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Wed 20th Mar 2013 - Coal Bar and Grill, Marston’s and M&B

Story of the day:

Ralph Findlay – there’s still upside to come from the smoking ban: Marston’s chief executive Ralph Findlay believes there is still an upside in terms of increased trade to come for the pub trade from the smoking ban. More than five years after smoking was banned in England’s pubs and bars, Findlay told the Numis Securities ‘Survival of the Fittest’ leisure industry conference that there are consumers who were deterred by the old smoky atmosphere who could be persuaded to start eating and drinking in their local pub. “Pubs still have a lot of benefit to come from the smoking ban, because those kind of changes don’t happen overnight,” he said. “It can take many years for a pub with a bad reputation to recover.” The reputation that some pubs carry with them is also one reason for Marston’s focus on new-build pub restaurants, said Findlay. “With a new build, there’s a lower risk because we select the site carefully, and a higher return on capital. There isn’t the baggage that you get with a pub conversion.” However, new-builds can also bring their own unexpected problems. “When you start a development, you don’t want to find newts, you don’t want to find bats, and you definitely don’t want to find an ancient burial ground,” said Findlay. Wildlife permitting, the company expects to complete around ten new-builds in the Two for One format and a similar number in its Milestone format in the current financial year. Marston’s move to a franchised model has transformed the tenanted side of the business, said Findlay. “We’re the only quoted operator to have reported absolute profit growth from what were tenanted and leased pubs. Customers don’t see the business model, they see the pubs.” Having successfully expanded through acquisitions of businesses such as the former Eldridge Pope estate, Findlay did not rule out buying further packages of pubs, but said the level of earnings-multiples being sought made them less attractive. “It’s hard to get the return on investment when you’re effectively paying off someone else’s goodwill.” Marston’s has also continued to invest in pub gardens, “although for the last two summers, they’ve really just provided our customers with umbrellas to shelter under”. Findlay added: “If we get some good weather this year, we expect them to come into their own in terms of driving footfall.”

Industry news:

The Sun forecasts beer duty will be frozen: The Sun has reported this morning that today’s Budget will see beer duty frozen with the beer duty escalator scrapped this year and next. A Whitehall source told The Sun: “George (Osborne) can’t afford to much for anyone this year as the state of public finances is so bad. But he wants to do what he can to help working Brits - and that means making a well-earned pint at the end of the day a little cheaper.” The move is estimated to cost £70m. The Sun reported that Treasury talks were ongoing yesterday about alcohol tax on wine and spirits.

The Office of National Statistics replaces RPI: The Office of National Statistics (ONS) has admitted its Retail Prices Index (RPI) is an inadequate measure of inflation. The ONS has now swapped RPI for RPIJ, which uses a different formula to work out inflation, which turns out to be lower than RPI. Over the past decade prices have increased by 31.9% according to RPIJ, but 38.1% using RPI. The Daily Mail said: “Families have been ripped off for decades by annual increases in bills linked to inaccurate inflation figures.”

Sun poll – overwhelming support for a beer duty freeze: There is overwhelming public support for a freeze in beer duty in today’s Budget, according a new opinion poll published in The Sun newspaper. The poll, commissioned by the British Beer & Pub Association, finds that supporters of a tax freeze outnumber those who oppose the move by almost two to one (57% to 30%). The poll also finds that men, and those aged 25-64, are the groups that most want to see the Chancellor supporting pubs in the Budget, and are the most likely to support a freeze in beer duty.

ALMR – duty hike fuels home-drinking: New figures released in advance of the Budget by the Association of Licensed Multiple Retailers has shown a further hike in beer duty will fuel unsupervised home drinking. The research, carried out in association with Liberum Capital, found that a second successive 5% hike in duty would see a third of customers reducing their pub visits and spend and a similar proportion increasing the amount they drink more at home. With over 70% of all alcohol now sold through supermarkets and drink outside the supervised, responsible environment of the pub, this will undermine public health objectives. Strategic affairs director Kate Nicholls said: “Tax policy remains the single biggest barrier to growth in our sector. Since the beer duty escalator took effect, pub taxes are up 21% - the average pub now pays just under half of its turnover in taxes of one sort or another - and operating costs arising from legislation are up 13%. But our record in job creation is down – from one in five of all new jobs created to one in eight.

CGA – 15% of managed pubs are ‘off the pace’: As many as 15% of managed pubs are losing sales due to changing competition in local markets and a lack of understanding of the customers they attract, believes CGA Strategy. The ability of independents to quickly adapt pricing and ranges to local circumstances is giving them an edge in the town centre market, delegates to Numis Securities ‘Survival of the Fittest’ leisure industry conference heard. Scott Elliott, business unit director of CGA Strategy said that “absolute clarity is needed in the local market” when positioning a venue. New competitors and changes to drinks offers by rivals can alter the customer demographic very quickly, something head offices may not pick up. “Our research shows that around 10% to 15% of managed estate pubs are not positioned in their local market where their owner thinks they are,” said Elliott. “You have to continually benchmark on a local basis to get the offer right.” 

Fuller’s Emeny – pubs need to be worried about the lost generation: Fuller’s managing director Simon Emeny has argued that a ‘lost generation’ of younger consumers who don’t put pubs at the centre of their social life is one of the biggest threats to the long-term health of the sector. Taking part in a panel debate at the Numis Securities ‘Survival of the Fittest’ leisure industry conference in London, Emeny was responding to CGA figures showing that 83% of 18 to 24 year olds now ‘pre-load’ with alcohol before going out. He said: “The threat of a lost generation of people who just don’t go to the pub is a real concern. My generation are natural pub-goers, which is a habit we acquired from our own parents, but there’s a danger that’s changing.” The figures were revealed by Scott Elliott, business unit director of CGA Strategy. He said that the growing price differential between off-trade and on-trade alcohol means that the 83% of 18 -24 year olds who now admit to pre-loading of supermarket alcohol is up from just 53% three years ago. In addition, the habit is changing the nature of the pub circuit, said Elliot, with the typical ‘pre-loader’ visiting an average of just 1.9 venues on a night out. “After drinking at home, they tend to go straight to the last venue – they don’t have the pub crawl habit.” There has also been a sharp decline in long alcoholic drinks in favour of spirits in venues targeting younger drinkers, which CGA again attributes to pre-loading. “Sales of shots and shooters are up 121% year-on-year,” adds Elliott, with these short drinks appealing to customers who have been already been drinking at home. 

Localism Act used to save London pub: The Localism Act, which came into force last September and provides local people with the chance to lobby their local authority to list a pub as an “asset of community value” and then buy it, has been used for the first time to buy The Ivy House in Nunhead. Ivy House Community Pub Limited bought the pub for £810,000 with the help of a £500,000 loan from the Architectural Heritage Fund.

Company news:

Charterhouse Leisure reports Coal Bar and Grill results: Charterhouse Leisure, which trades as Coal Grill & Bar, has reported site ebitda rose 27.6% to £1.2m in the year to the end of February 2013. The company operates six high volume casual dining restaurants in Wimbledon, Basingstoke, Bristol, Bristol Waterside, Exeter and Meadowhall in Sheffield. Like-for-like sales were ahead of the previous year by 4.4% with sales reaching £8.2m for the 52 weeks. Company ebitda increased 29.2% to £642,000. Whilst bank debt was reduced by 34% throughout the year, additional facilities have now been agreed with Barclays to support a more aggressive roll out of the brand. The two private equity investors Beringea and Octopus VCT have also committed additional funds for expansion. Chief executive John Gater said: “I am very pleased that in a difficult economy we have demonstrated considerable progress throughout the year in terms of growing our average unit sales, building a loyal following from our customers and strengthening the brand. I am delighted that we have also secured the support of our investors and bank to provide additional funds to enable the brand to open more outlets.” Chairman James Horler added: “These are very strong numbers from John and his team. They have proven that Coal can outperform other brands at retail/leisure destinations. The family-friendly brand serving quality fresh food is now poised for a period of expansion.”

Domino’s – 80% of sales to be digital by 2020: Domino’s now generates 55% of its business through digital sales, and expects this to rise to 80% by 2020. The franchised pizza business says its success in persuading customer to order from PCs, laptops and mobile devices makes it one of the most successful bricks-to-clicks operations in the UK. Speaking at the Numis Securities ‘Survival of the Fittest’ leisure industry conference, chief executive Lance Batchelor said that the move online has improved service, “because customers can take their time to build their order online, whereas on the phone they may feel rushed, and there’s more scope for errors”. There has also been a “halo effect” on delivery times, with the average order arriving 22 minutes after the customer has clicked on ‘send’. Growth has also been generated by the company’s policy of splitting stores, said chief finance officer Lee Ginsberg. By persuading a franchisee to run two stores in an area, both sales and penetration are improved and the existing store largely recovers its original sales within two years. Domino’s key measure of customer penetration – the number of customers who have ordered within the previous 210 days – has increased to 19%. However, Batchelor points out that penetration rates in the US and Australia are around 40%, meaning “there is much more growth to come for existing stores.” The company expects to grow to 1,200 stores in the UK and Ireland my 2020, compared to 805 currently.

Enterprise to give regional directors more power to segment: Enterprise Inns is to give its regional directors more power to segment pubs in local markets in order to maximise the potential of each business – as well as to identify those that should be closed or sold. Neil Smith, chief financial officer, told Numis Securities ‘Survival of the Fittest’ leisure industry conference that devolving more ‘risk capital’ from the company’s capex budget to its divisional directors was the right way forward, rather than taking “decisions at head office where we really don’t know what’s going on locally”. Smith cited the example of Wakefield in Yorkshire, where this segmented approach to Enterprise’s ten pubs in the area has created a destination food venue, several community locals, and sports bars, as well as identifying those pubs which weren’t viable. He said that Enterprise is on track to generate around £150m through disposals in the current financial year, and a further £100m in the next. Around £50m a year is earmarked for capex across the estate, with the remainder used to pay down debt. Smith said Enterprise’s ‘Beacon’ pubs, which gives the company greater operational control in return for bigger discounts, would remain steady at around 250 to 300 pubs. He described Beacon as the company’s “intensive care unit”, with some pubs passing through the process and others remaining for longer. “The alternative would be disposal,” said Smith. Many pubs outside Beacon are also receiving additional support, “because sometimes you have to help a good licensee through difficult times, rather than just sit back and watch a good pub close”. He added that the company is still waiting to see what the government’s final stance on tied agreement will be, but insisted Enterprise has always been flexible on agreements. “We’re happy to go free-of-tie. For the right rent, we’re very happy indeed.” 

Upmarket Italian chain Zaza opens sixth site: Upmarket Italian restaurant chain Zaza has opened a sixth site – just off Berkhamsted High Street in Lower Kings Road. The company already operates sites in Bushey, Harpenden, Pinner, Rickmansworth and Ruislip. The company states: “Our philosophy has always been about good honest food sourced from reliable and sustainable sources. Our service is friendly and informal yet attentive. Our chefs prepare all dishes by hand in house using fresh pasta, prime cuts of meat, fresh fish and vegetables which are delivered daily directly from the market. Fresh pizza dough and speciality breads are baked in the kitchen to traditional Italian recipes.”

Alistair Darby - M&B still not ahead of the pack: Mitchells & Butlers (M&B) is “into the pack, but not yet ahead of the pack,” in terms of competing with other managed pub groups, believes chief executive Alistair Darby. Darby, who took over as chief executive at M&B in November 2012, also told delegates to the Numis Securities ‘Survival of the Fittest’ leisure industry conference that he is still considering whether the number of brands operated by the business needs to be reduced. With M&B emerging from several years of boardroom turmoil, Darby said that “amidst everything that’s been going on, the fundamentals of the business had been forgotten”. The problems in the business had created a “siege mentality” amongst M&B staff, and “you just can’t shake that off overnight”. Investment in training and improving retail standards has pushed up M&B’s guest satisfaction scores from around 45% in 2011 to around 55% last year. “But that means 45% of our customers would not recommend us to their friends. There’s still a long way to go,” he said. Darby confessed that on Monday mornings his email inbox regularly contains complaints sent by customers who have faced long waiting times or other issues over the weekend, “asking me what I’m going to do about it”. He also quoted a customer complaint that said the pub in question’s three-star ‘Scores on the Doors’ rating should have been a warning. “Achieving at least a four star, and probably a five star rating, will be increasingly business critical.” Darby believes that M&B has now improved to the point where its offer is on a par with other leading managed pub operators, but insisted that the underlying quality of the estate meant it should be the industry leader. Using M&B’s 300 country pubs as an example, he said it would be “impossible” to build an estate of such quality today. With the M&B estate including, among others, Vintage Inns, All Bar One, Harvester, Toby Carvery, Ember Inns and O’Neills, Darby was asked if the business operates too many brands. He said: “I’m still considering that. You have to look at what it is your customers want on every occasion that they go out.”

Greene King launches new Hungry Horse menu with hot dogs and ‘man versus burrito’ challenge: Greene King launched a new menu across its Hungry Horse estate yesterday by offering a free drink to customers when they try a new menu item. New items include a selection of three hot dogs (classic, chilli and cheese and New Yorker each for £4.69) and four types of ‘smoothered chips’ (chips and cheese, chips and curry shop sauce, chips and smoky bean chilli, chips and chilli beef all for £2.59). Also new is customisable sandwiches and burritos, each with a choice of bread and fillings. Its curry selection now includes a ‘Big Bombay Banquet’ for £7.99. The revised menu also offers a smoothered chicken Diane (£5.29), customisable sizzling skewers with a choice of sauces (£8.79) and a man versus Burrito challenge dish (£12.99).

Vanessa Hall set to join YO! Sushi as first chief operating officer: Former Mitchells & Butlers brands operations director Vanessa Hall is to join YO! Sushi as its first chief operating officer. Hall will join YO! Sushi in September. Her appointment comes as James Fowler is set to leave as finance director in July, joining Nando’s in the same role.

Gary Neville to open a private members’ club in Manchester: Gary Neville has bought Manchester’s former stock exchange building for £1.5m with plans to turn it into a private members’ club. The Norfolk Street building was valued at £4.7m when previously sold in 2004.

JD Wetherspoon to open in Selby with free coffee offer: JD Wetherspoon will open a new pub in Selby, Yorkshire next Tuesday (population: 13,012) with a free coffee offer. The company has spent £1.37 million re-developing the outlet on the site of a former furniture store, owned by the Everatt family, in Gowthorpe. JD Wetherspoon is offering readers of the local newspaper, The Selby Times, a free filter coffee to mark the new opening. It’s one of seven JD Wetherspoon pubs opening this month.

ETM Group pub hosts burger battle: ETM Group is capitalise on the current interest in mini-burgers – or sliders - by hosting London’s ultimate cooking challenge, The Slider Decider, at its The Gun, Docklands venue. Professional chefs are being invited to display their culinary creativity in a cook-off on Thursday 16 May. Judges include: Metro’s food and drink editor Chloe Scott, Bloomberg restaurant critic Richard Vines, restaurant critic for Metro and The London Magazine Joe Warwick and burger blogger Burgerac. The deadline for applications is 15 April,

Orchid reports 21% food sales uplift on St Patrick’s Day: Managed operator Orchid Group has reported a 21% gain in dry sales on St Patrick’s Day over last year. Covers were up 15.5% over 2012 to 50,000, and dry sales hit £364,000. Two pubs, The Queen Elizabeth in Chingford and The Ainsworth Arms in Radcliffe, surpassed last year’s sales by 222% and 203% respectively. In fact, all Orchid pubs in the company’s top ten achieved sales growth of more than 100% over St Patrick’s Day 2012. On Sunday, Orchids pubs sold: 11,000 pints of Guinness, 43,000 pints of lager and 16,000 carveries. “Despite the wet weather and average temperatures 6.2 degrees lower than last year, it seems customers knew that the best place to stay dry, warm and well fed and watered was their local Orchid pub,” said Simon Dodd, commercial and human resources director at Orchid Group. “The figures really do speak for themselves and just go to prove how being prepared and working hard to give customers many reasons to visit pay off for the business,” Simon added.

Britvic wins Center Parcs contract: Soft drinks company Britvic has secured a five-year contract to supply Center Parcs’ four UK sites. The contract, which had been held by Coca Cola, involves supplying 12 retail outlets and 12 restaurant or bar venues at each site. It is understood that the fifth Center Parcs site, Woburn Forest, which is due to open next year, is included in the agreement. 

Costa Coffee plans drive-thru in Scunthorpe: Costa Coffee has lodged plans with North Lincolnshire Council for a drive-thru on a proposed retail park in to the rear of the Trent Valley Garden Centre, off Scunthorpe’s Doncaster Road. Costa’s agent said the drive-thru represents “one of a growing number of the company’s out-of-centre orientated formats which are designed to complement the brand’s traditionally strong high-street portfolio, which includes a Scunthorpe town centre unit”.

New microbrewery to open in Ilkley pub: Flying Duck Enterprises, which is being advised by Ilkley Brewery founder Stewart Ross, is to invest £160,000 creating the new Wharfedale Brewery at The Albert pub in Ilkley, which will be re-named The Flying Duck. Flying Duck Enterprises is backed by investors including gambling tycoon Peter Fisher. Jonathan Shepherd, one of the investors, said: “We felt there was a niche in the market to capitalise on the resurgence in the popularity of real ale by producing and selling our own beer in the kind of pub which has been sadly lacking in Ilkley.” Fisher, a director and shareholder at, said: “The shareholders have a great passion for beer and a great camaraderie and I thought it would be an exciting project. I think we are going to be offering a unique drinking experience. It’s a fantastic premises – it’s 300 years old, it has some tremendous features, it really is the essence of the traditional British pub.” Wharfedale Brewery will produce three regular beers, a blonde, a bitter and a dark, plus experimental brews. The company will start renovation work on 1 April and has bought brewing equipment from Oban Ales, a Fort William-based supplier to the microbrewery industry. The company plans to extend the main bar area and create a beer cellar in the gents. Wharfedale Brewery will initially have capacity to produce around 1,300 pints a week.

Jongleurs founder plans worldwide expansion: Jongleurs, the comedy club brand owned by Maria Kempinska, is planning to franchise overseas. Jongleurs has three sites in London and six elsewhere in the UK. Kempinska said: “My aim is to become the number one comedy brand globally. Everything we’ve done here we can take abroad.” The rights to Jongleurs returned to Kempinska after Regent Inns went into administration.

Greggs like-for-likes down 2.7%: Bakery chain Greggs has reported total sales up 4.8% to £735m but like-for-like sales down 2.7% in the year to 29 December 2012. 100 new shops were opened net. Pre-tax profit was down 2.2% to £51.9m. Chief executive Roger Whiteside said: “We have reshaped our plans for 2013 to focus on our core estate by increasing investment in our successful new formats in ‘food on the go’ and ‘local bakery’. At the same time we will continue to develop sales through new shop openings, and make further progress in new markets through our wholesale and franchise agreements.”

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