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Morning Briefing for pub, restaurant and food wervice operators

Tue 30th Apr 2013 - Breaking News - Greene King reveals power of Hungry Horse
Greene King reveals power of Hungry Horse
Whitbread increases growth targets for Premier Inn and Costa

Greene King reveals power of Hungry Horse in time of austerity; 144 more sites identified; potential to be the leading UK pub restaurant brand: Suffolk-based Greene King has taken City analysts on a tour of three of its Hungry Horse sites in Birmingham as its lead brand, which trades at the value end of the market, prepares to open its 200th site in Leamington Spa. The company has doubled the size of the brand since 2008 when there were 96 Hungry Horses. The company now believes it can double the size of Hungry Horse to 400 sites – and it has 114 specific sites identified. There are 24 more sites in the pipeline and Hungry Horse has “the potential to the be the leading pub restaurant brand in the UK”. Hungry Horse revenue and profit has doubled in the last three years. It has added 20 Hungry Horse sites in less than a year to reach the 200-site landmark – Mitchells & Butlers hit the 200 mark with its Harvester brand last year but it was founded more than a decade earlier. Greene King told analysts that there was a customer “flight to value” and value offers account for 47% of managed profit but would rise to 53% over the next three years. Hungry Horse was founded in 1996 but the company considered disbanding it between 2005 and 2007 when the brand had “lost its way”. However, Hungry Horse had shown itself to hit a “value-for-money sweet spot” in times of austerity and is now, analysts were told “at the forefront of our growth”, “leading on innovation” and is the nation’s “first choice, third place”. Analysts were told that the Hungry Horse and Cloverleaf brands would provide Greene King with the opportunity to expand into new customer locations such as retail and commercial parks and cinemas. The wet/dry split at Hungry Horse is 50/50 with average weekly takings climbing from £15,900 in 2008 to £21,700 in 2013. Average spend-per-head is £6.20, compared to £5.88 in 2008 (a rise of just 5.44% in five years). The average price of a main meal is £5.03 compared to £4.72 in 2008 (a rise of just 6.57% in five years). Average brand ROCE is 12% compared to 9.2% in 2008. Since 2008, 67% of new Hungry Horse sites have been transferred from the existing estate, 24% have been acquisitions, and 9% have been new-build. Its average burger retail sale price is circa £4, which makes it cheaper than JD Wetherspoon, Sizzling Pubs and Flaming Grill. Greene King told analysts that it had a “cluster strategy” with Hungry Horse – it has 16 Hungry Horses in the West Midlands with one more Hungry Horse on site. This allowed the company to build a “powerful presence in chosen geographies” and apply marketing synergies. On-site innovations include “Big Bean” self-serve coffee machines and ordering kiosks. Openings in the past year have included one in the hometown of rival Marston’s – it erected a new-build Hungry Horse on Stafford Road in Wolverhampton on the site of the old Goodyear headquarters.

Whitbread increases growth targets for Premier Inn and Costa Coffee: Whitbread has increased its growth targets for Premier Inn and Costa Coffee. In April 2011 Whitbread set out plans to grow Premier Inn UK rooms by 50% to 65,000 rooms and to double Costa’s worldwide system sales to £1.3bn. Chief executive Andy Harrison said this morning: “We are well on track to achieve these milestones and have announced new 2018 milestones to grow Premier Inn UK by 45% to around 75,000 rooms and to double Costa’s system sales to around £2bn. This exciting organic growth opportunity, together with a clear focus on returns, will continue to create substantial shareholder value. In the first few weeks of our new financial year, group trading has been in line with our plan. Premier Inn has maintained its positive momentum. The unseasonably cold weather has held back sales within restaurants, and benefitted Costa.” Costa like-for-likes grew 6.8% in the year to 28 February while Premier Inn like-for-likes were up 3.1%. Pub restaurant like-for-like rose 2.3%. Underlying pre-tax profit rose 11.4% to £356.5m. Chairman Anthony Habgood said: “Whitbread has grown its total sales in the year by over 14% and continued to produce strong operating cash flows of over £500 million. This has funded both significant organic investment to grow our businesses and a double-digit percentage increase in our dividends while maintaining prudent debt levels. With the Premier Inn and Costa brand propositions going from strength-to-strength, this growth is set to continue.”

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