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Fri 26th Apr 2013 - Friday Opinion
Subjects: The widening pub food spectrum, Margaret Thatcher and the market, alternative thinking and tomorrows consumer
Authors: Paul Charity, Paul Chase, Chris Gerard and Kate Nicholls

The widening pub food spectrum by Paul Charity

The pub food spectrum is widening. Setting top-end gastro-pubs aside, mainstream operators have become more versatile and imaginative. Generally speaking, British traditional food has been the arrowhead of UK pub food, supplemented by a taste of the States (burgers and ribs). Italian food, pasta and pizza dishes, along with Asian food have played a supporting role in livening up pub menus.

One of the key battlegrounds is at the value end where pubs are well-placed to grab market share. Multi-site operators like Martyn Hathaway’s Number Works Pub Company, which has four Punch pubs, is taking the fight to the large managed companies, with a bargain menu priced in four tiers, £2, £4, £6, and £8, that drives his more profitable drinks trade. He says: “I was one of the first operators to trial Two for One offers successfully nearly 20 years ago. My view is that you can compete with somebody like JD Wetherspoon, which is not as cheap as it used to be. We offer a value menu but we don’t compromise on quality. Our 14 oz T-bone steak costs customers about half what they’d pay elsewhere. Our £1 coffee and cake offer between 10am and midday tends to attract mums to our pubs in the morning – and we offer a full breakfast for £4. It’s a bit of a loss leader to get people in. It often means that if customers aren’t in by 11.45am, they struggle to get a table. Other people have tried to copy us. But you can’t do food in a tatty-looking pub – customers look at the pub and expect the food to be rubbish. Our pubs are quite contemporary, quite modern – a good quality environment offering great food at great prices.”

A major trend here is to move away from predictable menu choices served in predictable ways to deliver bigger flavours. Greene King, Mitchells & Butlers and Spirit all operate brands that incorporate Flaming or Sizzling in their titles, serving very affordable food that is hard to replicate at home by dint of service style, cooking style or flavour punch. JD Wetherspoon’s newest menu takes a large leap in the direction of big flavours though sauces or cooking style – the introduction of its own peri-peri sauce, hotdogs smoked over beechwood and Tennesee burger with a Jack Daniel’s honey glaze. Operating far further north in the spend-per-head league table, Mitchells & Butlers Miller & Carter steakhouse concept is so keen to ensure customer enjoy flavour impact that it’s opted to throw-in free steak sauces in its latest menu launch.

Last week, Peter Borg-Beal’s Oakman Inns and Restaurants opened its latest site in Beaconsfield, Beech House, a shop conversion. Oakman is currently Eat Out Magazine’s Pub Company of the Year, but its new arrival is a logical and updated iteration of its own style of eatery that blends the best of pub and restaurant. Its site in Tring, The Akeman and The King’s Head in Berkhamstead site offer pub style drinking-at-the-bar with modern restaurant design cues – it’s a particularly impressive feat at The King’s Head, which is a coaching inn. Beech House’s design is an effortlessly funky amalgam of traditional and modern, a difficult blend to pull off with wood paneling imported from a barn in the United States, and imaginative and artful use of a central fire, open kitchen and racked wine display. There’s a front-facing coffee station and bar which send a strong morning and afternoon croissant and cake message. Wow flavours on the strongly Italianate menu are delivered through a Josper oven, which Marston’s Revere Pub Company is using to deliver ramped-up taste experience at it Revere Pub Company sites. (For proof that the UK food experience is on the march in this very category visit Jungs opposite Beech House for the best quality bakery café experience I’ve come across in the UK).

It was interesting that market insights form CGA reported last week that ‘better’ pubs have menus dominated by mainstream pub grub classics and offer more of the alternative flavours and experiences mentioned above. The independent Asian restaurant and takeaway has had a very difficult recession and faces an equally difficult future if mainstream pubs can capture the authentic flavour of the East on their menus.
Paul Charity is managing director of Propel Info

Margaret Thatcher and the market by Paul Chase

In the wake of Margaret Thatcher’s death and recent funeral I thought this would be an appropriate moment to reflect on the relationship between government and the licensed retail sector. Thatcher’s reforming Chancellor, Nigel Lawson, once remarked: “The business of government is not the government of business.” By this he didn’t mean there shouldn’t be a framework of commercial law, but that government should not run businesses, nor seek to dictate how businesses should be run. Interference in the working of free markets should be kept to a minimum, unless there was an overwhelming ‘public interest’ justification for intervention.

Quite how this philosophy could sit easily with the Beer Orders of the 1980’s, with minimum unit pricing or with Dr Vince Cable’s current intention to re-divide the cake between pubcos and their lessees is difficult to discern. It should perhaps give us pause for thought about the meaning of George Osborne’s comment that he wants to “do more to help the pub”. If, as a sector, we prefer self-regulation to government regulation then making it work becomes an imperative. This gives added resonance to the comment by David McHattie (ALMR’s new CEO) that it is important for the sector to speak with one voice and present a united front to government.

But ours is not the only voice government has to listen to. Margaret Thatcher didn’t have to contend with a public health lobby constantly pouring pseudo-scientific, anti-alcohol rhetoric in her ear. No doubt she would have been philosophical about such political lobbying and advocacy groups, but she would surely have been indignant if groups that were constantly lobbying for government market interventions were themselves funded by a government resolutely opposed to such intervention.

How would the Iron Lady have dealt with the fact that public health advocacy groups such as Public Health England, Balance North-West, ASH, Alcohol Concern, Consensus Action on Salt and Health, Tobacco Free Futures and Smokefree South-West all receive, or, like Alcohol Concern, have in the recent past received taxpayers money, some of which is then used to lobby government for legislative interference?

The Department of Health recently announced: “The department supports and recognises the role of charities and voluntary organisations to undertake advocacy, lobbying and campaigning where they are seeking to improve the health and well-being outcomes for the population of England.” It begs the question: how can government balance competing policy demands in respect of the alcohol and food retailing sectors when they are in large measure funding the advocacy of one side of the argument?

And it is not only in terms of central government that we have to contend with intervention. The creation of Police and Crime Commissioners (PCCs) provides yet another opportunity for restrictive action. I really think that PCCs are an underestimated threat to the licensed retail sector. The PCC controls the budget of the local police service; he or she sets the local crime reduction strategy – an important part of which is creating an alcohol-related crime reduction strategy; the PCC can sack the chief constable if he’s not satisfied with his delivery. All this adds up to a pretty toxic mix for pubcos and local managers battling it out in the trenches.

I think Margaret Thatcher would have had difficulty in recognising concepts like ‘public interest’ when used as a justification for market intervention in our sector. If she thought about them at all, her justification for the Beer Orders would have been that her government was championing the consumer. The Beer Orders were justified as necessary to improve competition and reduce the price of a pint – how the world has moved on!

For Thatcher, who famously said “there is no such thing as society”, there wasn’t a public interest, only competing interests, and I suspect she would have given short shrift to the petty gauleiters of the nanny-state who beset our industry today.

However insidious the ideological influence of the public health lobby, however well-submerged they may be in ‘movement politics’, I suspect the Lady would not have been for turning.
Paul Chase is a director of CPL Training and a leading UK on-trade alcohol policy commentator

How rearing pigs provided a VAT epiphany by Chris Gerard

Sometimes ideas have merit and some outcomes of ideas are obvious, whilst others, sometimes, are not. So, to a couple of good ideas that offer more than one benefit. Both are ideas about fattening up stock - fattening up pigs for the pot and fattening up the public for the NHS. Both are interesting subjects for the entrepreneurial restaurateur.

At our Rusty Gun pub we rear rare breed pigs. To do this you need lots of love of all sorts. This produces piglets and eventually pork belly and Sunday roast to which, as a consequence of provenance, a high margin can be attached. That, of course, is not a new idea. But what was, last Sunday, a new idea to me, is the notion that, as the piglets are adorable (they gamble and snuffle, they are playful and naughty) they are an attraction and therefore they can be revenue earners. They can become a reason to return and indeed pay for themselves.

I may have discovered the Holy Grail - guests will queue to pay twice for their pork; once when they feed the piglets and once when the piglets feed them. Small boutique wrapped ‘pig nuts’ at £1 a bag for children to feed to the piglets was the idea - and we sold 40 last Sunday alone! Pig rearing suddenly became even more attractive!

Meanwhile, how do we stop the public from making a pig of themselves? Could we, at a stroke, help our country, our economy and public health levels? How could the country and our industry make a judo move that picks up the momentum of the health lobby, its very real concerns about salt and sugar content, and flip that energy to help drive sales, investment and jobs in our industry?

I listened with enormous interest to veteran French VAT campaigner Jacques Borel on Radio Four’s Today programme this week. He advocated the opportunity of creating 600,000 plus new jobs in our sector by reducing VAT from 20% to 5%. But perhaps he missed a judo move. Change the VAT definition on food from ‘hot food’ to ‘hot and prepared food’. This is a brilliant judo move, providing of course you argue it from a health lobby perspective and not from a self-interested restaurateur’s perspective!

The broadening of the tax base from hot food to hot and prepared food will increase the lines carrying duty to such an extent that the VAT on prepared food would need to be reduced to 5% from 20% just to remain revenue neutral! It would, of course, push diners toward freshly prepared, healthier food – and away from more expensive (post VAT increase) processed ready meals.

The health lobby would get its way - we would save the NHS a fortune, and, more importantly, many lives. We would create hundreds of thousands of jobs, stimulate the construction industry and stimulate tourist appeal and demand. And unlike the pastie tax, the move would be popular as payment of VAT on prepared food would be ‘voluntary’ as there is a more attractive choice - cook fresh. The price of battered fish in the supermarket would go up but that of the battered fish at the ‘chippy’ would go down! Moving food production from food factories abroad to our small businesses in Britain would be game-changing in terms of employment and quality. At a ‘stroke’ those that don’t want to eat too much salt or fat could would buy cheaper non-factory made processed food of known origins in pubs and restaurants.

The sector would gain sales enabled by reduced prices, jobs would be created in those businesses and the related supply chain, as they have been in other EU countries that have reduced VAT on hot food. New entrepreneurial construction activity would erupt in the hospitality sector, readying the nation to be the recipient of the emerging wealthy tourist from Indo China that ‘get’ Britain and will visit over the next years. 

So let’s consider how one action, whether it be rearing pigs or broadening the tax base, can have multiple and extraordinary benefits.
Chris Gerard is chief executive of gastro-pub operator Innventure and rolled-out Vintage Inns when he worked for Mitchells & Butlers

Serving tomorrow’s customers today by Kate Nicholls

A sell-out 200 capacity audience of the industry’s leading opinion formers attended yesterday’s ALMR Spring Conference for a high protein/low carb diet of intelligence, innovation and inspiration about the future direction of not only the sector but also the Association.

The Conference was the valedictory event for outgoing chief Nick Bish and, as chairman Steve Richards said in his concluding remarks, he certainly went out on a high, handing incoming chief executive David McHattie an organisation full of momentum. And the conference certainly demonstrated in spades the dynamism, vibrancy and energy around our sector at the moment.

Even though I had a hand in planning the vision and the narrative we wanted to tell, the quality and breadth of insights from all the speakers was still overwhelming and trying to sum it up in a few hundred words barely does justice to their input. But if I had to sum up the event for those unfortunate enough not to be able to attend, then there were three key messages I took away:

The future’s bright: Despite the talk of austerity Britain and the appalling weather, just like Narnia, there are signs of a thaw. Justin Urquhart-Stewart gave us a whistle-stop tour of the world economy to tell us not just that things can only get better – they already are. The green shoots are there in terms of consumer spend and consumer confidence but business optimism is lagging behind. And the most resilient market demographic – the millenials. In eating out terms, they have been the only age bracket showing growth throughout the recession and 61% eat out at least weekly – but not necessarily in our outlets. That compares with just 30-40% of the old age range which make up traditional pub customers. Although I can hardly claim to be their voice – except in my own imagination where I am still 19 - they are not only our customers, they are our employees. Understanding what motivates and drives them will be key to capturing their leisure spend. More importantly, the flat business confidence is not matched by the investors. A panel of private equity, banks and business angels suggested that confidence in and support for the sector is returning. Investors are perking up and the funding is available for good ideas and crucially good operators. The future may be brighter than we think!

The future’s – well, if not Orange, then at least digital: This was an overriding theme coming through loud and clear across all the presentations. Contactless payment, ordering services, data capture were all explored and with 63% of those pesky millenials using social media and the internet to decide where to eat, drink and party – it is one operators cannot ignore. This is not just the media you can control, it is the power and influence of a poorly lit, fuzzy smartphone photo of a meal on Instagram. Paul Madden of Mitchells & Butlers and Alison Dolan of Sky identified the untapped potential of Wi-Fi and digital communications to deliver enhanced revenue but acknowledged that even the best digital marketeers in the sector know that general retail and other leisure sectors are streets ahead of pubs and bars in spotting this potential. This is not just a service to customers, but is a key business driving tool, allowing you to capture and exploit information about your guests – which Karen Forrester of TGIF explained delivers a win-win in terms of team engagement, with the numbers following inevitably.

Back to the Future: What I found particularly interesting – and salutary – though was the fact that with all this technology at everyone’s finger tips it simply means that we are retailers have to be even better at the basics; getting retail right. One lightbulb moment I had was a discussion about window dressing – basic I know in a digital age where you attract people in via vouchers, emails, online booking. If we remember to think like retailers then we should use our shop fronts in exactly the same way that Harvey Nichols and other high street retailers do. Carluccio’s windows don’t just let you see into the venue, they sell a lifestyle, an aspiration. Check out a Drake and Morgan venue next time you are in the city and you will see what I mean about window dressing. Because, let’s face it, if consumers are getting ever more sophisticated and discerning, if they know everything there is to know about your venue and your offer through the internet – or a friend’s photo – before they set out, then simply meeting their expectations is not going to be good enough. You are going to have to do something different, something exciting – you are going to have to exceed their expectations each and every time they visit. And the way you do that is through your service and through your people. You need to invest in them first and foremost. As Luke Johnson said when he was talking about unlocking investment, angels and private equity invest in people – and there’s a man who knows a thing or two about retail!

For those of you not able to hear first hand from our fantastic line up of speakers, the full presentations are available on the ALMR website.
Kate Nicholls is strategic affairs director of the Association of Licensed Multiple Retailers

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