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Thu 9th May 2013 - Candy Cakes, HK Taverns and Restaurant Group

Story of the day:

Tim Martin – Peroni has snubbed us too: Wetherspoon founder Tim Martin has revealed that Miller Brands UK has declined to sell the company Peroni on draught – it was revealed last week that the brewer has also declined to allow it to be stocked in Skegness. Martin said: “They have snubbed us. Our guys got upset. To use a bit of cockney rhyming slang I say, ‘David Duckham’ (an England rugby union wing forward). I think JD Wetherspoon and Skegness have more in common than people realised. It’s all a bit of a mystery to me. I’m actually not too sure what Miller Brands are up to. We sell premium lager for only a bit less (than competitors) and they sell Peroni to us in bottles.” Last week, YouGov’s chief executive Stephen Shakespeare has argued that it makes sense for Miller Brands to refuse to allow JD Wetherspoon to stock Peroni. He wrote in City AM: “We can see that there is method behind Peroni’s decision – it is an upmarket brand that appeals to smart set consumers, and to safeguard this image it takes steps to disassociate itself from more downmarket ones. The open question is whether Peroni will benefit from branding itself as a “posh pint”, or will it be harmed by what might be seen as class snobbery.” Meanwhile, Martin claimed yesterday that the company has hit a “long lunar note” on like-for-like sales increases. He told Propel: “We were flat for quite a while, but with the pressure on everyone in the company starts to graft that little bit harder.” Martin, quoting musician Captain Beefheart, added: “It’s all come together - you hit that long lunar note and let it float.” He said that the company, which reported margins up from 8.4% to 8.6%, does not try to manage margins. “Margins are there or thereabouts where they have been the past couple of years. Margins are much more of an area of focus for City analysts (than us).” Martin has also clashed with Greene King over its move to seek a judicial review in Stirling, Scotland over the grant of a Wetherspoon licence. The Wetherspoon founder had even hinted that the company might review its contract with the brewer. However, he said: “We’ve traded with Greene King for a long time and don’t want to do anything too hasty. We’ve got a long contract with Greene King anyway, although there’s no minimum barrelage. I’ve just turned 58 – and turned into a very cool and philosophical guy.” 

Industry news:

Established food pubs within the M25 are being squeezed: Research by CGA has shown that managed pubs within the M25 are being squeezed by new openings. The CGA Strategy Trading Index shows managed food pub sales within the M25 have increased year-on-year by +6.7%, with the rest of the country performing at +5.1%, this is due to growth in supply and investment. Like-for-likes for established food pubs within the M25 are down -1.5% in the last year, with wet sales of -1.7% joining even larger food sales declines of -2.6%. Food pubs outside of the M25 have conversely seen a like-for-like growth in food sales of +1.2%. This decline in performance within the M25 does seem to be restricted to food pubs however and we see LFL sales growth in bars of +2.2% compared to an average -1.9% like-for-like decline for bars outside of the M25. CGA’s Scott Elliott said: “We are seeing a massive influx of food-led concepts into the London market, which is squeezing like-for-like trends in the established food venues. That said, we don’t see this happening in managed bars and wet led venues where outlets within the M25 take roughly 25% more revenue than in other locations, with more positive like-for-likes. Is the food pub market becoming slightly saturated? Possibly, and these kind of metrics should be watched closely. Moving beyond food pubs, the evidence suggests that for managed operators the London market still offers higher revenues and better like-for-likes than other parts of the country.”

ALMR membership grows 8.5% in first quarter of 2013: The membership of the Association of Licensed Multiple Retailer (ALMR) saw membership grow by 8.5% in the first quarter of 2013 with the addition of 22 new operator members. Notable new members included Chameleon Bar and Dining, Grand Union, Lovely Pubs, Malvern Inns, Scott & Quaff and Lucky Voice. Last year, ALMR membership income grew by 50%. New chief executive David McHattie told yesterday’s annual general meeting: “This is my Day Five and I’m being a sponge, getting an appreciation of what the ALMR does. I’ve learnt a lot in five days – and there’s certainly a lot to do. I will endeavour to do my part – and as quickly as possible. I’m looking forward to working with you.”

City analyst loses man versus burrito challenge at Hungry Horse: City analyst Patrick Coffey, from Liberum Capital, took on the Hungry Horse “man versus burrito” eating challenge last week, when a group of analysts toured three Hungry Horse sites with owner Greene King. Coffey had to admit defeat less than half-way through the giant-sized eating challenge. “He valiantly ate about a quarter of it,” one observer reported. “It was bigger and wider than him.”

US fast food restaurants fail to raise nutrition levels in 14 years: A study has found fast food restaurants in the US have failed to raise the nutritional value of their dishes in 14 years. The study, funded by the Robert Wood Johnson Foundation’s health eating programme and published in the American Journal of Preventive Medicine, shows that little has changed on nutrition in nearly a decade and a half. The nutritional quality of fast food meals, measured against the health eating index (HEI-2005) developed by the US department of agriculture, went up from 45 out of 100 in 1997/98 to just 48 in 2009/10. The eight chains put under scrutiny were McDonald’s, Burger King, Wendy’s, Taco Bell, Kentucky Fried Chicken, Arby’s, Jack in the Box and Dairy Queen. Americans spend 41% of their food dollars on foods eaten outside the home compared to 26% in 1970.

Luke Johnson – the wealthy should give their money away: Sector investor Luke Johnson has argued that the wealthy should give their money away to fund education and medicine. In his Financial Times column, he wrote: “Whether the wealthy donate for vanity, to gain recognition or for altruistic reasons is irrelevant. What matters is that the rich put their cash to work in areas such as education and medicine. Not only do such donations deliver public goods, in the form of better-qualified and healthier citizens, but they also provide a crucial means of financing innovation, in addition to the money supplied by government and industry. For example, the Wellcome Trust, the creation of a US immigrant, is possibly the world’s largest medical endowment, and an amazing British asset. It is no coincidence that Americans are probably the world’s biggest philanthropists, best innovators and have the most highly rated universities. Entrepreneurs and researchers there operate in a symbiotic relationship that delivers prosperity like no other nation.”

Company news:

HK Taverns placed in administration: HK Taverns, the operator of circa 50 pubs, including 45 pubco leasehold sites, in Northamptonshire, Lincolnshire, Cambridgeshire and Rutland, has been placed in administration following the death of owner Harry Kelly last month. Baker Tilly Restructuring and Recovery LLP has been appointed administrator of the company, which is based in Corby, Northamptonshire. It operated 45 tied leasehold pubs owned by Punch Taverns, Enterprise Inns and Admiral Taverns and owned five freeholds that Baker Tilly expects to continue trading until a buyer is found. Graham Bushby, restructuring and recovery partner at Baker Tilly, said: “Sales at HK Taverns have been affected by the continued pressure on consumer income. In response to creditor pressure, the company management reached the inevitable conclusion that the only option was to appoint administrators. Since our appointment we have worked closely with the pub company landlords to facilitate an orderly handover of the leasehold portfolio, thereby in many cases saving jobs and preserving value for all parties. We anticipate continuing to trade at five sites, which will secure around 40 jobs, until a buyer for the individual pubs or the group can be found.” The five sites that will continue trading are The Admiral Hornblower in Oakham, The Magnet Taverns in Boston, The Red Lion in Rothwell, The Wishing Well Inn at Dyke and The Beehive in Grantham.

Coca-Cola moves to head off obesity criticism: Coca-Cola has unveiled new initiatives to beat off growing concern about the link between sugary drinks and obesity. It is adopting clearer calorie-count labels, promoting diet drinks and renewing a pledge not to market to children under 12. Analysts said Coke and rivals were concerned about a crackdown around the world. The company said it would encourage consumers to adopt more active lifestyles and apply all the measures in the 200 countries where it operates. The company has tried to take a lead in the war on obesity, running adverts that encourage consumers to burn more calories and highlighting its low-calorie and no-calorie drinks. “There is a place for all of our beverages in a healthy lifestyle,” said chief executive Muhtar Kent.

Iconic Hoste Arms to unveil £2m investment this week: The iconic Hoste Arms, the coaching inn in Burnham Market, Norfolk, now owned by former media executive Brendan Hopkins but previously owned by Paul and Jeanne Whittome for two decades, is to unveil a £2m investment this Saturday (11 May). The investment will see a new function space called The Garden Room with 110 covers, a garden lodge that will be able to host 30, four new bedrooms to bring the total to 61 and a new reception area. In addition, the Hoste Beauty Spa will be extended with hairdressing, manicure and pedicure facilities and a hot tub. Meanwhile, the kitchen has been doubled in size.

The Chimichanga, Coast to Coast and Restaurant Bar and Grill to open in Chester’s new dining quarter: Prezzo’s Chimichanga brand, Restaurant Group’s Coast to Coast brand and The Restaurant Bar & Grill, owned by Individual Restaurants, are all lined up to open in Chester’s new dining quarter, a glass-fronted former Habitat building in Pepper Street. Individual Restaurants already operates a Piccolino’s opposite the proposed development. Concerns were raised by ward councillor Samantha Dixon on behalf of city centre residents about opening hours creeping further into the small hours of the morning ‘in that area of town’.

Former Cecconi’s chef to open Tozi: Former Cecconi’s executive chef Daniele Pamagnin will open Tozi in Victoria next Wednesday (15 May), bringing ‘classic Italian flavours and an informal, design-led dining environment’ – it is located at 8 Gillingham Street, Victoria. The 15-strong all-Italian kitchen team will serve an authentic Venetian menu of cicchetti (Venetian-style small plates), charcuterie and cheese platters, wood oven-cooked mains and sharing dishes. Prosecco on tap will be available as an aperitif, produced in the Veneto region of Italy, as well as barrel-aged Negroni - the quintessential Italian cocktail.

First Temperance Bar in a century opens in Lancashire: The first new temperance bar in a century, the Botany Bay, Chorley, has opened in Lancashire. The Temperance Bar, run by Emma and Jason Seddon, is a return to the Victorian age when teetotal bars sprang up in most towns in the north to combat the threat of the demon drink. The couple have plans to roll out the idea across Lancashire in the next three years, reviving a philosophy which had its roots in the county back in the 1830s. “Our first weekend went extremely well,” said Emma. “Lots of people came to have a look and a taste of what we offer.”

Travelodge opens sixth hotel in Spain – biggest yet: Budget hotel chain Travelodge has opened its biggest hotel in the country’s second largest city, Barcelona. The new 250-room hotel is situated in the heart of the most innovative district in Barcelona “22@” - also known as the city’s ‘Silicon Valley’ and represents an investment of €30 million. Barcelona Poblenou Travelodge is the Company’s fifth hotel in Spain and is also the first of two new Spanish hotel openings for the budget hotelier this year. The second hotel will be located in the famous Julian Camarilo commercial district in Madrid and is scheduled to open this summer. Tomorrow, (10 May 2013), Travelodge is also opening its seventh hotel in Liverpool.

McDonald’s chief executive joins the board of InterContinental Hotels Group: Jill McDonald, chief executive of McDonald’s in the UK, is to become an independent non-executive of the world biggest hotel company, InterContinental Hotel Group, next month. Patrick Cescau, the IHG chairman, said: “Jill’s wealth of experience in marketing will be extremely positive for the group.”

Douglas Jack – The Restaurant Group’s shares are overcooked: Numis Securities analyst Douglas Jack has issued a “Reduce” recommendation of shares in The Restaurant Group with a Price Target of 400p. First quarter results are due next Wednesday (15 May). He said: “Strong sales growth (4.5% like-for-likes and 4.8% expansion in 2012) and a sector re-rating helped to drive the company’s valuation close to record levels. However, comparatives now become much tougher and any slowdown in like-for-like sales is likely to put the high rating under pressure. After a strong January-February and with new sites performing well, The Restaurant Group has not needed to promote aggressively. Nevertheless, ongoing cost pressure and tougher like-for-like comparatives should make 2013 a more challenging year; and the high rating leaves little room for error.”

Nicholson’s sells one million pint of its own label beer: Mitchells & Butlers Nicholson’s pubs have sold one million pints of its own label beer, Nicholson’s Pale Ale (NPA), since it was launched a year ago in May 2012. The exclusive beer is brewed by St Austell. Ben Lockwood, marketing manager, Nicholson’s pubs, said: “We’re really proud of what Nicholson’s Pale Ale has achieved in its first 12 months of being poured. Combining over 300 years of heritage and expertise has proved a roaring success with our guests and our team members. This is a testament to the quality of the beer master brewer Roger Ryman has created with NPA. The passion displayed by St Austell on the brewing side is matched by that same passion behind the bars in our pubs, and this partnership will continue to be a success.”

Individual Holdings takes fourth site: Individual Holdings has acquired its fourth site, the iconic Wall Heath nightclub The Kingfisher. The group already operates neighbouring pub The Wall Heath Tavern, The Park Tavern in Cot Lane, Kingswinford, and Pensnett based Lenches Bridge, formerly known as The Talbot. Finance director Marina Parry revealed: “We’ve had our eye on The Kingfisher for quite sometime and then suddenly the deal just seemed to happen. I know what a great venue it can be. For ourselves, it’s the missing piece in the jigsaw and definitely the biggest project we’ve taken on so far.” Work is set to start shortly on refurbishing the external appearance of The Kingfisher which will incorporate a patio area along with additional visuals to the thatched roof.

Tesco in Ware replaces Costa Coffee with Candy Cakes: A Tesco supermarket in Ware is replacing a Costa Coffee with a Candy Cakes outlet selling coffee, cupcakes and shakes. A Tesco spokeswoman said: “The Costa Coffee area in our store was introduced on a trial basis. We will now be installing a Candy Cakes area, where customers can enjoy drinks and cupcakes.” A Costa Coffee spokeswoman said: “I can confirm that the Costa in Hertford’s Tesco was a trial with Tesco, for which the trial period is now at an end and that is why Costa has ceased trading there.” Candy Cakes has five sites in London, including a concession at Hamleys toy store. Its flagship site is in Covent Garden Plaza.

TGI Friday’s in the US and overseas: Figures published in The Star Tribune in the US highlight the relative fortunes of TGI Friday’s in the US and elsewhere. The company operates 934 units in the US, with 565 of those restaurants in the United States, where about half are owned by franchisees. Domestic sales totaled $1.7 billion in 2012, down for six consecutive years and below the pre-recession level of $2.1 billion in 2007, according to Technomic. Internationally, Friday’s sales have been steadily increasing as it finds new markets in Asia, Eastern Europe and the Middle East. Sales overseas climbed from $780 million in 2008 to $913 million last year. In the US casual dining segment, Friday’s is the fourth-largest player, trailing Applebee’s, Chili’s and Buffalo Wild Wings, in that order, with 3.6% of the market in terms of sales, down from 4.7% five years ago. But TGI Friday’s has returned to profitability. From a loss of $4.8 million in 2010, the chain showed a net profit of $14.9 million in 2011 and $34.5 million in 2012.

Douglas Jack revises recommendation to “Add” on Marston’s shares: Numis Securities analyst Douglas Jack has issued an “Add” recommendation on Marston’s shares with a Target Price of 165p. Marston’s first half results are due next Thursday (16th May). He said: “We forecast H1 EBIT to be down 1.5% due to poor weather. Due to a higher interest charge, we estimate H1 PBT will be down 18% to £27.5m. Despite this, we expect to hold our full year forecast of profit before tax rising 8% to £94.5m (consensus £94.7m). After recent strength, we have pulled our recommendation back to Add (from Buy). Premium & Destination should be Marston’s growth engine over the next few years, during which it should receive two-thirds of group capex. In 2013E, this should include circa 23 new builds and a few conversions to the Revere premium format.”

McDonald’s – the McRib campaign in 2010 was our biggest social media success: McDonald’s director of social media Rick Wion has described the McRib campaign in 2010 as its biggest social media success. He said: “I ran the return of the McRib in 2010, and what I loved about that campaign was we put fans front and centre. We identified a few superfans, like the creators of the first McRib fan page and the McRib Locator website, and asked them to be our spokespeople. It connected fans to other fans because McRib people get really excited and want to talk to like-minded folks.”

Plymouth multi-siters acquire Enterprise Inns site: Plymouth operators Pete Wright and Rod Murrain have acquired their third site – Enterprise Inns’ Mount Pleasant Inn. The pair already run The Barbican’s Three Crowns and The Plymstock Inn. The Mount Pleasant has been closed since the turn of the year. The new owners plan a carvery operation. The pub is a substantial two-storey building, with three letting bedrooms and 6,000 sq ft of space.

Supermarkets enjoy 46 million more out-of-home eating visits in 2012 versus 2009 amid continuing expansion: Insights company NPD Group has reported that supermarkets enjoyed almost 46 million more out-of-home eating visits than they did three years ago. The primary motivation for these visits was “Didn’t want to cook/Nothing at home”, accounting for an additional 28 million more visits to a supermarket in 2012 compared with 2009. Guy Fielding, director of business development for NPD Group, said: “Previously more traditional restaurants would typically benefit from people not wanting to cook or having nothing in, but more and more consumers are answering this need with a trip to a supermarket – in many cases choosing the smaller local c-stores with their extensive prepared ready-to-eat meals and snacks.” Supermarket visits were up across all out-of-home eating occasions last year – a number of which can be seen as a threat to local competing restaurants and takeaway operators: deal/promotion occasions, accounting for 64.2 million more supermarket visits in 2012; snacking occasions, accounting for 27 million more visits in 2012; breakfast occasions, accounting for 15.6 million more visits in 2012; dinner occasions, accounting for 3.8 million more visits in 2012. Fielding added: “As supermarkets continue to expand in numbers, neighbouring foodservice businesses should expect direct competition from these operators, especially as their product mix and deal/promotion strategies are refined and adapted to the local trade. We expect to see more ready-to-eat hot offerings, variations on portion sizes, more drink and snacking options, and a heavier focus on breakfast, an area that is enjoying rapid market growth. However, all is not lost; there are still opportunities for restaurants and takeaway operators to focus on their lunch offerings, and in particular, to consider offering inside and outside seating. At the moment, the lunch eating occasion is being left behind by growth in breakfast, dinner and snacking. As most supermarkets lack on-premises seating facilities, foodservice operators have a great opportunity to capitalise on on-premises seating, a factor that continues to be an advantage for most high street operators. However, foodservice operators ignore other factors at their peril – consumers are more than happy to take-away if the ambiance and atmosphere don’t meet their expectations.”

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