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Morning Briefing Strap Line
Mon 8th Oct 2012 - Waverley, Hard Rock Café and Byron

Story of the day:

UK consumers have the second highest “going out” frequency in Europe: UK consumers make the second highest number of eating and drinking out-of-the-home visits in Europe, Jochen Pinkser, of NDP group, has told the European Foodservice Summit in Zurich. UK consumers make 142 visits per annum, second only to Italy, which has a much bigger breakfast usage (30 per cent of all visits) and averages 176 visits each year per capita. Italian consumers go out twice as often as French consumers, with an average of 89 visits per capita. Pinkser also outlined the main areas of opportunity for foodservice operators. He reported that female consumers are becoming more important with female usage of foodservice outlets up from 45 to 49 per cent of the total compared to men since 2008. “It’s often men in industries like construction who are the first to lose their jobs (in a downturn),” he said. An ageing population means that the proportion of over-50 consumers has grown from 22.7 per cent in 2008 of the total to 24.9 per cent in 2012. The breakfast segment of the day-part is growing in importance, too, with breakfast sales growing from 18.5 per cent of the total in 2008 to 19.5 per cent now – in the US breakfast sales account for 25 per cent of total foodservice spend. He said: “There’s growing demand for away-from-home breakfast – and single households are twice as likely as a couple or a family to have breakfast away from home.” Pinkser also reported the UK has the most developed market for on-the-go coffee where this accounts for 35 per cent of the market compared to one or two per cent across Europe. Propel Info visited the European Foodservice Conference in Zurich in association with CPL Training and the ALMR

Did you know that 25 of the top 50 companies in the sector operate pubs? 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:

Speculation that a Waverley buyer to be unveiled today: Industry sources report that a buyer for Waverley TBS could be unveiled today after an intensive five day bidding process. Sources close to Waverley TBS report that administrator Deloitte asked interested parties to table bids for the company by midnight on Thursday, with a view to a completion of a deal by the end of yesterday. A source said: “It looks like a smart move by the administrator, creating a sense of urgency in the process. The strategic thing to do for buyers to wait as long as possible – because the longer they wait, the less the company is worth.” One major problem for Waverley is that £5m of wine and spirits stock is in a bonded warehouse and Her Majesty’s Revenue and Customers is unwilling to release the stock until outstanding bills are settled. The situation means that a number of contracts with customers are voided and time is of the essence in the bidding process. Enterprise Inns, for which Waverley is the wine and spirits supplier, has already told licensees without stock that they can buy outside of the tie. The 60-strong wine team at Waverley were made redundant soon after the administration. One source said: “Many customers have been fantastic in terms of standing by Waverley while the situation is worked through.” Waverley was pushed into administration after major suppliers reduced credit terms, wet weather had a negative affect on revenues and its borrowing facility was reduced by £6m. The company mounted an intensive 12-week marketing period prior to the administration as its situation worsened. Waverley’s collapse came after owner Manfield Partners looked to be enjoying success in focusing on higher margin customers – in 2011 the company made a pre-tax profit of £4.2m on turnover down £40.2m to £309.4m.

Alcohol consumption by young Britons has dropped: Alcohol consumption among young people is dropping, according to research by the British Beer and Pub Association and HM Revenue & Customs. In 2003, 70 per cent of 24-year-olds told interviewers they had had a drink in the previous week – by 2010, the number had dropped by 48 per cent. The number of young children drinking alcohol has fallen by 29 per cent since 2008. The change has been linked by some observers to the rise of social networking sites that mean teenagers spend more time chatting to friends online that going our drinking.

Company news:

Admiral Taverns explores options: Admiral Taverns, the tenanted operator led by Kevin Georgel, has appointed PwC, to explore its strategic options. The company, which operates around 1,150 pubs, is looking at options that range from debt refinancing to a sale.  The move is regarded as marking the completion of a turnaround that saw Lloyds Bank swapping debt for equity in the company in 2009, taking a 45 per cent stake in the business. Since the debt-for-equity swap more than £200m of debt has been paid off through site disposals. Admiral Taverns now makes underlying profits in the range of £27 to £30m. It is thought that Lloyds Bank, which effectively controls Admiral, is open to a range of options that include selling some debt or equity in the business, doing both or neither. Admiral Taverns, which was founded in 2004, had around 3,000 pubs it its peak as it acquired pubs from he disposal estates of other major tenanted operators.

Gondola considers spinning off Byron: Pizza Express operator Gondola Holdings is considering spinning off its Byron “better burger” business, which was launched in 2008 and is headed by Tom Byng, according to The Times. The brand, which has 25 sites with seven or eight in the pipeline, could be sold or floated. The brand was bought in June 2010 from Ask Restaurants for £6.8m. In the 52 weeks to 26 June 2011, Byron achieved sales of £17,506,000 and had an operating profit of £1,208,000 and a pre-tax profit of £1,085,000 – the company opened seven sites during the year so turnover will not reflect full year trading. A Gondola spokesman told The Times: “No decisions have been taken. The brand has done very well and has achieved a scale we hadn’t anticipated at this stage. It makes sense to consider options for the business, but we may decide to do nothing.”

Stonegate launches new brand Popworld: Managed operator Stonegate, which is led by Toby Smith and operates around 550 pubs, has converted the Reflex site in Southampton, a late night brand focused on 1980s music that was one of the 333 wet-led pub it acquired from Mitchells & Butlers, into a broader concept, Popworld. The bar aims to celebrate pop music from the 90s to the present, “as well as its trademark anthemic 80s music”. Stonegate has spent £100,000 refurbishing the bar with bright and vibrant colours and a new sound and lighting system complete with an 8ft by 6ft LED wall, along with the addition of new “party booths”, seating up to ten people. Manager Matt Chalis said: “The whole Popworld experience is all about our team taking care of our customers so that they have a memorable night and want to return time after time. One of our team members summed up Popworld perfectly. They said it’s like being at a wedding party but without the wedding. You can dance like no one is watching and everyone feels relaxed and safe.”

Carlsberg UK turnover hits just short of £1bn: Carlsberg UK has reported that turnover climbed to £999.2m in 2011 up from £978.8m the year before. The company said that its market share had remained consistent at 15 per cent, with an increase in the on trade and a decline in off-trade volumes. It said: “The overall market is in decline partly due to the beer escalator that continues to be a burden on the UK beer and pub industry.” Operating profits before exceptional items were £25.2, compared to £25.9m in 2010. Management wrote down an investment in Ubekistan by £36.9m. Carlsberg had a loss of £12.9m in the UK compared to a profit of £14.9m the year before, which included net exceptional items of £28,944,000. Carlsberg reported that it sold “fully written down assets at its Leeds site with an original cost of £84.9m for £5m”.

AB Inbev reduces UK losses: Stella Artois and Budweiser brewer AB Inbev reduced its losses to £4.46m in 2011 from £29.08m the year before. The company’s turnover dropped to £1.235bn from £1.461bn in 2010 after the company switched its business model from direct distribution to an indirect model through wholesalers. This resulted in a £196.7m loss of turnover but a £194.1m reduction in the cost of sales. The launch of Stella Artois Cidre in April 2011 produced £42.8m of sales in the first eight months. The company’s market share was 20.7 per cent, down from 21.2 per cent in 2010. Stella Artois volume “was down, Budweiser was up and Beck’s was flat”. The company added: “To sustain volumes the company will continue to operate a simplified and focused business model, which will allow it to reduce costs whilst improving distribution and rate of sale of our products, with the aim of driving top-line growth.” 

Wellington Pub Company reports £9.25m profit: Wellington Pub Company, the 800-strong free-of-tie estate owned by the Reuben brothers and run by Criterion Asset Management, has reported a pre-tax profit of £9.25m for the year to 31 March 2012, down from £9.55m the year before. Turnover declined to £27,774,000 from £28,230,000 the year prior. Wellington said that it “continues to maintain its market position although turnover decreased from last year due to the current economic climate”. Companies House accounts state that Wellington’s owners believe that “asset values have increased since the year end” but no change had been made to asset valuations in the accounts due to “prudence”.

Hard Rock Café reports half of UK income comes from merchandise: Hard Rock Café UK, which operates restaurants in five UK cities, has reported that £10,460,000 of its £20,842,000 revenue in 2011 came from the sale of merchandise. Average spend on merchandise was £29.11 compared to £22.37 average restaurant spend. Turnover in 2011 was up by just under one million from £19,966,000 in 2010. Pre-tax profit rose to £5,288,000 from £4,519,000 in 2010. The company stated: “Operational performance improved in 2011 largely through the positive trends on the retail side of the business. This was driven by continued positive tourism inflows into the UK. The priority for Hard Rock Café in the UK is to continue investing in its core operations with no further expansion being considered.”

Inventive Leisure to open flagship Revolucion de Cuba this Friday: Inventive Leisure will open its flagship Revolucion de Cuba this coming Friday in Manchester. Inventive operates rum-based Revolucion de Cuba pop-up bars at 11 Revolution vodka bar sites across the country and three stand-alone sites. The Manchester opening is in the former Squares venue on Peter Street.

Utopian Leisure reports increased losses in 2011 and covenant breach: Utopian Leisure, the nightclub, restaurant and bar company led by former Ultimate Leisure boss Bob Senior, has reported losses increased to £3,324,868 in 2011 after an £2,379,904 exceptional item related to writedown in the value of assets – the company lost £1,623,673 in 2010. Turnover in 2011 was £8,147,520, down from £8,924,058 the year before. The company negotiated a new £7.92m loan in 2009 and breached its covenants in the year and is renegotiating its facilities. Utopian stated: “The food and drink market has contracted in the tight economic conditions resulting in a decrease in our unit sales of five per cent on a like-for-like basis. Our food-led unit sales have been flat on a like-for-like basis but we have seen a significant fall in sales in our late night venues, particularly in Northern Ireland, on a like-for-like basis.” Ebitda was £429,000 in 2011 compared to £120,000 the year before.

Yum! Brands in fresh talks over Pizza Hut sale in the UK: An unnamed private equity firm is in talks with Yum! Brands over the sale of its Pizza Hut business in the UK, according to the Mail on Sunday. The talks come after both Leeds-based Endless and Rutland Partners dropped out of discussions. Yum! Brands has previously stated that it would like to sell the business by the end of 2012. Among the complications are the number of loss-making units, the need to invest in existing site, the decision by Yum! Brands to retain the delivery part of the business and the fact that any buyer would be paying royalties to Yum!.

Welcome Break report turnover and profits increase: Welcome Break UK, the operator of motorway service stations, has reported pre-tax profit increased to £15,441,000 in the 53 weeks to 31 January 2012, up from £13,800,000 the year before. Turnover rose from £285.5m to £299.2m. The company said performance had been resilient in challenging economic conditions. Ebitda was £25.1m, up from £23m the year before.

Canteen report turnover up, profit down: Modern British Canteen, which runs three Canteen restaurants, has reported turnover rose 3.2 per cent in the year to Christmas 2011 to £6,079,854. Pre-tax profit dipped to £168,117 from £348,240 the year before. Gross profit increased from 74.5 per cent in 2010 to 74.9 per cent in 2011 after a “concerted effort to control costs and reduce food and beverage wastage”.

Harvester launches a digital advertising campaign with Apple and Eagle Eye: Harvester, the Mitchells & Butlers brand, has become the first UK retailer to use Apple’s new Passbook functionality - available for Apple iphone or IoS6 users - as a promotional tool. iPhone users can enjoy £5 off their total bill when they spend £30. An observer said: “This really is leading not just the eating out industry, but the whole retail sector (Harvester has just beaten Oasis to launch) and it really is something to be proud of.” Helen Worrall, Harvester marketing manager, said: “We are excited to be amongst the first in line to use this new way to distribute mobile vouchers to Apple Passbook users, offering our customers a better and more convenient experience. Not only does it provide us with a new way of engaging the iOS 6 iPhone users, but the benefit having one central point to digitally distribute and redeem vouchers in real-time means we have more control and visibility over our marketing campaign performance.”

Rollo - brand expansion at Mitchells & Butlers to slow down and become more flexible; less emphasis on value brands: Morgan Stanley analyst Jamie Rollo has reported that brand expansion at Mitchells & Butlers is to slow down and become more flexible. He said: “From minimal expansion over 2008-10, M&B ramped up to 100 units in 2011 and probably expanded too quickly as Return On Investment on some sites was disappointing. Stated EBITDA returns are 17 per cent (which is about 10 per cent post tax and depreciation), but higher on single site leaseholds (26 per cent). It is now targeting 50 new sites per annum and is more focused on ROCE and quality, rather than quantity. However, MAB is not expanding its value propositions such as Sizzling (220 sites) or Crown (120). It sees less potential in these value conscious areas, and with hindsight made some of them too food-orientated so lost the high margin local drinks trade.” Rollo said the incoming chief executive Alistair Darby, due to start this week, is unlikely to conduct a major strategic review. 

Six Travelodge sites on the market: Six hotels, currently leased to Travelodge Hotels Limited, are to be marketed for sale by the specialist property adviser Christie + Co, on behalf of Piccadilly Hotels. The hotels are situated in key trading locations including central Bath and Edinburgh. Christie + Co will be marketing the hotels on an individual basis with a view to selling with vacant possession. Jeremy Jones, Director of Corporate Hotels for Christie + Co, said: “Given the strategic location of these Travelodge hotels and the potential for new operators to explore re-branding them in both budget and mid-market segments, we expect a great deal of competitive interest.” The six hotels being marketed are: Travelodge Edinburgh West End, EH4: 178 bedrooms; Travelodge Newcastle Silverlink, NE28: 126 bedrooms; Travelodge Oldham Manchester Street, OL8: 102 bedrooms; Travelodge Leofric, Coventry, CV1: 120 bedrooms; Travelodge Stevenage, Little Wymondley, SG4: 69 bedrooms; Travelodge Bath Waterside, BA2: 124 bedrooms.

Staughton takes over from Wells as chairman of the family brewers: Charles Wells chief executive Paul Wells is to step down as chairman of the Independent Family Brewers of Britain and will be replaced by James Staughton, chief executive of St Austell Brewery. Wells said: “After seven years in the role, I think it is an appropriate time to pass the leadership to someone else. The Family Brewers are unique, they are fiercely independent and they are passionate about cask beer and great pubs - it’s been a rare privilege to have been in the chair for a while. I will retain a keen interest and continue to support the Family Brewers and James going forward.” James Staughton is the great great-grandson of St Austell Brewery founder Walter Hicks and part of the fifth generation. He joined the company in 1980 and worked his way up on the wine side of the business becoming wine and spirit director in 1990 before being appointed managing director in 2000. During his time in the wine business, James was chairman of the Independent Wine Buyers Consortium (IWBC) for seven years. Said Staughton: “I would like to thank Paul for his steering of the Family Brewers during the last seven years. Under his tenure, we have rigorously defended the tie, seen renewal of the EU Block Exemption, helped fund Jacques Borel’s campaign to reduce the VAT charged in pubs, and seen our membership grow after a previous period of decline when former members were absorbed by larger brewing concerns.

Caldmore Taverns picks up derelict Newcastle pub: Caldmore Taverns, the Shropshire multiple, has acquired The Victoria, on King Street, Newcastle. The firm, which already operates Darcys in Fenton, the Sutherland Arms in Stoke, Brennans in Kidsgrove, and the Wheatsheaf in Northwood, plans to reopen it by the middle of this month. A spokesman said: “We want to emphasise that this is going to be a local pub, employing Newcastle people and, where possible, serving locally sourced food. We’re working with local breweries to bring Staffordshire ales in, and we’ll be rotating these on a regular basis so we can promote everything that the area is known for.”

Fearnley-Whittingstall to open third River Cottage Canteen & Deli: Celebrity chef Hugh Fearnley-Whittingstall has signed a lease to take over the historic council-owned Abbey Mill, off Colebrook Street. His third River Cottage Canteen & Deli is now set to open in about a year’s time. Like the two other River Cottage restaurants, in Axminster and Plymouth, it will also offer cookery courses.

Trump to open £750m hotel: Entrepreneur Donald Trump is to press ahead with a hotel complex in Aberdeen Bay, backing down on an earlier promise not to build it if Vattenfall’s nearby 100MW offshore wind farm went ahead. In January, Trump halted work on the £750 million development while stepping up his campaign against wind farms in Scotland and the Vattenfall project in particular. But Trump said: “I’m ready to build a hotel. It will be the best hotel in Scotland and one of the best hotels in Europe. Everybody wants to be near our course.”

Demand from burger restaurants in London up 40 per cent: Demand for space fro sushi restaurants is down 60 per cent from the 1990s but there has been a 40 per cent jump in searches for premises for burger bars using high-quality fresh meat. Morris Greenberg, of restaurant lease specialist Cedar Dean Gilmarc, told the London Evening Standard: “These are for good, classy restaurants with a distinctive style rather than fast-food outlets. The burger has elevated itself from a convenience food into a gourmet experience. There are still plenty of greasy burger places but you can also pay £15-25 for a cheeseburger cooked with care and served in a great restaurant. The burger is definitely back and is now a ‘destination food’.”

World’s first underwater nightclub opens this month: The world’s first underwater nightclub will be opened this month. The nightclub in the Maldives, which is only accessible by boat, will offer party-goers a view of the surrounding sea bed. It was fully built on land before being lowered into the water to minimise damage to the environment and the protected coral reefs. It has ceiling-to-floor glass windows that will allow customers to watch sea life lit up by underwater spotlights. The Subsix nightclub, at Niyama resort, is 500 metres from the Dhaalu Atoll shore, six metres below the sea. Steps lead down to the venue from an above-water restaurant.


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