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Morning Briefing for pub, restaurant and food wervice operators

Fri 20th Mar 2015 - Friday Opinion
Subjects: Permitted Rights Development, the Budget, Greene King IPA and customer feedback
Authors: Peter Marks, Kate Nicholls, Martyn Cornell and Carl Platia

The dangers of Permitted Rights Development by Peter Marks

I was recently asked to speak at a Westminster Social Policy Forum on the future of the UK High Street. As traditional retail comes under pressure from the internet the late night economy is at last being seen as part of the solution to empty premises. As the UK’s largest nightclub operator, we’re passionate about what we do and believe that, when late night operators get it right, they add real value to the economy and help to create vibrant town centres. The late night economy comprises anywhere that trades after 6pm. It is a large and often overlooked piece of our economy, accounting for 6% of GDP, 8% of UK businesses, 10% of all jobs and 27% of town and city centre turnover. The sector also creates a huge amount of employment, especially for the under-24s, which has been a primary concern for the UK since 2008. In the last year alone, the night-time economy has created 37,000 new jobs and generated £66bn of sales, delivering significant tax returns for the government.
Over the past three years, Luminar has invested more than £20m in transforming our nightclub estate. We have some fantastic venues in great locations, but we cannot do it on our own. We want to see a healthy economy in our town centres but if we are the “last man standing” it is a bad place to be and it is often only a matter of time before we, too, may need to close. A new or invested nightclub can often boost a town or city centre far better than any other single cafe, bar or pub, because we have the capacity, the marketing budgets and the expertise to bring people back into town. When a nightclub ceases trading the local night time economy usually follows a downward spiral. No one picks up the trade, the town gets quieter.

Things are getting better and most of us remain cautiously optimistic. The latest CGA Peach report also shows that confidence is the highest for years. But just when you think the worst is over, we have another issue to deal with – Permitted Development Rights (PDR), introduced in May 2013. Put simply, a vacant office block, often having laid empty for several years, can, without any input from the planning officer, now be developed into residential premises. On the face of it, it’s a great idea. It helps the housing issue, revitalises town centres, and makes use of unwanted office space. So what is the problem? Because it doesn’t matter if you have had 30 years in a site as a bar, restaurant, club or live music venue, a new resident has the ability to complain about the noise from the venue or other public nuisance and restrict hours or even revoke your licence. That’s it. Trade gone. No compensation. 

For example, a live music venue in London, which was owned by one family for more than 30 years, had to shut last year because someone moved in to a new development nearby and complained about the noise about a year later. This was a successful and respected business that created investment and jobs but was forced to close because of just one complainant. The Ministry of Sound had to fight for three years before doing a deal with the developer of the office block opposite its front door, which is being turned into apartments. Having done that deal and spent a lot of money on the way, I understand that there is another development proposed to the rear of the club! I believe several pubs in London, particularly Soho, are also having issues. 

With Luminar, our Yeovil landlord has, on appeal, won the right to put in several apartments above us, in the same building. Can you imagine any of us going to a planning committee with an application to remove the ground floor of an apartment block and put in a pub or club? I think the residents may have something to say! Yet the opposite can, and is, happening. 

When I asked Brandon Lewis MP last year at an ALMR event whether this was right, his view was that it was not. Yet it continues. It wasn’t thought through properly. Furthermore, the PDR legislation was meant to be for a limited period only, but there is a view that the government may extend the window indefinitely, which could have serious ramifications for our sector. The answer of course is not to stop the transference of use from old offices to accommodation, it can be a good idea. But it needs more thought. We either need town centre zones without such accommodation, that allow late night economies to flourish, or an understanding that should someone move into a building that was developed into accommodation after an existing licensed premises, the residents have limited or no rights to object to a licence – a “we were here first” rule. 

We can all continue to be part of the success story for rejuvenating town centres but this will not happen if the risks are too great for the investment.
Peter Mark is chief executive of the nightclub company Luminar

A tonic for the troops from the Chancellor by Kate Nicholls

The House of Commons is a unique place: a theatrical stage set wrapped up in anachronistic traditions and procedures, and none more so than this week’s Budget.
There are red lines on the floor to ensure political opponents stand at least two sword lengths apart – literally daggers drawn. There is an actual bag on the back of the Speakers’ Chair from where we get the phrase “it’s in the bag”. Tradition says that the Chancellor of the Exchequer is allowed an alcoholic drink while he delivers the Budget. It also says that the speech is listened to without interruption and in silence. Neither were observed on Wednesday.
But with Ladbrokes giving odds of 1-10 on beer being mentioned in the Budget as George Osborne rose to his feet, if ever there were a time when an industry issue could be said to be “in the bag”, this was it. And the Chancellor certainly did raise a metaphorical glass to the industry. A hat-trick of penny off a pint budgets was topped off with a 2p cut in spirits and cider duties and a freeze on wine duty, a welcome recognition of the broader sales mix of modern pubs and bars. The British Beer and Pubs Association estimates that the beer duty cut hat-trick will give producers a £180m boost, attracting new capital investment and supporting 3,800 new jobs. 
But the real impact and importance of the duty cuts lie in the symbolism of the gesture, a recognition of the importance of eating and drinking out to the UK economy and local communities, of the political power of pubs. And the fact that the Chancellor was odds on to mention them in a Budget which was flagged as having no populist pre-election give-aways is a sign of how much progress we as a sector have made in changing the political perceptions of pubs.
This was an intensely political Budget, with clear battlelines drawn for the general election. So it is even more significant that the Chancellor chose to stick with pubs as his key metric for demonstrating his populist touch – that and a fair few pop culture references. Pubs, high streets, small businesses remain political touchstones. And perhaps it is no coincidence that they are all very British, a symbolic flag to wrap the party in, and contrast to the problems associated with French socialism which the Chancellor sought to align Labour to.
The headlines may have been dominated by duty cuts, but the real boost for the sector were tucked away in the detail. And make no mistake about it, this was a very pro-pub Budget, rounding off just over a year of positive political measures, which have saved operators more than £150m.
The more substantive measures delivering bottom line benefits were around people and property, the two biggest areas of concern for eating and drinking out businesses which a CGA Peach Business Leaders Survey highlighted as the biggest barriers to growth. Action in these areas are key to giving businesses the confidence to continue to invest.

Further and faster increases in personal allowances, breaking the £11,000 barrier, and the promise of more reductions in NICs (a tax on job creation pure and simple) arguably have a greater impact on sales and margin than a penny off duty. Allowing lower paid workers to keep more of their income tax free not only reduces payroll costs, it immediately boosts disposable income for our teams and our guests. Increase the amount of cash in people’s pockets one day, they will spend it across the bar the next, and we will create a new job the day after is a message we have been pushing consistently, and it really hits home. It is also a better way of boosting incomes than potentially unaffordable and unsustainable living wage policies.
This was one part of the government’s message: that the sun was now shining and Britain could walk tall in the world again. The other side of the Chancellor’s argument was that there would be an end to austerity. Just three months ago, the Chancellor had claimed that the budget would deliver a surplus of £23bn in 2019, something that could only be achieved through cuts in public spending twice as deep as we have already undergone, prolonging the age of austerity well into the next Parliament. That doom and gloom hardly encouraged a feel good factor and consumer led recovery. So one of the hidden messages in the Budget was a substantive revising down of the budget surplus, from £23bn to just £7bn. 
On property, the Chancellor had more good news. A root-and-branch overhaul of the business rates regime is long overdue and, crucially, this Budget kickstarted that, with reforms to be delivered this time next year. We have the highest taxes on property in the EU, and with rates and rents being intimately linked, this could have a dramatic impact on business profitability if we get it right. The ALMR is leading discussions and working with other trade bodies to do just that.
But perhaps one of the most important measures for our sector is the Chancellor’s confirmation that the Annual Investment Allowance will be retained. As a result of our lobbying last year, the allowance was extended and increased to £500,000, but that was due to be withdrawn at the end of the year. The Chancellor said the level would be reviewed in the autumn. The retention of the allowance, which is key for refurbs, kitchen refits and new-build alike, will be vital to sustain investment in the high street and new development. Without it, we will see greater austerity in business spending and capex.
These were the key Budget asks for the ALMR. The spiralling cost of property is the single biggest issue holding back growth in the market. So let’s raise a pint to the pro-pub Chancellor – cheers, George!
Kate Nicholls is chief executive of the Association of Licensed Multiple Retailers

A perspective on Greene King’s best-selling cask beer by Martyn Cornell

If you ever descend into the vipers’ pit that is the (unofficial) Campaign for Real Ale page on Facebook, you will discover that there are a fair number of Greene King haters out there. They don’t like the company’s alleged policies, and they don’t like its beers, in particular its best-selling its IPA. They think it’s too bland, and “not a real IPA” at 3.6% abv. But, of course, Greene King, quite rightly doesn’t care at all. Not the tiniest drop. In fact it’s probably quite pleased the haters don’t like it. They’re not its target market – it’s after a vastly larger constituency. If the haters liked its IPA, it’s fairly sure those people that Greene King would most like to capture to and in the cask ale market, young people, people still with a lifetime of drinking ahead of them, wouldn’t like it – and for that reason, the Bury St Edmunds crew have no intention of changing their IPA just to make the haters happy. In fact they’re not changing it at all – except to shake up its look, and put £2m in media spend behind it.

Of course, it’s not just Greene King IPA that has hosepipes of vitriol directed at it by the Camra hardcore. Any widely available cask ale gets the same – Fuller’s London Pride and Sharp’s DoomBar are equally hated, without the haters apparently being able to work out that the reason why these beers are widely available is because lots of people actually like drinking them, even if the haters don’t.

Indeed, it’s the popularity that is prompting the Bury St Edmunds crew into its current push. To its obvious delight, and, I suspect, slight surprise, Greene King has discovered that the flood of new young drinkers coming into the cask ale market find Greene King IPA just the sort of beer they want: there’s more to it that can be found in a pint of lager, but it’s still reasonably safe and unthreatening.

I was at a launch on a recent Monday night in a bar near Oxford Circus in London to announce a new look for Greene King IPA, and other initiatives including a new website to educate licensees and bar staff on cellar management and how to serve the perfect pint. Dom South marketing director for brewing and brands at Greene King, who was presenting the new initiatives, quoted figures from a survey done last year for the Campaign for Real Ale showing that 15% of all cask drinkers tried cask ale for the first time in the past three years, and 65% of those new drinkers are aged 16 to 24. “We’re seeing a complete revolutionary shift in the drinker base coming into cask ale, which is exciting, because it means that this category, for the future, is in rude health,” South said. And where does Greene King IPA fit in here? “When you look at what those young drinkers want, from a cask ale brand, or just a beer, the three things a new young entrant wants are, first, something that feels right to them, a reflection of themselves, that makes them feel good about drinking the beer,” he said. “They want something a little bit modern, a little bit contemporary. The second thing is, they expect the beer to taste good – but let’s face it, too many pints in the UK are served sub-standard.

“The third thing is that younger people coming into the market want something that is a bit tastier than the lager market that they’ve left, but they want it to be pretty easy-drinking, the majority of them. They want something that tastes good, not something that needs chewing. That’s where the role of Greene King IPA comes in. There is a real role for a brand to play in the market, one that represents the safe choice when you enter into a product category that’s new to you, one that won’t let you down, that represents taste that is relatively easy drinking versus some of the 20,000-odd beers that you can have in the UK. With Greene King IPA, our simple strategy is to bring many more young people into our brand and the market, and also to stand for a signpost to quality, trust and assurance for people who might be about to come into the market.

“When we tested ourselves against those key things that young drinkers want, ‘Does it look and feel right for me, make me want to drink it?’, ‘Is it good quality, not going to let me down?’, and three, ‘Is it easy to drink, and something you’d want to have as your first drink?’, we were really excited by the results. We found the number one reason for people drinking Greene King IPA, time after time, is the fact that it’s easy drinking. I know a few people give it a hard time because it’s easy to drink – that’s its strength, that’s its role in the market. It’s the first drink I would recommend to someone if it’s their first time drinking cask ale, because it won’t let them down and it’s not too challenging. We did a load of blind taste tests and Greene King IPA, when it’s served right, is absolutely up there with the world’s largest cask ale brand* in taste tests, and beat significantly most of the leading brands in the cask ale market. So this product doesn’t need changing, it isn’t going to change and we haven’t changed it. It’s absolutely right.”

There we are, then, haters. Greene King has the figures to show that four out of five cask ale drinkers love the fact that Greene King IPA is an easy-drinking pint – which is, after all, the core definition of a session beer, and session beers are, or should be, the pride and pinnacle of British brewing, the beer that makes going to the pub with your mates worthwhile. If you don’t like it – tough. Go and drink something so hoppy your teeth need re-enamelling afterwards.

Not that everything in the IPA garden is perfectly lovely. There were two problems, the first relatively easy to try to solve, the second far more crucial, and difficult. On the first, South said: “We recognised, and consumers told us, we did need to move forward with the look and feel of the brand. We looked a little bit corporate, and perhaps a little bit traditional to the younger consumer. So we set off on the journey of bringing ourselves really up to date, a modern, contemporary look and feel that won’t alienate people who already enjoy a pint of Greene King IPA but that will genuinely bring younger people into the category and into the brand. I’m confident that this is going to do the job. It’s not a tweak and it’s not a small pigeon step forward, it’s pretty bold and it’s pretty big as a leap forward in terms of look and feel. Ziggurat Brands, the design agency that did it, have stripped it back to bare basics, taking inspiration from things they found in the brewery, so the copper colour is inspired by the copper kettles in the Greene King brewery, the teal colour because we wanted to evolve the green colour of Greene King IPA to something much more modern and contemporary. This is where we needed to make a big change to bring people in. At the same time it shouts heritage, with the crown and the arrows.”

More importantly, South said, “What we do need to focus on is making sure every pint is served perfectly. We are going to carry on with consumer support, advertising, all of those good things. But we feel it’s really important that we shift a lot of our emphasis, and put more money into the brand, with the trade. We’re going to invest heavily in supporting the trade to get quality right, and quality is the number one thing for us to focus on.” There two big initiatives here, the first a quality accreditation drive, with unannounced pub visits made by either Quality and Dispense Services, a senior Greene King representative or a third party quality agency. A pub will be required to pass ten quality tests, which include the taste, aroma and temperature of their Greene King IPA through to whether it is served in the right glass and the ability of bar staff to talk about the beer and describe it accurately. Pubs that are judged to pour a perfect pint of Greene King IPA will be awarded with a plaque and certificate, and crowners for their IPA pumpclips, “all signposts to the consumer to say, ‘This is going to be a safe bet’,” South said. Pubs that do not pass first time will be educated on the importance and benefits of looking after their cask beer range before another visit is made.

You cannot improve quality in a vacuum, however: and to that end, Greene King has launched a website giving free training, troubleshooting and best practice videos, available at “Beer Genius is Greene King’s open access training portal to the industry,” South said. “We recognise that staff turnover is a problem – it’s different for everyone, but let’s make an assumption, 100% every year. How on earth can licensees be expected to make sure every new bar staff member knows even how to serve a pint, let alone clean down the bar and do all the basics? So what this portal is going to do is teach cellar managers, bar managers, operations directors, BDMs, local area managers, but also bar staff, three things: how to manage a cellar, how to make the most money and yield they can out of cask ale, by getting the quality right and the yield up, and why commercially it makes sense, and third, how to serve the perfect pint.

“Why does it matter? It’s not just about giving the consumer the perfect pint – although that’s absolutely key. The benefit of giving the consumer the perfect pint is that yields in pubs will massively skyrocket, because quality and yields go hand-in-hand. A key part of what we’ve got to do is educate bar staff, as well as bar managers that when you get it right, but that tiny bit of extra effort in, your till will start ringing up more money. The numbers astounded me. About 70% of pubs, we estimate, have a yield of 91% or lower on their cask ales. It should be 97, 98, even 99%. When they close that gap, the benefit to that pub in terms of profit is enormous – it’s up to £5,000 through the till, per annum. That’s their benefit: the benefit to the consumer is no more dodgy pints. And therefore you stay in the pub, you tell your friends about that pub, the net promoter score of that pub improves, people come back. So what could be a huge loss to that pub through a dodgy pint becomes a huge gain. So it’s absolutely key that we help licensees with this.”

There we are: get the quality right, your yields from every cask will be up, and so will be your profits. The licensee is happy, the consumer is happy, the brewer is happy. Mind, I doubt the haters would be happy even if Greene King had the head brewer personally deliver every pint to their table in solid gold goblets with a £50 note for use as a beermat. Personally, I’m delighted if young drinkers find Greene King IPA a good gateway into cask ale: as they grow older, and more experienced, it’s likely that some – though not all – will start to experiment, to explore, and discover the kind of beers the haters enjoy, beers which indeed have a great deal to offer those who are ready for them. The quality initiative is excellent – other brewers, please, please copy. And the Beer Genius website, from what I’ve been able to explore so far, is a terrific resource for everybody – including drinkers, who can find out what has to go on to get them that elusive perfect pint.
Martyn Cornell is managing editor of Propel Info

Customer feedback with respect by Carlo Platia

As a former operator now working with foodservice business leaders, I find those leaders’ key concern is usually, “What are my customers thinking?” In reality, most operators face the double difficulty of gathering feedback in sufficient volumes to properly inform operational improvements, whilst doing so in a non-intrusive manner. 

It has become clear to me that by linking feedback to EPOS data to make it more powerful for operators, you cannot avoid making the process less intrusive and more engaging for guests at the same time.

We are a decade on from the advent of “industrialised” consumer feedback – estate-wide online “census” feedback surveys for retailers, pubs and foodservice operators, replacing old-school sample-based research, and supposedly the death-knell for mystery shopping, reports that were clearly exaggerated. But it was a step-change in insight capabilities from the constraints of pen and paper surveys, transforming customer knowledge for clients.

Three facets of this innovation were critical:
• It made customer feedback devolved and decentralised. Customer metrics were no longer the marketing teams’ domain. Operators became the target audience, at all levels of the business. At least that was the theory.

• It multiplied the volume of data exponentially, and the resources needed to make sense of it. But perhaps we got too much data, and asked too much of customers, whose opinions are sought with ever- increasing frequency.

• Information therefore became more “granular”, loaded with diagnostic and drill-down potential. Except it was still typically a step removed from the customer transaction, and often was not transmitted to the operators fast.

While respecting the undoubted advances made by mass-scale digital feedback, let’s consider these facets in turn.

The devolution of data to individual sites is as governed by technology as the data collection itself. Consumer research always had its gatekeepers, traditionally a head office job. But in modern-day devolved models, the unit/branch manager becomes the gatekeeper of feedback. Yet those managers account for only a small proportion of available customer-facing time each week, especially in large scale managed chain units, and the knowledge is surely most useful to the front line serving staff that most directly and regularly influence guests’ experience. 

Too often survey processes don’t respect the front line’s need for the full and direct benefit of the insight, and therefore neither, subsequently, does the customer.
Early online surveys typically used fixed, trendable questions over time, and it was all too tempting to throw the kitchen sink in at the survey design stage. But uniform surveys go against marketeers’ increasing efforts to personalise communications, and there is a risk in larger multi-brand groups that surveys fail to adopt the right tone of voice, for the brand or its customers. Furthermore, it may not take long to determine that some questions have little bearing on brand recommendation or revisit intentions, in which case the marginal benefit of continued measurement (and repeated questioning) diminishes.

This is all the more relevant today, in an era of potential feedback fatigue, not least in the out-of-home food and drink setting, where the same customer in the same venue is prone to be asked for feedback regularly. The survey screen may dutifully say “we value your time”, but the risk with repeat customers is that they see no value in providing repeat feedback. “Customer effort” is the current watchword, with the Henley Business School citing the case of BT, which is said to have identified “effort” as its number one driver of customer advocacy. 

Meanwhile has talked of “finding a balance between the very real benefits of data collection and utilisation … and earning the trust of increasingly hacked-off consumers.” Consequently we should not add effort with burdensome survey tasks; we should make it easy and convenient. The feedback process is part of the customer experience after all, and the days of a ten to 12-minute survey with repetitive rating scale questions are surely numbered. 

Too often, surveys fail to respect consumers’ tolerance.
Bigger customer feedback data opened up new data cuts and “deep dives”, enabling fresh insights for feedback clients. But many surveys are completed after the event, and remote from it. Despite the trend towards “in the moment” feedback, this delay need not necessarily be a concern, depending on the questions asked. However, surveys typically seek feedback on a specific customer experience, and if it is unconnected to transaction data, we not only rely on consumers’ accurate recall and description of what they consumed and when, but we are unable to directly and readily link sentiment to sales. Such linkages can be attempted, but they take time, they require manual intervention (in terms of data cleaning and manipulation), and they are prone to be imprecise.

Too often the feedback lacks precise commercial context. 
If we were starting afresh, wouldn’t it be better to create a scheme with these objectives:
• One that respected customers patience and their valuable time
• One that respected front-line teams’ priority in customer service delivery
• One that respected the need to deliver accurate transaction-linked and therefore time-specific data

Such a system would also ideally:
• Have flexible and responsive questions, sensitive to the customer’s purchase on the day
• Properly align with brand values and the tone of brand communication 
• Break through the gatekeepers and fully democratise customer feedback for front line teams
• Give voice to what’s important to customers, not what’s important to us

Combine this with real-time sentiment capture, and a feedback programme would not only deliver actionable and commercially valuable insights, but do so in a more engaging and sensitive way – respecting the internal and external audiences of your teams and your customers. That is why at Feed it back we’ve created a feedback system that is integrated to EPOS, so that the guest’s feedback is automatically and instantly joined to the detail of their purchase. It allows the customer to give their opinion there and then, in a low-intrusive manner, with the information immediately available to in-house teams, at all levels.
Carlo Platia is chief executive of Feed it Back

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