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Mon 30th Jun 2014 - Propel Monday News Briefing

Story of the Day:

BrewDog sets out plans for the next 12 months and apologises to 4,000 plus AGM attendees: Scottish brewer and retailer BrewDog has set out its plans for 2014 and apologised to the more than 4,000 attendees of its fourth Annual General Meeting for the length of queues at its bar on the day – around 150 people attended the first AGM in 2011. The company stated: “We understand that there was an unacceptable queue length for the bars at various stages throughout the day. For this, we are incredibly sorry. Our AGM has grown in size every year so far and we were blown away by the volume of attendees in 2014. It overwhelmed us and we let you down, but we promise we will be 100% prepared for next year.” One attendee, Kenny Body, said: “The queues were bad but a simple queuing lane would have solved the issue as there wouldn’t have been any pushing and shoving and there wouldn’t have been the frustration of feeling like people were jumping the queue – or that you were being overlooked by the staff. All in all a great day, though, and considering the frustrations with the queues, I didn’t see anybody causing any trouble. Considering the number of people and the volume of alcohol consumed, it just goes to show that high strength beer can be consumed responsibly by responsible adults.” The company set out its plans for the coming 12 months: to brew 90,000HL of craft beer, increase our fermentation capacity to 23,400HL per month, establish an Investment Fund to support new craft breweries, open UK bars in Clapham, Cardiff, Liverpool, Brighton, Glasgow and Leeds, launch BottleDog Birmingham, Leeds and Glasgow, open overseas bars in (amongst others) Berlin, Rome, Florence and Helsinki, launch a trading platform for shareholders, release new-look packaging for our bottled beers and bring ‘BrewDogs’ to TV screens in the UK.
   

Industry News:

New research – visits to pubs increase: New research by Kantar Alcovision has found that visits to pubs have increased year-on-year. Drinkers bought fewer but more premium drinks in the year ending 31 March 2014, with the trend mirrored in the off-trade where there was growth in the sale of bottled ales and world lagers. The on-trade increased its share of all beer and ciders sold from 39.4% to 41.7%.
   
Michel Roux – France could lose culinary crown to the UK: Michelin-starred restaurateur Michel Roux has claimed that his home country of France is falling behind the UK because of its use of pre-packaged ingredients and microwaved meals. He blames the decline on EU regulations that limit the number of hours chefs can work – and credits Margaret Thatcher with stopping Britain going the same way. “When the food comes in the morning, you have to unwrap it, clean it, store it, prepare it properly,” he told The Sunday Telegraph. “In those (French) hours, you can’t do that. So restaurants are buying food which is either pre-cooked, vacuum-packed or frozen. Instead of having three or four chefs in a bistro, they have one who can open a baguette and put food in the microwave.” He added: “Chefs work long hours, some up to 50 hours in five days. Does it hurt them? Do they feel worse? They are proud of their job and what they’re doing. In France, they’ve lost it. How can you be proud of doing your job reheating food out of packets?”
   
Blackpool – Nando’s arrival a good sign of our family appeal: Blackpool is spending £1 million on a new destination microsite and TV campaign this summer and hailed the opening of Nando’s as a sign of its increasing family appeal. The #Blackpoolsback initiative aims to challenge negative perceptions, and place the northern seaside town front of mind when families are thinking about UK breaks. The £1m marketing pot is a collaboration between Merlin Entertainments, which runs multiple attractions in the city, and Visit Blackpool. Cassie Forshaw, head of the Blackpool initiative, said: “We’re aware that there are negative perceptions and historic prejudice around Blackpool, but it attracts 13 million visitors every year and there has been significant investment in the last few years. As a result, Blackpool is attracting trusted family brands such as Nando’s, Travelodge and Ibis.”
   
Cask Marque – 39% of ale pythons not working effectively: Recent research by Cask Marque shows that 39% of ale pythons are not working effectively, leading to warm beer and increased call out charges. The cause is invariably low water levels or poor water circulation problems. The industry has spent more than £1m over the last ten years tackling the issues relating to cask ale temperature by installing Ale Python Controllers (APC). A Cask Marque spokesman said: “As with any equipment, regular checks by the licensee are required to ensure the APC is working effectively. Cask beer should be dispensed at 10-14°C and this equipment when looked after will ensure that every pint hits the temperature specification. Each week licensees should check the temperature of beer in the glass and secondly check the water levels in the Ale Python Controller in the cellar and top up if required. The equipment works on a similar principle to a car radiator by circulating water to control the temperature – if the water runs out, the car breaks down.”
   
Dispatches – supermarkets selling alcohol cheaper than water: Channel 4’s Dispatches has found that supermarkets are selling alcohol for less than the cost of sparkling water as part of new prices set for the World Cup. The study by the programme found Tesco multi-packs of Foster’s Carlsberg and Carling lager selling for the equivalent of just 69p a pint and Strongbow cider for 65p a pint while Perrier cost 75p a pint. Asda and Sainsbury also sold lager and cider for less than the cost of sparkling water. At Tesco and Asda, two-litre bottles of own-brand cider cost £2.25, meaning a man could drink his recommended daily alcohol limit for £1 and a woman for 75p.
   
French to increase hotel tax by 500%: France has decided to increase its hotel tax by 500%, which will add up to £8 to the cost of hotel rooms in the country. Foreign Secretary Laurent Fabius condemned the move as “dangerous and totally contrary to the promotion of tourism, a priority for jobs”. A tax of £6.40 will be added to the current £1.20 with the higher figure of £8 applying in Paris. The new tax is expected to raise around £120m a year.
   

Company News:

Cote targets further northern expansion after Manchester and York success: Cote is looking to expand further into the north after the “phenomenal success” of openings in Manchester and York. Harald Samuelsson, joint managing director of Cote, said: “It’s an exciting time for the casual dining sector in the north and we are delighted to be part of that. As we look to expand further in this area of the country, we continue to seek talented, ambitious and enthusiastic individuals to join the Cote family and share in our incredible journey.”
   
Admiral Taverns recruits national craft ale ambassador: Tenanted pub company Admiral Taverns, led by Kevin Georgel, has recruited a high profile Punch Taverns business relationship manager, Jean-Paul Russek, as its national cask ale champion. He told Propel: “I will be their National Craft and Cask Ambassador, which is the first time they have had someone to do this role. I’m very excited by this, allowing me to build on the role and relations I am building especially with regards to the craft side and reunites me with Kevin who was my managing director when I started with Punch. I will be part of Wayne Billyeald’s team – he was himself recently promoted to regional director.” Russek has worked at Punch since December 2009 – he starts at Admiral Taverns in September. Earlier in his career, he worked at Old Orleans as brand development and operations manager and was also a special projects manager at Spirit.
   
Carluccio’s founder – public being conned by supermarket pasta: Carluccio’s founder Antonio Carluccio has argued that supermarkets are fooling the public when it comes to pasta. He claimed that pasta is being packaged in a way that means it weighs more – and costs more. He said: “What the industry offer as fresh pasta is a bit of a con because they store it in a plastic bag to keep it the moisture which means it weighs more. If it was left out it would go drier, but still be fresh and therefore weigh less. So you would be getting more pasta.”
   
Former multi-site restaurateur goes the street food route for comeback: A former multi-site Devon restaurateur has opened a street food venture in Exeter as he aims to bounce back from the pain of losing his long-established business. Edmond Davari operated a number of award-winning restaurants in Plymouth and Exeter over the past 25 years but was forced to liquidate his company last August, when his remaining five restaurants closed with the loss of around 100 jobs. Since then, the former owner of Al Farid, Havana and Cohiba in Exeter, has developed a street food concept featuring Cuban food, opened now at the regular street food market in the Guildhall Shopping Centre. “The pain of what I went through for the last two or three years is still very fresh, so I’m not intending to get back into the restaurant business any time soon,” said Davari. In recent months Edmond has taken his stall to various events, including the Exeter Festival of South West Food and Drink.
   
New York restaurants beat large soft drink ban: In a major victory for restaurants and consumer choice, the New York Court of Appeals has struck the final blow against New York City’s efforts to ban the sale of sugar-sweetened drinks larger than 16 ounces. The court announced on Friday that it would uphold lower court rulings that the ban was arbitrary and held restaurateurs to a different standard than their competitors, including grocery and convenience stores, by permitting those establishments to continue selling large-sized beverages. Former New York Mayor Michael Bloomberg proposed the ban in 2012, claiming that it would help combat obesity. The National Restaurant Association, American Beverage Association and other business groups fought back and took the city to court, arguing the ban unfairly targeted certain establishments like restaurants, delis, movie theatres and sports concessions stands while exempting grocery and convenience stores.
   
Stonegate Pub Company to add to Slug & Lettuce estate this week: Stonegate Pub Company will add to its Slug & Lettuce brand this week with the £300,000 conversion of the Cape site in the City of London, acquired when Stonegate bought the Bramwell Pub Company estate – ten jobs will be created when it re-opens on 1 July. Guests receive 50% off their food bill on ‘Happy Mondays’, while ‘Tikka Tuesdays’ offers two for one curries and ‘Wine Down Wednesday’ offers selected wines for £11.45. There will also be a range of world beers and free Wi-Fi on offer. 
   
Jamie Rollo – JD Wetherspoon needs to hit 5.4% sales growth in its fourth quarter to hit our targets: Morgan Stanley leisure analyst Jamie Rollo has argued that JD Wetherspoon will need to achieve 5.4% sales growth in its fourth quarter results, unveiled on 9 July, to hit his target for profits. He said: “JD Wetherspoon needs 5.4% Quarter Four like-for-like sales growth to hit our full-year estimate, broadly in line with the rest of the year. While we think the company is a strong operator and long-term winner, this seems reflected in its 13x calculated 2015e P/E. Like-for-like sales growth accelerated to 6.2% in Quarter Three from +5.2% in H1, bringing the first 39 weeks to +5.6%. However, sales growth slowed in April, with Easter below last year, after a strong February and March. The company said at the Quarter Three IMS that it “retains an element of caution” about the exact outcome for Quarter Four given the slowdown, the strong comp (though we note Quarter Four like-for-like sales were only +3.5%), and the unpredictable World Cup. JDW needs +5.4% to hit our full-year estimate of +5.5%, a slowdown from Quarter Three’s strong growth, which we think looks reasonable. We estimate 45 new pub openings in the year, in line with company guidance, meaning it needs to open a further 19 pubs in Quarter Four. It looks on track here, given new openings tend to be back-end weighted.”
   
Douglas Jack – Punch restructuring proposals moving closer to approval: Numis Securities analyst Douglas Jack has issued a ‘Hold’ note on Punch shares with a target price of 10p after last Thursday’s news on restructuring progress. He said: “The proposed debt restructuring has moved closer to full approval under the previously-announced terms of total debt falling £0.6bn and existing equity being diluted to 15% of the post-restructuring total. These terms now have a high level of support, including institutions who own/control circa 59% of the bond notes and circa 54% of Punch’s equity. This transaction requires 75% approval from all asset classes. The Board expects the implementation of the restructuring proposals to complete by 19 November, but this first requires noteholders (meeting on 18 July) to vote to extend the covenant waiver request from 4 August (to 19 November). Our forecasts are broadly in line with guidance for like-for-like net income to rise 1-2% in 2015E and by 2% pa from 2016E, resulting in Ebitda stabilising at circa £200m. Thus, the £80-90m annual decline in net debt from 2015E should equate to the value transferred into equity. It is equivalent to 18% of the post-restructuring market capitalisation. Our 10p target price equates to 9.6x 2015E EV/Ebitda, a slight discount to Enterprise Inns’ 9.9x (2015E)”.
   
TCG partners DVD release with two-for-one offer: Managed pub and bar group TCG has formed an innovative partnership with promotions specialist Play 7, which this month sees a two-for-one cocktail offer included with DVD copies of hit comedy film Cuban Fury. The first 200,000 copies of the newly-released film, which stars Nick Frost and Chris O’Dowd, include a leaflet which can be redeemed when ordering selected cocktails at TCG venues such as Henry’s Cafe Bars. The latest promotion builds on the success of a voucher in a recent Soccer AM DVD, which offered consumers a drinks deal when watching sport at TCG venues. Ben Levick, TCG director of operations, said: “When we approached Play 7 with the idea for offers in relevant DVDs, they were very keen to work with us. Cuban Fury focuses on salsa dancing, which has strong links with latin cocktails we serve, such as the mojito. We’re both in the business of entertaining consumers, and just as Play 7 is using offers like this to add value to DVDs over streaming a film online, we are using them to bring new customers into our pubs and bars.” Further targeted offers are being developed by TCG for Play 7 to feature in upcoming DVD releases. 
   
Famous Newcastle bar Popolo to re-open: Well-known Tyneside cocktail bar Popolo is set to re-open on Newcastle’s Quayside at the end of July. Styled around a New York cocktail bar and with drinks inspired by the Big Apple, the new Quayside venue will have two floors and three bars. The original Popolo was based at Pilgrim Street but closed in March after 11 years, leaving 21 staff without a job. The re-opening will create 50 new roles as the venue which has capacity for 600 people and will offer New York-style street food. Stefan Bell, from Popolo, said: “A blend of bar, lounge, kitchen and private party pad inspired by the best bars of the city that never sleeps, we’ve at last got the space to embody all that’s great about Popolo and our mission to bring you the famous hospitality of the Irish-American tradition.” In 2012, 300 jobs were saved after Popolo Leisure Limited, which is based in Gosforth, bought the Popolo Newcastle, Popolo Sheffield, San Lorenzo Gosforth, San Lorenzo Cramlington and Establishment Sunderland, from the former Principle Leisure (North East) group, out of administration.
   
Toksvig to host BBPA Annual Dinner: Writer and presenter Sandi Toksvig will host the BBPA Annual Dinner 2014, it has been announced. Bookings are now being taken for the BBPA Annual Dinner and Awards, which will again be held at the Park Plaza Westminster Bridge. Following on from the success of the 2013 event that saw a record attendance, this year’s programme will see a focus on the industry’s historic and contemporary advertising.
   
Wetherspoon to open in former Penrith nightclub next week: JD Wetherspoon is to open its new pub in Penrith on Tuesday, 8 July, with the creation of 45 new jobs. The company has spent £1.5 million developing the outlet, on the site of the former Toppers nightclub, in Southend Road. The Wetherspoon pub, which will be called The Dog Beck, will be managed by Cheryl Woodhouse.
   
Greene King to unveil full year results this Thursday: Greene King will announce its full-year profits on Thursday (3 July). The consensus is for an operating profit of £263 million and revenue of £1.28 billion. Greene King is trading at 828p, and the shares price is down 2.5% since the company announced its half-year results in December. The shares performed well in the first quarter of 2014, but has been drifting lower since May.
   
New McDonald’s plan near to Newcastle’s biggest school causes storm of protest: Plans to build a new McDonald’s fast food outlet near Newcastle’s biggest school have provoked a storm of protest. Feelings are so high it has caused a city councillor to stand down from the planning committee which will decide whether to give it the go ahead – to help organise protests against it. David Pearmain, head teacher of Kenton School, where around 2,000 pupils study, has submitted a lengthy objection to the city council in which he concluded: “For the sake of our children’s health and safety, please do not approve this application.” Coun David Stockdale, who represents the neighbouring Blakelaw ward, has taken the rare step of “recluse” – voluntary exclusion – because he felt so strongly against the application. It is for a two-storey drive-through outlet on the old Crofters Lodge pub site at the junction of Kenton Lane and Ponteland Road. “On the committee you have to be open minded about applications you consider,” he explained. “I’ve already got a pre-determined attitude towards this and it is against it.”
   
Burger King site repossessed: A Burger King, at Anchor Retail Park off Marina Way in Hartlepool was shuttered last week when bailiffs executed a repossession warrant. The restaurant was run by a franchise under the name of Windmill (NI) Restaurants, which had a registered office in Belfast but has recently been wound up. A spokesman for Canada Life Investments, which is responsible for the building, said: “The registered tenant (Windmill Restaurants Limited) was placed into administration in May 2013 and the company was then dissolved by the administrator in May this year. Because the legal tenant no longer exists, steps were taken to secure the premises from any unauthorised third-party occupation.”
   
Absolute Pubs adds a Young’s pub to its estate: Absolute Pubs has added a fifth site after taking over The Kings Arms in Epsom, Surrey, on a lease with Ram Pub Company, the tenanted division of Young’s. The pub is described by Absolute director Simon Bailey as one of the historic town’s “hidden gems”, with significant potential to grow both food and wet trade. “As soon as we saw The Kings Arms we knew it was right for us,” said Bailey. “The pub’s had significant investment very recently, including refurbishment of the large restaurant area and improving the large garden and patio, so we really haven’t needed to give it more than a wash and brush-up.” Having finalised the deal in mid-June, Absolute has launched a new menu, which, like its four other sites in the Surrey and Middlesex area, is focused on freshly-cooked classic British food. The Kings Arms in Epsom is the second Young’s pub leased by Absolute, joining the Waggon & Horses, Surbiton. The family-owned business, founded by Simon Bailey and wife Sarah, also operates The Kings Arms, Hampton Court with Hall & Woodhouse, The Bell Inn, Hampton with Punch Taverns, and The Flower Pot, Lower Sunbury with Brakspear. “All our pubs are unique, and our ‘new’ Kings Arms is no exception,” said Bailey. “What they have in common is our 100% commitment to great customer service, freshly-cooked food, high quality drinks and a warm welcome.”
   
Drake & Morgan lines up two sites: Drake & Morgan, the privately owned bar and restaurant group, has announced the acquisition of two new sites in central London, bringing its portfolio to nine. The first 6,000 square foot site will open in Regent’s Place, the British Land mixed-use campus occupied by over 12,000 residents and workers in London’s West End. Spread over two floors, the bar and restaurant will feature a large al fresco terrace and will open late 2014. The second venue, opening early 2015, is located in the new AXA Real Estate development on St Pancras Square, King’s Cross, which will also be home to Google’s new head quarters. The 12,000 square foot venue will also have al fresco seating in a central courtyard. Managing director Jillian MacLean said: “This is an exciting time for Drake & Morgan as we move into the next stage of our growth post Bowmark’s acquisition last year. We’re delighted to be working with AXA again (our landlords at The Happenstance and The Fable) and British Land. At both sites, we are in the company of some really great businesses and fellow leisure operators.”
   
Giraffe offers 15% summer takeaway discount: Giraffe is offering customers a 15% discount on takeaway food from today until the end of August. The company stated: “To help you get the most of your precious time in the sun, we’re giving you 15% off take out food, all day every day from Monday until the end of August. So whether you’re perched on the office fire escape, out and about or even picnicking in the park, put on those sunnies, take off those shoes and seize the best of summer whilst savouring the very best of Giraffe.”
   
Draft House invests £100,000 in ‘underground lab’ – eyes sixth site: Draft House, the five-strong craft beer operator led by Charlie McVeigh and backed by Luke Johnson, is investing £100,000 in the development of the Bump Caves in almost 1,000 square feet of under-utilised lower ground space, including vaults, at its Tower Bridge site. The company has installed a ‘Rotary Evaporator’ that will infuse pure grain alcohol with a variety of unique flavours, which will also be distributed to other Draft House sites. Draft House has a £5m run-rate turnover – and the Bump Caves are expected to add another £500,000 to turnover at the Tower Bridge site. McVeigh said: “Bumps are spirits, liquors, vermouths and infusions that we have made using various pieces of pharmaceutical and kitchen equipment right here in the Bump Caves. Using the equipment we can capture pretty much any flavour or combination of flavours in spirit form. We have been playing around with fun stuff like “Tequila Slammer” in Bump form or even The Monster Dog Bump, infused with essence of Draft House’s famed Bacon Chilli-Cheese Hot Dog. We’re very inspired by the late-60s psychedelic movement. The Bump Caves takes its lead from the “Happening” – an underground party that was also an assault on the senses. I am a little bored of the Speakeasy – I promise you will not need to drink a cocktail out of a teapot.” Meanwhile, Draft House is at an advanced stage on a sixth site. McVeigh told Propel: “Much to mine and Luke’s frustration sites have fallen away that were under offer. We’ve been mounting up cash, which is good and the site at Tower Bridge has a lot of space that is under-used. We thought we’d do something crazy and fun. Draft House has not been very good at spirits. We’re not going to be distilling, we’re going to be ‘rectifying’ – infusing grain alcohol with flavours and creating house spirits we’re going to distribute throughout the group.” The Bump Caves open on 10 July. McVeigh added: “I first fell in love with spirits and beer while working as a barman in Aspen, Colorado, aged 21. Later on, with the nightclub Woody’s, I worked with London cocktail legend Ben Reed and we brought good drinks to W9 for the first time. Since then it has been all craft beer mania with the build-out of the Draft House across five locations in London. But now, with the launch of Bump Caves, I am reconnecting with the aetherial world of spirits. Max Chater, who will be ‘Bump Chemist, Distiller and Rectifier’, came to me a year ago me with the idea for Bump and creating our own mind-blowing spirits using the Rotary Evaporator and other bits of pharmaceutical equipment. I told him to get lost and sell some more good beer. But he is persistent and passionate – and has an incredible nose and palate. While being the boss at our Charlotte Street pub he invented the Beer and A Bump (contrasting beer & spirit pairings) and blew many happy customers’ minds with outrageous flavour combinations. The Bump Caves is an extension of that beautiful thing.”
   
Chilango burrito bond raises £1,040,000: The Chilango mini-bond, paying 8% interest, has reached it target with £1,040,500 raised from 293 investors through crowdfunding website Crowdcube. The largest single investment was £50,000. The offer has another 42 days left to run – and is open to investment of as much as £3,000,000, which would allow six sites to be opened. Chilango was founded by Dan Houghton and Eric Partaker in 2007 with an opening in Islington. It operates seven sites in London and has three openings lined up for this year – in Brewer Street, Soho, Camden High Street and an unnamed site where it has had an offer accepted. The company states in its prospectus: “We started Chilango because we wanted Londoners to be able enjoy the same incredible Mexican food we love so much. With seven established restaurants we’re delighted to see thousands of people enjoying Chilango’s vibrant flavours each and every week. But we also know that London is a massive city and that there’s more growth ahead. We’ve spent a lot of time thinking about our future, pulling together all the lessons we’ve learnt in opening our restaurants over the last seven years, along with the invaluable advice of our experienced advisors. Now we’re ready to take things up a gear. Our newest restaurant at Monument just opened in May 2014 and our plan is to open 3 additional restaurants in London this year with many more to come in the years ahead. Two of these restaurants are already secured and in development, while a third is in advanced legals. Each new restaurant requires around £500,000 to cover the upfront capital expenditure as well as the pre-opening costs. The Burrito Bond will help us open this next batch of sites.” The company reported that turnover rose 54% from £3.2m in the 52 weeks to 24 March 2013 to £5m in the most recent year to 29 March 2014 when administrative expenses fell from 15.2% to 12.2% of turnover. In 2013, the company became Ebitda positive, with Ebitda of £110,708, a £600,000 plus rise in Ebitda from the 52 weeks to 25 October 2011 when it was minus £531,510. Industry investors include Krispy Kreme UK chief executive Mike Dowell, Carluccio’s chief executive Simon Kossoff, and Whyte and Brown chairman Kevin Bacon. One would-be investor asked, via the Crowdcube forum, about why the company had closed sites at Meadowhall and Bluewater, which had caused turnover to drop in the year to 23 October 2012. A spokesman for Chilango said: “We found that visitors to the restaurants weren’t consistent throughout the week or weekend which made it difficult to manage them profitably. The lessons we learned from that – although painful – have been invaluable and led to us forming our advisory team and developing a much more refined property selection strategy.”

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