning permission for extensive alterations and refurbishment of the pub has already been granted. East Devon District Council is due to consider Wetherspoon’s license application this week. “I can confirm that Wetherspoon has exchanged on the property,” said Gershon.

Marston’s Norfolk pub plan opposed by Civic Society: A plan by Marston’s to build the first the first new-build branded pub in Hunstanton on the scenic north Norfolk coast has met opposition from the town Civic Society, which has claimed the planning authority is conflicted by owning the land Marston’s want to build on. In a report to West Norfolk planning committee, the society said: “As the borough council will benefit financially if the application is approved a request should be made for the application to be called in by central government.”

Harvester – freehold sites versus leisure park sites: Mitchells & Butlers has provided information on how Harvester has been modified for retail and leisure park sites. The company told City analysts on a visit to sites on Tuesday that the floor space in square metres is around 62 per cent of freehold sites – 372 squares metres versus 600 square metres – with front-of-house space a larger ratio of overall space – 69 per cent to 31 per cent compared to a 55 to 45 per cent split in freehold Harvester venues. Covers are 50 lower at 150 seats and kitchen area is just over half the freehold site space. Development cost of a retail and leisure park is £740,000 compared to £2.1m for a freehold site. Mitchells & Butlers currently has 48 leisure and retail park sites, four Miller & Carter sites and four Browns sites with 16 described as “other” to make a grand total of 73

Grand Union launches “seriously dirty hot dogs”: Grand Union Group, the London-based multi-site operator led by Adam Marshall, has launched “seriously dirty hot dogs” across the estate. Its Nude Dog with cheese, onions and/or bacon is £6, the Hell Dog, featuring spicy chorizo, jalapenos, cheese and spicy sauce is £7 and the Dog’s Dinner, cheese, bacon, onion rings and Barbecue sauce is £7.50. Customers can “double dog” their order for an added £3.

Bonnie Gull Seafood Shack pop-up opens Fitzrovia restaurant next week: The Bonnie Gull Seafood Shack pop-up that opened in Hackney is opening a permanent restaurant in Fitzrovia’s 21a Foley St next Tuesday (9 October). A spokesman said: “Taking over a former fish restaurant, we thought it was time to inject some fresh blood into this 17 year old joint.” It will offer 100 per cent British produce. Head chef is Luke Robinson. 

Cask ale specialists open third pub in Hull’s Old Town area: A Hull couple, Alan Murphy and Chrissy Fleming, has opened their third venue pub in Hull’s Old Town with a focus on cask ale sourced from within 50 miles of the city. They have opened Hawkes in Scale Lane and already run the Lion And Key in the High Street, just at the end of Scale Lane, and Walters. Murphy said: “We decided from the outset we wanted to specialise in cask beer. However, when we opened Walters, there was not the demand for it. But we started with eight hand pumps, now we have 26, so it continues to grow in popularity. The main reason is we wanted to support the local economy – we’d rather see our money going back into the local area than to a big international brewing company, and all of the beers are brewed within a 50-mile radius of here. People are becoming more aware of what they are buying, and want to support the local economy, too.”

First new pub planned for Cheltenham will have real ale focus: The first new pub planned for Cheltenham will have a cask ale focus. Grant Cook, of Loughborough-based pubs and bar operator Mainly Beer, has applied to convert the old Club EXS, a former gay club, in the High Street into a traditional drinking house. The move will mean four real ale pubs within a 30-metre radius. 

Soho House UK Ebitda hit £10.8m: Soho House, the upmarket members’ club business headed by Nick Jones, has reported sales rose by 4.4 per cent to £63.9m in the year to 1 January 2012 after making an allowance for the previous 40-week financial year. Group Ebitda was £10.8m, an increase of 14.2 per cent when compared to the previous year (after making an allowance for a 40-week period). The company stated that its hotels – Dean Street Townhouse, Shoreditch Rooms, High Road House and Babington House – continue to perform well with 93 per cent occupancy. It said: “Existing sites have performed well with Ebitda growth on the prior period – Babington House (7.3 per cent), Soho House (4.6 per cent), Shoreditch House (13.5 per cent), Cecconi’s London (10.4 per cent), High Road House (25.2 per cent) Hoxton (43.3 per cent) and BKB (two per cent). This is a very strong performance from each of the company’s units. In May, the group opened Little House Mayfair, which is the first of what we hope will be a number of sibling clubs to Soho House in various locations. Envisioned as a slightly more grown-up concept, Little Houses will partner with an existing Soho House in a city to provide an additional private, sophisticated haven for our members.” In 2008, Richard Caring, the clothing magnate, took an 80 per cent stake in Soho House for a reputed £105m. Last year, US billionaire Ron Burkle invested £250m in return for a 60 per cent stake, with Jones owning 10 per cent, and Caring the remaining 30 per cent. With Burkle’s investment, new clubs in Toronto, Barcelona, Chicago, Istanbul and Mumbai will open in the next two years. Gross profit margin in the UK is 80.8 per cent, Ebitda conversion is 16.8 per cent and operating profit margin is 10.6 per cent. Pre-tax profit was £6,071,183, up from £3,753,941 in the 40-week year to 2 January 2011.


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