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Wed 26th Jun 2013 - Robert Cain, Starbucks and Thwaites

Story of the day:

Tim Martin and Jens Hofma issue VAT appeal to industry: JD Wetherspoon founder Tim Martin and Pizza Hut chief executive Jens Hofma have issued an appeal for the industry to back Tax Parity on Wednesday 25 September. Martin said: “In the long run it is impossible for pubs to compete en masse with supermarkets, which are right next to them, if they pay no VAT on food and we pay 20%. Over time pubs have lost half their beer sales to supermarkets and looking back, every time tax goes up, it increases the disparity. Now VAT is at 20% we are losing out again. The battle can and should be won if we all work collectively. Winning over our customers is a good place to start.” He was supported by Hofma in urging others in the industry to follow suit by taking part in Tax Parity Day. Hofma explained that Pizza Hut will be displaying posters all around its 320 restaurants in the UK. “We are a fragmented sector compared to supermarkets and we don’t have a strong voice like they do. This is a unique opportunity to show unity. We, as a sector, are being unfairly treated and we are not taking it any longer.” Hofma explained that reducing VAT would encourage people to go out more for food and drink. “It is good for society when people go out. Everyone has to take part in Tax Parity Day. One of the things I admire about Britain is that people act on a good cause.” The pair spoke at the Propel Multi Club conference last week, along with campaigner Jacques Borel, whose VAT Club campaign is pressing for a 5% cut in VAT across the sector in a bid to boost economic growth and jobs. On Wednesday 25 September, publicans, restaurateurs and foodservice operators are being called upon to reduce their prices by 7.5% for the day, in order to highlight the benefits of the proposed reduction. “Our aim is to secure a more equal tax treatment for food sold through pubs, restaurants and food service operators, compared to supermarkets, which benefit from a zero VAT rate,” he said. Borel, who has secured tax reductions in countries across Europe, including in his native France, where restaurants and cafes were granted a VAT reduction from 19.6% to 5.5% in 2009, explained that the industry could create 670,000 jobs if tax is reduced. Among the 40-plus companies supporting Tax Parity Day so far are JD Wetherspoon, Daniel Thwaites, Everards, Subway, TGI Friday’s, St Austell, Shepherd Neame, Fuller’s, St Austell, Heineken and Punch Taverns. Those who wish to sign up for the campaign can visit the website www.vatclubjacquesborel.co.uk/join.html and they will receive ten posters per site. Membership costs £150.

Industry news:

Allegra – branded restaurant market set for growth: Allegra’s Project Restaurant 2013 reports that the UK’s branded restaurant market is set for encouraging growth as they continue to win market share from independents. With an expected turnover of £16.4bn in 2013, this market is set for accelerated growth through physical expansion and positive like-for-like performance, including modest underlying volume growth. Consumers’ eating out habits are, however, becoming less structured and more informal. The key findings of the report, which includes survey results from over 22,000 consumers about their eating out habits and over 120 industry leaders about their expectations for the industry, show that: branded/managed pubs, forecast at £7.6 billion turnover for 2013 across 8,488 establishments with annual growth of 6.0% in sales and 3.1% in outlets, are well placed to benefit from this propensity to eat out informally throughout the day.

New Pub Company pledges support for Tax Parity Day: New Pub Company, the London multiple headed by Peter Linacre, has pledged its support Tax Parity Day on Wednesday 25 September. Linacre said: “My initial reaction to this Parity Tax Day idea was not very positive. However, the more I pondered this day of action and its ability to unite the entire leisure and hospitality sector to call for equality of tax treatment, it struck me that the focus that we can bring prior to, on the day, and after the day – can galvanise a huge level of support. Our customers, our suppliers, our staff and the economy will all benefit from a VAT reduction. We just want to play our full part in this brilliant idea.”

Food inflation running at 4%: Food inflation is still running at over 4%, with some categories, including butter (up by 25% in price between February and April), vegetables and salmon rising in cost by much more. The latest Prestige Insight market report states that fruit inflation has been over 10% for the past four months, with vegetables up by 8.6% in price compared with last year. Beef and potato prices also remain very high, with supply outstripping demand.

Company news:

Robert Cain Brewery has debts of more than £8m: The Robert Cain Brewery, operated by the Dusanj family, has debts totalling more than £8m. Propel reported exclusively on Saturday that the company is the subject of a winding up order after a petition from HMRC, which is owed more than £5m. A separate firm, Brewery Village, incorporated at the start of the year, plans to redevelop the site. More than £100,000 worth of beer left inside vats in the brewery will have to be destroyed. A total of 44 other creditors are owed £3m and 38 workers made redundant have been told there is no money for redundancy. In April, the Dusanj brothers announced plans to create a £50m Brewery Village on the site, incorporating shops, a cinema, hotel, spa, gym and other attractions as well as apartments. Robert Cain first brewed beer on the site in 1858. Ten years after his death in 1917 it merged with Walker’s of Warrington with the site sold to Higson’s of Liverpool. The brewery was bought by Manchester brewer Boddington’s in 1985 and sold six years later to the Danish Brewery Group and renamed Robert Cain & Co Ltd.

The Guardian’s Simon Bower argues Starbucks ‘voluntary’ tax contribution is fiction: Respected Guardian leisure reporter Simon Bower has suggested it is fiction to suggest that Starbucks is a making a voluntary tax contribution of £20m over the next two years. Bowers wrote in The Guardian: “Unwrapping the layers of spin from his original remarks, what (chief executive Kris) Engskov actually pledged is way more modest. For 2013 and 2014 Starbucks would make a taxable profit because it would amend a series of controversial intra-group transactions which had for years sapped profits from the UK company. These include royalty payments for use of the brand, certain interest charges and wholesale coffee supply deals. This is the source of the latest contribution to HMRC coffers, which is expected to be hinted at in Starbucks UK’s historic accounts published this week. It is an absolute fiction – and one the company has done nothing to discourage – to suggest these tax payments are being made without an obligation arising.”

Interest rate swaps cost Daniel Thwaites another £8.9m provision: North west brewer and retailer Daniel Thwaites has made another £8.9m provision against interest rate swaps. On 31 March 2012, the company had a total of £95m of interest swap contracts, against which it made a provision of £11.9m to settle up to £50m of these contracts on which it was committed to paying the difference between Libor and the fixed rates for periods of up to 22 years. During the most recent year it settled £40m of these swaps, at a cash cost of £9m. Since March 2012, Libor has fallen even further, increasing the termination value of the remaining £55m of swaps to £17.6m. The company said: “We have undertaken a review of our longer term funding requirements, and have made an additional provision of £8.9m for an additional £25m of the swaps as we now consider that they are not highly likely to be used against future borrowings.” The company saw turnover drop 0.6% to £136.4m with operating profit down 15% to £10.5m. Five exceptional items totaled £8.4m.

Pub People Company develops ‘cosy country pub’ format: Pub People Company, the East Midlands multiple headed by Kevin Sammons that runs just under 50 pubs, is to re-open its freehold site The Green Northern at Langley Mill today (27 June) after a major investment. The company has developed a ‘cosy country pub’ format at the site, which overlooks the small canal marina at Langley Mill. The pub offers five handpull real ales and three real ciders. Operation director Andy Crawford said: “We will be supporting as many local breweries as possible and have begun with ales from Castle Rock and Blue Monkey, along with some Kelham Island and Derventio.”

Rugby star Olivier Azam sells Cheltenham French restaurant: Rugby star Oliver Azam has sold his French restaurant in Cheltenham, Armagnac, through agent Christie + Co to first-time buyers. The restaurant, renamed Tarragon Restaurant, will move away from the modern French cuisine to offer a fresh, casual fine-dining experience. The restaurant has been sold due to the increased commitments of the former operators Olivier and Kate Azam, who are now based in France. Olivier Azam is a coach at French Top 14 rugby team Toulon and for many years was a front row forward at Gloucester RFC. The Azams departure has opened the door to first time buyers Sadek Ahmed and Tom Johnson. Both are experienced chefs with extensive CVs. Sadek comes from a background of restaurant management, which includes Café Rouge in Cheltenham, while Tom Johnson comes with a CV including Sous Chef at Café Rouge, Cheltenham and Chef De Partie at Grape & Olive, Swansea.

Great Witley Bay hotel owner slashes price by 20% to sell: The owner of a landmark Great Witley Bay hotel is trying to push through its sale before the end of the year. The asking price of the Hundred House Hotel has been slashed from £699,000 to £550,000 in a bid to find a buyer. Hotels specialist Peter Brunt of Colliers International said: “My client is very motivated to have sold the business before the end of the year and with 20% knocked off the asking price we are confident we can achieve his objective. The Grade II listed hotel is at the crossroads of a road network linking Stourport, Kidderminster, Droitwich, Worcester, Tenbury Wells and Bromyard. It has 27 bedrooms, a manager’s flat and banqueting facilities.”

SA Brain’s wins coffee shop of the year award for fifth time: SA Brain’s coffee shop brand has won the title of Coffee Shop Chain of the Year for a record-breaking fifth time The Café Society Awards saw Coffee#1 beat off some of the best known names on the high street to secure the title. Coffee#1 was acquired by Brains in October 2011. Since then the brewer and retailer has developed the business to include 31 coffee shops across Wales and the south west, with the most recent opening in Winton, Bournemouth in May. SA Brain has unveiled plans for a further four openings across the summer and has a target of 50 shops within three years.

Five HK Taverns freeholds hit the market: Colliers International’s Licensed and Leisure team has been instructed on behalf of Baker Tilly Restructuring and Recovery LLP, Joint Administrators of HK Taverns Limited to dispose of a portfolio of five freehold pubs formerly managed and operated by HK Taverns. HK Taverns, headquartered in Corby, Northamptonshire, managed and operated approximately 50 pubs in the East Midlands ranging from small community pubs to large food-led operations, when it went into administration in May 2013. Paul Hands, director at Colliers International, said: “The portfolio includes a range of traditional pubs including one of Rutland’s finest gastro pub and hotels, The Admiral Hornblower. We expect a good level of demand for these properties, whereby potential buyers may wish to purchase the pubs individually or as a group. We anticipate that these sites all have the potential to develop trade with the right operator and investment behind them.” The sites are located in Grantham, Nottinghamshire, Rothwell in Northamptonshire, Boston and Dyke in Lincolnshire as well as Rutland in Leicestershire. All properties in the portfolio are still currently trading.

Richard Slade wins ‘Good Egg’ award: Richard Slade, owner and operator of Battlesteads pub, hotel and restaurant in Wark, near Hexham, has been awarded the esteemed ‘Good Egg’ award’ by the Considerate Hoteliers Association at a gala lunch held at The Landmark Hotel in London. The Considerate Hoteliers Hotel of the Year Awards celebrate the best in environmental, sustainable and socially responsible performance and Battlesteads picked up the overall ‘Considerate Hotel of the Year’ title. The Good Egg award recognises those in the hospitality industry who have inspired and encouraged others to embrace certain principles of life relating to environmental, sustainable and socially responsible performance. Additionally, it acknowledges individuals who help others to achieve excellence in what they do. John Firrell, executive director of the Considerate Hoteliers Association, said: “Each year when we come to consider who the Good Egg should be, we start off with seemingly dozens of worthy candidates. However, each year, the perfect recipient quickly and naturally emerges from the throng, and 2013 was no different. Richard is constantly looking at ways of furthering Battlesteads’ considerate agenda. This is mainly achieved through innovation, ferreting out facts, cajoling, inspiring, dedication and sheer enthusiasm.”

Numis issues Buy note on SABMiller: Numis Securities has issued a Buy note on brewer SABMiller with a price target of 3700p. Analyst Wyn Ellis said: “SABMiller has plenty of value fermenting away, bubbling beneath the surface of the current valuation. It has 49% of the leading brewing company in China and commanding shares of several fast-growing markets in Latin America and Africa. None of these are yet performing at close to their full potential; neither is Foster’s (acquired in Australia in 2011), which is already showing encouraging signs of responding to the SABMiller conditioning process. In addition, we believe that the company will continue to participate in the consolidation of the industry, initially as predator, but possibly as prey.”

Russell Norman firms up new openings: Restaurateurs Russell Norman and Richard Beatty are to open Polpetto at 11 Berwick Street in November. The venue returns after a break that followed the closure of its original site in May 2012. Norman and Beatty also plan to add The Ape & Bird pub in Covent Garden in November and have signed with Soho Estates to open a 4,500 square-foot restaurant and bar on Walkers Court. “People think we’re opening a lot of restaurants, but we’ve only got five and it’s because the initial Polpo was so successful that we’ve been able to fund our growth,” Norman said in an interview. “We don’t have a third-party investor: We simply build restaurants on the back of cash flow. We estimated that the weekly turnover we needed to keep our heads above water at the original Polpo on Beak Street would be about 18,000 to 20,000 pounds and it’s regularly doing two to three times that.”

Darden to expand through high-end brands: Darden Restaurants is to expand in the US through its higher-end brands within its Specialty Restaurant Group arm. Both Seasons 52 and Yard House will open seven or eight new restaurants, Capital Grille will open four or five new restaurants and Bahama Breeze adding three or four new eateries. Its LongHorn Steakhouse concept is expected to open up to 40 new units in Darden’s fiscal 2014, a slower rate than fiscal 2013’s 44 new restaurants. Additionally, Darden plans to define its LongHorn menu, creating new “approachable” dishes inspired by upscale and polished casual restaurants, introducing seasonal appetisers, side dishes and add-ons plus more non-steak choices and coming up with more affordable steak dishes. Openings at its mid-market Olive Garden brand will taper off. The company plans to expand the brand’s restaurant remodeling program during the second half of its fiscal 2014 and slow growth from the 36 that opened in its fiscal 2013 to 15 in fiscal 2014 to just five or ten beyond that.

London Ordinaries acquires second pub - Enterprise Inns site: London Ordinaries, the company led by Michael Buurman where Nick Pring and Malcolm Heap are silent partners, has acquired its second pub, The Crooked Billet in Upper Clapton, an Enterprise Inns free-of-tie lease. The site, previously let on a short-term agreement, is currently being refurbished. The area is close to Stoke Newington where Antic London opened the Clapton Hart about a year ago, a pub rumoured to be taking in excess £30,000-a-week net. London Ordinaries already operates The Empress of India, a pub acquired from Tom and Ed Martin’s ETM Group in March 2011. London Ordinaries is focused on opening pubs in areas of East London that are subject to gentrification. Pring and Heap left Greene King two months ago and are blocked from active business involvement for six months under the terms of their exit from the company – Greene King acquired their 14-strong previous business for £53.1m in April 2011. Antic Pubs and other operators are currently relaunching pubs in less glamorous parts of London where demographics have improved dramatically in the last few years. Of the London Ordinaries, where Pring and Heap are taking a back seat, Pring told Propel recently: “The opportunity to acquire a freehold estate will never happen again in London in our lifetime – so we will be looking at free-of-tie leases and even tied leases.” Pring also told Propel that he and Malcolm Heap would be working on their new project but that both of them also plan to undertake projects independently. He also reported that becoming involved in other people’s businesses in a non-executive capacity is an idea that he finds ‘attractive’. “I’ve had lots of requests from various people to look at their businesses in a mate’s capacity – it’s given me a strong belief that I can add value.”

McMullen criticises statutory regulation of tenanted sector: Peter Furness-Smith, managing director of Hertfordshire brewer and retailer McMullen, has criticised the decision by the government to consult on a statutory regulation of the tenanted pub companies. He said: “The outlook (for our business) continues to be uncertain as the government is once again considering interfering in commercial agreements agreed between pub companies and their tenants. We all know that rent (in our case fixed cash rent combined with variable, performance related, tied income) represents a significant proportion of the cost of running any business. In the case of pubs, total rent pales into insignificance compared with the cost of government, including taxation which amounts to over 40% of gross sales of a small community pub! In theory, the proposal will not affect regional brewers and pub companies such as McMullen but the prospect of politicians overriding commercial agreements and effectively setting rents in our sector is a very worrying development. If a Government, like the current one, with a stated commitment to reducing red tape is contemplating this sort of interference heaven help the prospects for investment by the private sector and therefore our economy. If any government really wants to help pubs they need to reduce their pernicious levels of taxation. A small community pub contributes to government coffers around five times the pub’s profit after rent. This is unsustainable and tinkering with the rent, therefore, is insignificant in comparison. McMullen therefore urges this government to support the VAT Club Jacques Borel, which calls for a substantial reduction in VAT for pubs. This would give confidence to the beer and pub industry, a more level, therefore competitive, playing field with supermarkets and encourage investment. It is estimated that this will quickly generate more revenue for the Treasury and importantly lead to the creation of many jobs, particularly for the young throughout the country.” McMullen reported a rise in underlying profits on turnover up by 5.0% to £63.8m in the 52 weeks to 29 September compared to the year before. Profit before tax and exceptional items at £6.6m was below the previous year (£7,383,000) but this decline was distorted by a number of one off items in each year, in particular refunds in VAT and property rates along with pension fund adjustments. 

YO! Sushi set for Kingston: YO! Sushi is to take a site at The Bentall Centre in Kingston, which is undertaking a £3.25m refurbishment programme to transform its Clarence Street entrance and create additional retail and food space. A new unit will be created for YO! Sushi, which will open at the end of the year.

Strada previews summer menu at 19 sites: Strada is previewing its summer menu, due to be launched on 2 July, at 19 locations; They are: Longleat, Birmingham Mailbox, Edinburgh, Newcastle, Exmouth Market, Reading, Cardiff, Bristol, Lakeside, Panton St, Heddon St, Market Place, Brunswick, Blackheath and Putney, all in London, Brighton, Cobham, Horsham and Cambridge.

Zoe Bowley becomes PizzaExpress customer experience director: Zoe Bowley, who is currently group projects director at PizzaExpress, has been promoted to customer experience director with immediate effect. She joined PizzaExpress in April 2010 as regional director for London and was promoted to operations director in 2011. The promotion comes after Emma Woods became group marketing director at Merlin Entertainment. 

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