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Mon 2nd Sep 2013 - Greene King, Heineken, new breweries, TLC Inns and Tortilla

Story of the day:

Heineken reports UK market share gain and doubled operating profit: Heineken, the UK’s largest brewer, has reported that it gained 60 basis points of market share in the UK in 2012. Operating profit for the year increased from £33.3m to £73.2m with a small decline in revenues offset by a higher reduction in operating costs. Beer volume outperformed a declining market and Foster’s extended its mainstream beer leadership in the off-trade, while the Heineken brand grew strongly, benefiting from links with the Olympics and its James Bond Skyfall sponsorship. The year saw the launch of Strongbow Pear and the continued growth of Bulmers but “overall cider volumes declined in low single digits”. The company stated that “2012 was an exciting year with significant strategic and operational progress”. Gains in the off-premise channel mostly offset reduced consumption in the on-premise channel due to poor summer weather and the economic environment. Profit after tax was £2.4m. The company’s UK staff numbered 1,927, which is 113 fewer than the year before – there were exceptional redundancy costs of £1.7m. Heineken added in a Companies House filing: “The fall in profit after tax from £335.2m in 2011 was due to significant restructuring activity across the Heineken Group last year, resulting in a net increase in profit of £433.9m. Specifically, the restructuring activity resulted in a £824.5m dividend from a subsidiary company and after transferring the dividend, an impairment charge of £390.6m on the value of the investment of this particular subsidiary company.” Turnover in the year was £1.547bn compared to £1.596bn in 2011, a drop of £49m.

Industry news:

Luke Johnson – you could draw a family tree of casual dining success: Sector investor Luke Johnson has argued that the UK fast casual dining sector now has a family tree of success, with key executives involved in multiple successful start-ups. In his Management Today column he wrote: “Years ago, there used to be wonderful drawings showing how different rock ‘n’ roll bands split and the members went on to create many other acts over the years. It depicted how a few highly talented individuals had a disproportionate impact in a particular musical genre. You could prepare the same sort of genealogical trees delineating the roles played by small groups of entrepreneurs in starting and building companies in various industries. Take the casual dining sector. Members of the board of PizzaExpress in the early 1990s are partly responsible for the growth of Strada, Patisserie Valerie, Giraffe, Gourmet Burger Kitchen and Punch Taverns, among others chains. Ex-My Kinda Town directors have built Bill’s, Cote, Gaucho Grill, Carluccio’s and others. I was lucky enough to serve on both boards and have followed the many trajectories closely. In business, if you’ve done it once, then confidence, capital, connections and experience combine to give you a huge advantage subsequently. Moreover, if you come from a good stable, the chances are you’ll do well. Two longstanding colleagues of mine at Risk Capital Partners have recently become independent restaurateurs in London: Bobby Hashemi with Pizza Union and Mark Farrer Brown with Whyte & Brown. I’m sure both will prosper mightily.”

Fish and chip shop makes lists of London’s ten top restaurants on TripAdvisor: A fish and chip shop in Fulham has been named as one London top ten restaurants on TripAdvisor. Reviewers praise Bailey’s Fish and Chips for its “perfectly cooked meals and light and crispy batter”. The venue is run by twin brothers Gary and Alan Fisher whose parents first ran a fish and chip shop 34 year ago.

Mary Portas bid to save the high street a stunt: Bill Grimsey, former boss of DIY chain Wickes, has described the attempts by TV star Mary Portas to save the high street as “simply foolish” and “little more than a PR stunt”. In an alternative report to be published this week, he will warn that 20,000 independent shops are at risk of closing. He will argue that business rates need reforming, parking made easier and the development of an app to allow shoppers to find parking spaces and see which shops have offers on.

Giles Coren – close all pubs: The Times food critic Giles Coren has called for the closure of all pubs in the UK in response to The Good Pub Guide’s prediction that as many as 4,000 pubs will close. He wrote: “For as long as men on this island have spoken English, we have been unique in sustaining a culture of premises that serve alcohol but no food. In France, Italy, Spain, Germany, Austria and Belgium, the equivalent drinking spaces were also places to eat. But in pubs not only could you not buy food, it was a point of pride that it was not sold. Pubs do not need to be saved, they need to be closed. Not just the bad ones, all of them. For heaven’s sake this is 2013, not 1320.”

UK adds new breweries at rate of five a week: More than 170 new breweries opened in the UK between January 1 and mid-August this year, over five a week, according to the American website RateBeer. The website said 158 new breweries had been added to its database for England, eight for Wales, seven for Scotland and two for Northern Ireland. Another 12 had been added for the Republic of Ireland, while elsewhere Italy had seen 69 new breweries added during the 32 weeks, France 62, Germany 51, Spain 43, The Netherlands 37, Australia 36, the Czech Republic 29, Sweden 29, New Zealand 28, Belgium 24, Switzerland 23, Mexico 20 and Norway and South Africa each 15. However, the United States was the runaway winner, with 463 new breweries added to Ratebeer’s database during the period, more than two a day. In all, from Finland to Peru, RateBeer recorded 1,448 new brewery openings for the 32-week period, or more than one new brewery every four hours.

Protests over US quick service wage rate escalate: Quick-service restaurant employees and supporters staged protests in 60 US cities on Thursday, in what organisers claimed as the largest series of protests yet, stepping up pressure on national chains to pay higher wages and to give employees the ability to form unions. The protesters are calling for employee wages of $15 per hour, which is more than double the current federal minimum wage of $7.25. They also demanded the right to unionise without interference or pressure from corporate or franchise management. These latest shows of force follow walk-outs in seven cities in July. “Mandating increased wages would lead to higher prices for consumers, lower foot traffic and sales for franchise owners, and, ultimately, lost jobs and opportunities for employees to become managers or franchise owners,” Steve Caldeira, president and chief executive of the International Franchise Association, said in a statement.

Restaurant chain owner faces £10,000 fine after immigration raid: The owner of three restaurants in Winchester has been warned he could be fined up to £10,000 after seven armed border police raided one of his outlets and arrested a woman aged 29 from Thailand. The woman, who is in the UK on a student visa and studying at Winchester University, was detained because her visa prohibits her from working. She was employed for ten hours a week at the Bangkok Brasserie in Winchester. Miff Kayum, who owns the Bankok Brasserie and two other restaurants in the city, Bengal Sage and Kyoto Kitchen, said: “I feel very silly because it is a mistake I made. She was here in 2010 on a student visa that allowed her to work, and when it expired she left the country. She got another student visa and on this one there are two small words – ‘work prohibited’ – but I assumed that it was the same situation again.”

McDonald’s introduction of wings set to drive price up: The re-introduction of chicken wings at McDonald’s on 9 September in the US is likely to drive prices up. McDonald’s is expected to sell a grand total of 250 million wings, and some analysts report the company’s wing-buying spree for this promotion last year drove up wholesale prices. In late 2011, the Georgia dock wholesale price of chicken wings started rising from 90¢ to more than $2 per pound earlier this year, an increase that got passed along at the supermarket. Prices have since fallen to about $1.46 per pound. Steyan believes it will be hard for McDonald’s to make wings a permanent menu item, as the company may have underestimated its own impact on the wing market.

Company news:

Leeds Trinity opening prompted closure of Anthony Restaurant: The opening of the Leeds Trinity shopping centre and restaurant complex was the final nail in the coffin for Anthony’s Restaurant, which opened in the Corn Exchange, in 2008 and was operated by top Yorkshire chef Anthony Flinn. A report by administrators reveals that a rent concession was granted in December 2011 and rent arrears of £50,000 written off. However, the opening of Leeds Trinity in March this year meant ‘a significant reduction in trade leaving the company considerably below its breakeven point’ forcing the company into administration. The restaurant turned over £2.14m and lost £160,000 in the year to March 2011 and turned over £1.91m and lost £198,000 in the year that followed. The landlord is owed £403,000 out of a total of £802,000 owed to unsecured creditors.

Tortilla doubles sales to £8.8m: Mexican restaurant chain Tortilla has more than doubled its sales to £8.8 million, The Daily Express has reported. The company’s accounts for the 15 months to 30 December 2012 show that group losses more than tripled to £58,321, but the restaurants traded profitability. The chain currently has 11 sites and at the end of last year, it opened up in Southampton, its first restaurant outside London. It is looking to follow that up by expanding into the Midlands and the north. Tortilla, which is backed by banking giant Santander, specialises in burritos and tacos and is chaired by former PizzaExpress and Gourmet Burger Kitchen boss Paul Campbell. Prime Minister David Cameron ate at Tortilla’s restaurant in the Westfield shopping centre Stratford during a trip to last year’s Paralympic Games.

Orchid boss praises longest-serving managers: Orchid Pub Company chef executive Rufus Hall has praised managers June and Richard Ogden who have been running the same pub, The Priory in Wellingborough since 1997. In his blog he wrote: “They run the pub with the same verve, enthusiasm and professionalism as ever (£37,000 last week!). In those 16 years the Ogdens have won awards, been regular bonus earners and, in Orchid’s time, always been a Top five pub. Beyond that they’ve become a mainstay of the local community (in line with our values), brought up three kids, passed the 60. As a young area manager I was also told that there’s no substitute for experience – the Ogdens are living proof that’s true. What really sticks out to me though is that even after 16 years their enthusiasm, sense of humour, genuine care for their staff and customers is still there. Another 16 years please – we’d like to keep The Priory as our only pub (and possibly the UK’s only pub) to have had one manager.”

Nando’s applies for site in Horsham: Nando’s has applied for planning permission to convert part of the former King’s Head Hotel in Horsham, West Sussex into one of its restaurants. The King’s Head closed in 2004, and Ask Italian opened a restaurant in part of the premises in 2012. Nando’s has submitted a planning application to Horsham Council for change of use, internal and external alterations, and the removal of the existing redundant plant at the site, on the corner of the Carfax and East Street.

Samuel Smith renews Bath consent: Secretive Yorkshire based brewer and retailer Samuel Smith has succeeded in extending its planning permission to turn a landmark Bath building which has lain empty for 27 years into a hotel and pub. Samuel Smith has owned the 18th century former King Edward’s School in Broad Street since buying it in 1989, three years after the last pupils moved out. It has been accused of secrecy by residents’ leaders, who have become increasingly frustrated at the way the firm has mothballed the building. Samuel Smith won permission in 2010 to convert the Grade II listed building into a hotel and pub. Since then, it has claimed through its planning consultants that conditions imposed by planners could make the redevelopment of the building financially unviable. It has now had an application to renew its planning permission for another three years approved by Bath and North East Somerset Council. It has permission to turn the building into a 12-bedroom hotel, with a restaurant and bar on the ground floor.

Close Brothers in pole position on Cote sale: Private equity firm Close Brothers is now in pole position to buy Cote, the 45-strong French brasserie chain owned by Richard Caring, according to The Sunday Times. Close Brothers appears to have moved ahead of Pret A Manger owner Bridgepoint, which had been in exclusive talks at one stage.

Two nightclubs to open in Taunton: Two new nightclubs will open in Taunton in the next couple of months. The former Que Pasa site in the High Street will be transformed into a bar and nightclub called L8. Work on the building is to start imminently with the doors scheduled to open in October. The site has been sub-let to the new venture by Marston’s. Meanwhile, building work at the former Bliss nightclub site at the top of East Reach is also nearing completion with bosses planning to open at the end of September. The venue has undergone a £250,000 revamp, and will now be a Hawaiian-themed cocktail bar called Aloha and nightclub called Khode. It will be run by owners 241 Leisure, who also run the Okoko nightclub in Bridge Street.

Greene King set to re-open fire-stricken Old English Inns site: Greene King has set an opening date of mid-October for a historic Old English Inns site on the Isle of Wight hotel, Ryde Castle Hotel, that was destroyed by fire in March 2012 after staff let off fireworks from the roof during a wedding. Greene King has changed the layout slightly – the hotel will have 18 bedrooms and improved access to the reception and bar.

TLC Inns up 17% in August: TLC Inns, the six-strong pub operator led by Steve and Jo Haslam, has reported 17% like-for-like sales growth in August. Steve Haslam told Propel: “August 2012 was very strong so to post 17% growth this August is astounding – it was the best company sales month ever. The weather was not as good as July but it stayed in the middle ground, which is enough to bring customers out of their homes.” TLC Inns is set to buy its seventh site, a free-of-tie lease in Cambridgeshire that will become it second Grand Central diner, next week.

Joule’s buy fourth pub since Easter: Shropshire’s biggest brewery Joule’s has bought its fourth pub since Easter – The Rose and Crown in Church Street, Ludlow. It is the third pub the company has bought from Punch Taverns since Easter, following The White Lion in Wem and The Kings Arms in Church Stretton. Joule’s has also purchased The Dolphin in Shrewsbury in a separate deal. It is part of am expansion plan announced in January in which the company will buy nine new pubs within a 40-minute drive of its brewery in Great Hales Street, Market Drayton. Joule’s Brewery, now has 18 Tap Houses across its heartland of Shropshire, Staffordshire and Cheshire.

Wagamama to open at the Intu Uxbridge shopping centre: Wagamama has taken a 20-year lease on a 3,400 square feet unit between the IMAX cinema and the Piazza restaurant area at the Intu Oxbridge shopping centre. It will join outlets run by Nando’s, PizzaExpress, Bella Italia and Zizzi. Jonathan Ainsley, asset management director at Intu, said: “Wagamama has wanted to join Uxbridge for quite a while but there wasn’t the right available space for them so we worked closely with them to create the space.” Sharon Cawthorne, director of property at Wagamama, added: “We look forward to opening the restaurant next year.”

Wahaca lines up Brixton opening: Wahaca is putting in an application for a Brixton premises license to Lambeth Council. Parent company Oaxaca Limited has put in the application for a site at 20 Atlantic Road, Brady’s Bar. Built in 1880 and with its iconic clocktower, Brady’s Bar (previously The Railway Hotel) is a Brixton landmark that has been left empty for over a decade. The premise license covers food, alcohol and (recorded) music until 1.30am, Monday to Sunday.

Mark Wahlberg to expand burger concept to Canada: While actor Mark Wahlberg’s plans to open a chain of Wahlburger restaurants in Britain and Ireland appear to have faded, a proposal to open a Wahlburger outlet in Toronto has just been announced. Wahlberg opened a burger joint in 2011 in Hingham, just south of Boston, Massachusetts with his brothers Donnie and Paul. In April 2012 the actor said the restaurant, with Paul Wahlberg as executive chef, was taking $17,000 a day and serving up to 1,300 “high-end” burgers every day, and the brothers were “opening a bunch of [Wahlburger restaurants] in Britain and Ireland this year”. Nothing appears to have come of that, but the brothers have now issued a press release announcing their first Canadian location, at the SoHo Metropolitan Hotel in Toronto. The Wahlbergs have talked about opening ten to 15 restaurants in the Boston area in the next three to five years.

Starbucks workers ‘much more friendly than independent cafe staff’ says study: Starbucks baristas are significantly more social and friendly to customers than their counterparts at independent coffee shops, according to a study of chain and non-chain outlets in Boston, Massachusetts. The study, by anthropologists at West Virginia University, found that while Starbucks baristas greeted customers by name, knew regulars’ orders, chatted about current events and shared experiences with customers and made helpful suggestions to those unsure what to order, “in contrast, the baristas at the independently-owned coffee houses were more aloof and would just wait or sometimes stare at a customer, offering minimal assistance.” The only area where independent coffee shops came out best in the survey was for atmosphere.

Simon French – Restaurant Group results were strong: Panmure Gordon analyst Simon French has issued a ‘Buy’ recommendation on Restaurant Group shares, with a target price of 600p, after the company’s first half results on Friday. He said: “Current trading is strong with year-to-date like-for-like sales up 4.25% implying circa 1.8% growth in the last eight weeks, although August trading has been ahead of the year-to-date run-rate. We expect no change to consensus forecasts of £70.5m profit before tax (26.4p EPS) at this stage although we believe the risk is firmly on the upside given the sales growth and margin progression reported in H1.”

Grand Union to open eighth site this month: Grand Union, the London bar operator led by Adam Marshall and 50% owned by investor Luke Johnson, is opening its eighth site, a Star Pubs & Bars site in Chancery Lane called The Blue Anchor, which will be renamed Chancery Grand Union on 12 September. Marshall recently told Propel: “We’re not spending a lot of money on the Chancery Lane site – it has lots of fixtures and fittings already and we’re not paying a premium. It’s more of a rebrand. It has a 2am licence every day of the week and the area is crying out for a decent cocktail bar – it’s an area with lots of boozers.” Marshall reported that trading currently is “amazing” with company like-for-likes up 16% in July – site Ebitda conversion rates since the start of the company’s new financial year in April have been 24%. Another site in Farringdon is in negotiations.

JDW’s Tim Martin confirms Dublin pub plan: JD Wetherspoon founder Tim Martin has told Propel that the company is planning to re-enter the Dublin market ten years after it abandoned its first attempt to open in the city. Martin said there was the ‘potential’ to open as many as six pubs in Dublin if it is successful at its first opening. “We have made a few offers on sites in the Republic of Ireland. Nothing has been signed or sealed. We believe there is an opportunity to do well there.” The market, although still not cheap, is more affordable than ten years ago – at that point you could open ten pubs in the UK for the cost of a Dublin pub, he told Propel. The Irish Times has reported that the company, which already runs nine pubs in Northern Ireland, is about to buy The Tonic public house in Blackrock village, on the coast five miles south of Dublin city centre. The pub and restaurant on the ground floor cover about 5,200 square feet, while an upstairs nightclub, which can hold about 350 people, covers 4,100 square feet. Wetherspoon is reported to be spending €1 million on buying the freehold of the pub. The property is currently being advertised for sale by the estate agents Morrissey’s and Bannon, whose website says terms have been agreed on the premises. The sale brochure says the pub, bistro and nightclub at the premises continue to trade successfully and it has “medium-term redevelopment potential”. It is currently being managed on behalf of AIB and pays about €45,000 in rates to Dún Laoghaire-Rathdown County Council. Wetherspoon was due to open in Dublin some ten years ago when it acquired the freehold on a furniture warehouse in the heart of the city for more than €2 million. However, high potential costs caused the company to pull out, and it was reported to have disposed of the premises at a loss. The pub trade in Dublin has seen five years of steady decline since 2008, with consumers cutting spending on drink in the face of high pub prices and the global financial crisis, which hit the Irish economy very hard, are now drinking more at home than in pubs. Wetherspoon is reported to be scouting for other sites in Dublin.

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