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Morning Briefing Strap Line
Fri 11th Jul 2014 - Friday Opinion
Subjects: An antidote to bravado, JD Wetherspoon in the Republic of Ireland, new guards and old ideas and changes to licensing conditions
Authors: Paul Charity, Martyn Cornell, Paul Chase and John Gaunt
 

An antidote to bravado by Paul Charity

One industry executive suggested to me recently that a note of bravado had entered sector reporting of late. I understood what he meant. With many companies firmly in expansion mode, confidence has returned with a vengeance – and there is a danger of this tipping over into unqualified bullishness.
 
An antidote has been a series of presentations at the Propel Multi Club Conference series, where a host of entrepreneurs have returned to a similar theme : starting and growing a business is subject to endless setbacks. Resilience in the face of adversity is the key quality required to side-step the multiple elephant traps that beset any growing business.
 
At a conference a year ago, JD Wetherspoon’s founder, Tim Martin, joined me on stage to go through his first decade’s figures. They are testament to the challenge of making decent early-years profits and generally gaining traction, with the problem of insufficient cashflow an ever-present threat. The early years of Wetherspoon are a story of its founder gingerly finding his way, beset, in Martin’s own admission, by the struggle to overcome an incomplete skill-set. 
 
In the formative years of a business, every opening represents a mortal threat. No matter how carefully a company budgets for a new opening, there comes a stage where money has to be thrown at a site to get it finished.
 
Personal credit cards and “alternative” short-term financing in the form of family and friends often comes into play. The bank account will inevitably look depleted at opening and the future of the business will hang on a new site’s performance. The scenario is likely to repeat itself over and over through the single-digit openings. Oakman Inns’ founder, Peter Borg-Neal, told a recent Propel conference that his main building contractor converted the bill into an equity stake at his first site in Tring, when a funding gap became apparent. My brother, Kevin Charity, told our last conference that a loyal member of his office staff lent his business £65,000 to get it through one funding gap.
 
At last week’s Propel conference, Morgan Davies, the founder of Barburrito, described the life of an entrepreneur as “Live, Die, Repeat”. He meant that entrepreneurs need the courage and stamina to innovate on a constant basis in the sure knowledge that many ideas will not work. Other ideas will work for a while – and then won’t. He compared the life of an entrepreneur to the fairground game Whack-A-Mole, where moles pop their heads up, and have to be firmly hit with a mallet. And, of course, that game only speeds up as it progresses: problems and challenges tend to increase in number and speed-of-arrival the larger a business gets. There is a stage where a company founder may have grown a business dramatically, but cannot yet afford the in-house personnel required to cover the ground. The trick here will be to pick up new skills slightly faster than the rate at which they will be called upon, like studying for a higher degree on a self-imposed fast-track. Successful entrepreneurs overcome obstacles by drawing on every ounce of inner resource, like those Grand Design subjects who build Tuscan villas out of a pile of rubble by working endless hours with a demonic glint in their eye.
 
There will be moments of crisis when a funder needs to hold his nerve. Alex Reilley, the founder of Loungers, told the recent Arena lunch that like-for-like sales began to drop across his embryonic estate when the credit crunch arrived. Fortunately, the company had the confidence to avoid the obvious knee-jerk response of discounting.
 
It is not just start-ups that are subject to endless travails as they navigate their businesses through choppy waters. Our recent conferences have had wonderful presentation from mature businesses that have found themselves in high seas. TGI Friday’s Karen Forrester gave an electric presentation on how her key resource, her staff, were galvanised to engage with customers and transform the performance of the business. La Tasca’s chief executive, Simon Wilkinson, told last week’s Propel conference how his business, beset by a number of year of double-digit sales declines, was being transformed through a cathartic focus on staff and customers. It is little short of incredible how quickly a company culture can be overhauled. La Tasca now has a staff turnover of just 5% and is climbing month by month, site by site up the TripAdvisor rankings. Nigel Wright, chief operating officer of the under-rated TCG pub group, who also made a presentation last week, underscored the point that it is not just formative businesses that can be short of capital expenditure. Innovation and product development have kept TCG’s like-for-likes moving forward.
 
At the far end of the sector spectrum are those businesses that are publicly listed. Scrutiny levels here are, by definition, at their most intense. But the challenge remains the same as for start-ups: the application of entrepreneurial spirit to out-perform the competition and to do the things that are right for the long-term health of the business. Last week’s Propel conference heard a tour de force presentation from Luminar’s current chief executive, Peter Marks, on how the company had succumbed to the temptations of self-defeating financial engineering as it became ex-growth. I wonder whether we will ever see another publicly quoted nightclub company, given the unique challenges of a business where the tide comes so far in and goes so far out. In Luminar’s case, the business has returned to private ownership where it is can be run according to the fundamentals without distraction: a supreme attention to operational standards, with every day fought like it might be the last.
Paul Charity is managing director of Propel Info
 

Is Ireland ready for a 12-handpump Wetherspoons? by Martyn Cornell

The two Irish beer fans lowered their voices and spoke almost in awe. They had been looking through the windows of the new JD Wetherspoon pub, the Three Tun, in the upmarket Dublin suburb of Blackrock, which opened its doors for the first time this Tuesday. “It’s got TWELVE handpumps!”, they said. That is twice as many as any pub in the Irish Republic has ever had before – and even that pub only had four handpumps actually working at any one time. Indeed, according to one (unverified) estimate, the 12 handpumps at the new ’Spoons, the company’s first in the Republic, will boost the total number of working handpumps in the entire country by 33%.
 
Is Ireland ready for a 12-handpump Wetherspoons? Since 2009, the country has seen a London-like explosion in the number of craft beer breweries, from a small handful to around 40 (indeed, one of the newest – N17 – actually sounds as if it ought to be in London, though it’s named after the road that runs from Galway to Sligo, and the brewery is in Tuam, rather than Tottenham).
 
Accompanying that has been a boom in the availability of craft beer: yes, Guinness, Budweiser and Smithwick’s are still ubiquitous, but you’ve got a good chance of tracking a pub or bar with at least something more interesting on tap. And there are now bars, such as Brew Dock in Amiens Street, Dublin, near Connolly station, where the bar top has more than 20 craft keg taps, selling beers from the United States and Britain as well as Ireland.
 
If you can discover a working handpump anywhere, though, it’s likely to be just the one, and you could find, as I did in the Alfie Byrne bar in Dublin two Sundays ago, that the beer on the one handpump is almost irritatingly familiar – in this case Fuller’s London Pride. I can drink that ten minutes’ walk from my house. Ironically, many great old Irish pubs still have a row of “policeman’s truncheon”-style handpump handles on the bartop, but they’ve not been used for 50 years.
 
What there seems to be in Ireland is a drinking population, certainly among the young (meaning under 35, I think) that is increasingly aware of the existence of this thing called “craft beer” and increasingly able to find it in a wider and wider variety of forms, but pretty much unused to seeing handpumps in operation and equally unused to drinking beer as delivered from a handpump: softly carbonated rather than sodawater-fizzy, and cellar-cool rather than chilled. Perhaps enough young Irish people have now crossed the Irish Sea and tried cask ale in Britain that their throats are desperate for it and the crowds will be pushing down the doors of the Three Tun pub in Blackrock, eager for a drop from the handpump. But I’ve now been in Dublin twice in the past two months, and despite seeing at least one “craft” beer on sale in many bars, there seems zero evidence of huge untapped (pun semi-intended) interest for cask ale.

I was in Dublin last week, and the general feeling among those knowledgeable folk I spoke to seemed to be that the Irish beer scene is still a long way from the sort of mature market that the UK represents in terms of consumer awareness and choice. Dean McGuinness, of the importer Premier Beers, said craft beer in Ireland was still “in its adolescence”, and in the same position as craft beer was in the United States was in the early 1990s. It’s certainly far better than it was: as Shane Long, founder of the Franciscan Well brewery in Cork (now owned by Molson Coors) remarked, when he started out brewing in 1998, the Irish craft beer scene was “a barren wasteland”. But according to John Duffy, a respected Irish beer blogger, “Cask beer at the JDW pubs in Ireland will have a leg-up because they’re following the British practice of pricing it lower than the keg stuff, lower than even famously-cheap Beamish. Most Irish craft beer pubs have no qualms at all about pricing cask higher than keg, because it’s an exotic novelty for a specialist clientele.”
 
While Ireland has been seeing the same trend towards drinking at home rather than in a bar that the UK has, Irish people are still rather more likely to down their pints down the pub instead of behind their own front door than the British are. So it makes sense for Wetherspoon to move into the Irish market, in terms of potential customers: each new Irish ’Spoons will have more pub-goers in a given radius than any new UK ’Spoons. The Three Tun, which is costing £1.9m to develop, on top of the £1.27m it cost to buy the site in the first place, is only the first of what are likely to be many JDW pubs in the Republic: it is currently spending another £1.2m doing up the former Newport Cafe site in Cork, it announced this week the acquisition of its second Dublin outlet, the 40 Foot, in Dun Laoghaire, just south of Blackrock, and the company has claimed that it could open between 30 and 50 pubs in the Republic over the coming decade.
 
Northern Ireland has nine Wetherspoon pubs, of which a remarkable eight are in the 2014 Good Beer Guide. However, the biggest number of handpumps in any one seems to be the ten in the Diamond in Derry, while the Bridge House in Belfast, the largest cask ale pub in the province, only has eight handpumps. So it looks as if the Three Tun will have more handpumps that anywhere else in the whole island. Will they all be still dispensing beer in a year’s time?
Martyn Cornell is managing editor of Propel Info
 

New guard, old ideas by Paul Chase

In my last article for Propel Opinion I discussed a “changing of the guard”, featuring information about Alcohol Concern’s new chief executive, Jackie Ballard, and the new chair of the Commons Select Committee on Health, Dr Sarah Wollaston, MP for Totnes. But while the messengers may have changed, the messages haven’t. In relation to alcohol, public health activists are still obsessed with the “three As” – advertising, availability and affordability. They agitate politically for restrictions on the first two and above-inflation rises on the third. They have nothing new to say. But they try to find new ways of saying it.
 
The journalist and satirist HL Mencken once put it like this: “The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless stream of hobgoblins, all of them imaginary.” Which brings me to the Dispatches programme “The cost of cheap alcohol”, which was broadcast by Channel 4 on Monday the 23rd of June. This purported to investigate the impact of cheap alcohol on crime and disorder and public health, and in particular whether minimum unit pricing (MUP) was “the answer”. As cheap hatchet jobs, go it doesn’t get much worse than this.
 
Its producers cannot claim ignorance as a defence. I was approached to appear on this programme by its producer, Michael Simkin, who witnessed me debating with a public health activist at an alcohol and public health forum earlier this year. I duly gave him my contact details and they got in touch. I was then put through my paces in an aggressive telephone interview that lasted an hour and that was conducted by Simkin and his investigative reporter Anthony Barnett, who later fronted the Dispatches programme. We went through all the issues – MUP and the so-called Canadian “evidence” for it (that isn’t evidence for it); binge drinking (where I explained it was going down not up); alcohol consumption (where I explained it was going down not up); underage drinking (where I explained it was going down not up) and, well you get the picture!
 
Throughout the interview they repeated every myth, false fact and inflated statistic that are a routine part of the public health movement’s ongoing false narrative about alcohol. It became apparent that this programme was not going to present an impartial investigation into a serious social issue, carried out in the best traditions of investigative TV journalism, but rather it started with a conclusion and then worked backwards to select information, often false, that supported the conclusion they began with. Subsequently I sent them five articles, some of which contained further references, to back up the statistics and arguments I had made. However, it came as no surprise when they later informed me that they would not be interviewing me for the programme or using any of the articles or information I had given them.
 
Just to give you an insight into the kind of methods they used to back their viewpoint: they selected a group of students, who all said the only purpose of drinking was to get wasted as quickly as possible, and they used them for an experiment. They gave each of them £8 to go and spend on alcohol. The students, somewhat predictably, selected the cheapest and strongest booze they could get their hands on; and they “pre-loaded” on this drink before going out into the night-time economy.
 
Then the programme’s producers borrowed a convenience store and set up the alcohol shelves with the same products the students had previously bought, but this time the drinks were more expensive – priced as if minimum unit pricing at 50p per unit had been introduced. Then they gave the students the same amount of money as before, £8, to spend on booze, and guess what? They bought less booze – thereby “proving” that minimum pricing works! The reporter, Anthony Barnett, then somewhat sheepishly admitted that while this wasn’t a “scientific experiment”, it nevertheless illustrated the point about the impact that minimum pricing would have. Actually all it illustrated is that a fixed amount of money will not buy the same amount of product if you raise the price. Gosh! Who knew?
 
The only person from the industry that appeared was a chap from the Scotch Whisky Association, who was given a very short interview in which he was accused of being anti-democratic because the SWA had the temerity to take the Scottish government to court over the legality of minimum unit pricing. I’ve heard this argument posed before: a democratic parliament has spoken, so do as you are told, and don’t exercise your rights to challenge something in the courts. But the rule of law is as much a part of democracy as elected parliaments, which themselves are not above the law. When public health activists complain about people exercising their rights, it is hard not to reach the conclusion that they don’t think you should have them: confirmation, if any was needed, of the authoritarian nature of the new public health movement and their media megaphone.
 
The broadcasting of this documentary “coincided” with a letter sent by Professor Sir Ian Gilmore, and a brace of other public health activists, to Downing Street calling for the reinstatement of minimum pricing – a “proven” policy that would “tackle” binge drinking and other problems that are diminishing already. To quote HL Mencken again: “For every complex problem there is an answer that is clear, simple and wrong.”
Paul Chase is a director of CPL Training and a leading commentator on-trade alcohol and health policy

Licensing – proposed changes to the mandatory conditions by John Gaunt

Two weeks ago, the government tabled proposed changes to the mandatory conditions which will appear on all premises licences from (it is expected) 1 October. These changes are significant in effect and undoubtedly intended to tighten up on what went before and to make enforcement of the conditions easier. As such operators should take note and be aware.

The full amended conditions appear at the foot of this opinion piece. Dealing with the detail in turn:

Irresponsible promotions
The prohibition on these is tightened up in a number of respects. In the first place it becomes a mandatory requirement to ensure that irresponsible promotions do not take place on premises. The current requirement is to ensure that all reasonable steps only be taken.

Second, the list of irresponsible promotions with which you will be familiar, now will be deemed irresponsible without reference to the previous test as to whether the promotion was designed to or ran the risk of undermining the licensing objectives in three types of promotion. This ancillary test made it much harder, if not almost impossible, for authorities to seek to challenge a promotion, unlike the comparable position in Scotland. 

The categories of promotion which are now unlawful in any respect are those listed at Paragraph 2 (a), (d) and (e) below. These include games or other activities which required or encouraged individuals to drink a quantity of alcohol within a time limit or drink as much alcohol as possible (whether within a time limit or otherwise.)

The promotion which allowed for unlimited or unspecified quantities of alcohol free or for a fixed or discounted fee to the public or to a group defined by a particular characteristic (other than any promotion or discount available to an individual in respect of alcohol for consumption at a table meal) is being altered, in that the table meal exemption is going.

The loss of that exemption in respect of table meals could have had major implications for corporate sponsorship events in particular, but this is now one of the two promotions which will only continue to be unlawful if it “carries a significant risk of undermining a licensing objective”.

What has gone from this list of irresponsible promotions is a promotion providing free or discounted alcohol in relation to the viewing on the premises of a sporting event, where that provision is dependent on the outcome of a race, competition or other event or process, or the likelihood of anything occurring or not occurring.

Free tap water is provided on request to customers
There is a limited change here in that the new requirement is to require that free, potable water is provided. It must by potable (not portable, as a previous guidance suggested!) but the rule no longer specifies that it comes from a tap!
 
Requirement for an age verification policy
All premises must already have to have an age verification policy in place; this requirement is reinforced by the additional obligation now to be imposed that whereas the premises licence holder remains responsible for setting the policy, the designated premises supervisor has the new responsibility for ensuring that the policy is applied within their premises. 
 
Smaller measures of beer, cider, wine and spirits to be available
The changes proposed here have the most direct and immediate impact for operators, for which you will need to forward-plan.
The existing mandatory condition provides that the responsible person must ensure that for on-consumption alcohol is available to customers in the following measures: beer or cider: ½ pint; gin, rum, vodka or whisky: 25ml or 35ml; and still wine in a glass: 125 ml and that customers are made aware of the availability of these measures. This was a weak requirement in terms of delivery. 

This is to be amended to provide that such smaller measures are displayed in a menu, price list or other printed material which is available to customers on the premises; and that where a customer does not (in relation to a sale of alcohol) specify the quantity of alcohol to be sold, the customer is made aware that these measures are available.

Operators will need to ensure that all menus, price lists and any other similar printed material references these smaller measures and their availability. There will be reprinting to be done. There will also need to be additional staff training to ensure that where a drink is requested without specifying the measure or amount, the smallest measure is offered. Only recently I was in a pub where I was told that they did not serve wine in a 125ml measure. Not to do so was unlawful before but will be completely “beyond the pale” in the future. This will be fertile ground for possible Trading Standards test purchasing.

The observant of you may notice that the separate requirement prohibiting the direct dispense of drink into the mouth of another has gone. Before you rush off the buy the so-called “dentist’s chair”, this practice now joins the list of irresponsible promotions at paragraph 2 (e)!

We are told that guidance to support implementation of these revised conditions will be published in advance of the commencement of the Order, although how close to the implementation of these changes remains to be seen.
 
The proposed amended mandatory licensing conditions referred to above are:

1.  (1) The responsible person must [as opposed to “shall take all reasonable steps to”] ensure that staff on relevant premises do not carry out, arrange or participate in any irresponsible promotions in relation to the premises.

(2) In this paragraph, an irresponsible promotion means any one or more of the following activities, or substantially similar activities, carried on for the purpose of encouraging the sale or supply of alcohol for consumption on the premises:
(a) games or other activities which require or encourage, or are designed to require or encourage, individuals to
(i) drink a quantity of alcohol within a time limit (other than to drink alcohol sold or supplied on the premises before the cessation of the period in which the responsible person is authorised to sell or supply alcohol), or
(ii) drink as much alcohol as possible (whether within a time limit or otherwise);
(b) provision of unlimited or unspecified quantities of alcohol free or for a fixed or discounted fee to the public or to a group defined by a particular characteristic in a manner which carries a significant risk of undermining a licensing objective [words added];
(c) provision of free or discounted alcohol or any other thing as a prize to encourage or reward the purchase and consumption of alcohol over a period of 24 hours or less in a manner which carries a significant risk of undermining a licensing objective [words added];
(d) selling or supplying alcohol in association with promotional posters or flyers on, or in the vicinity of, the premises which can reasonably be considered to condone, encourage or glamorise anti-social behaviour or to refer to the effects of drunkenness in any favourable manner;
(e) dispensing alcohol directly by one person into the mouth of another (other than where that other person is unable to drink without assistance by reason of disability).

2.  The responsible person must ensure that free potable water is provided on request to customers where it is reasonably available.

3.  (1) The premises licence holder or club premises certificate holder must ensure that an age verification policy is adopted in respect of the premises in relation to the sale or supply of alcohol.

(2) The designated premises supervisor in relation to the premises licence must ensure that the supply of alcohol at the premises is carried on in accordance with the age verification policy. [New]

(3) The policy must require individuals who appear to the responsible person to be under 18 years of age (or such older age as may be specified in the policy) to produce on request, before being served alcohol, identification bearing their photograph, date of birth and either
(a) a holographic mark, or
(b) an ultraviolet feature. [New]

4.  The responsible person must ensure that
(a) where any of the following alcoholic drinks is sold or supplied for consumption on the premises (other than alcoholic drinks sold or supplied having been made up in advance ready for sale or supply in a securely closed container) it is available to customers in the following measures:
(i) beer or cider: ½ pint;
(ii) gin, rum, vodka or whisky: 25ml or 35ml; and
(iii) still wine in a glass: 125ml;
(b) these measures are displayed in a menu, price list or other printed material which is available to customers on the premises; and
(c) if a customer does not in relation to a sale of alcohol specify the quantity of alcohol to be sold, the customer is made aware that these measures are available. 
John Gaunt is a partner at the solicitors John Gaunt & Partners 

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