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Morning Briefing for pub, restaurant and food wervice operators

Fri 17th Apr 2015 - Friday Opinion
Subjects: The impact of increasing graduate numbers, lager as a pioneer, and alcohol and the election
Authors: David Martin, Martyn Cornell and Paul Chase

Where once the mass market meant blue-collar workers with minimal education, today graduates make up almost half the workforce, something consumer-facing companies have to take on board, says David Martin

I was lucky. In my youth, I was among the one in 20 of my generation fortunate enough to get a university education. 

Nowadays, to borrow the title of a recent Economist article, “the world is going to university”. 

After a tripling of the number of full-time undergraduate students in the UK since 1970, over 40% of people currently aged 25 to 34 in England and Wales have achieved at least degree-level qualifications, against only 23% among the over-50s. 

More reasons I was lucky: I did not have to live with my parents into my late 20s, I had no student debt, and I didn’t have to take a “non-graduate job”. But, setting aside those contemporary problems, in the Trajectory Partnership’s words, we now have “the best educated generation in history” and while many things are attributed to “Millennial” consumers, this educational step-change is arguably the significant driver behind their behaviour and attitudes. 

As they mature, the influence of the higher-educated in society, and their market power, will therefore grow significantly. But these consequences are far from equal across different categories, brands and retailers.

Data on the exact significance of graduate consumers in the out-of-home market is not easily available but let us keep it simple and make a reasonable assumption that in the mid-1970s, graduates accounted for a very small proportion of on trade business, and now they could account for 40 to 50%. 

But that is just the numbers. We have to load in two other powerful factors: first, attitudes and aspirations, and second, influence – or in current parlance, “social capital”. Put simply, graduates increasingly set the agenda. They will become, if they have not already become, the dominant consumer voice. Move over Boomers. Here come The Graduates.

The mainstream “blue collar” market may have been dominant in the past, but brands and categories that align with, or are still associated with it, are now facing a serious challenge. Just consider the evident changes in the beer market for example. This argument carries weight both sides of the bar. An age-old adage is that your staff (and management) should mirror your customers. As the pub market steadily moves away from its historical blue collar roots, not least because of the long-term rising real price of pub drink, it is worth asking whether enough graduates have yet been attracted into unit management. 

Recent news coverage of the Campaign for Real Ale’s National Pub of the Year winner, The Salutation in Gloucestershire, noted that the licensee is a 31-year-old psychology graduate. His thoughtful views on the pub (individually and generically) featured in a Daily Telegraph piece, which duly observed that his success “may speak more to the trade’s future than its past.”

There is a geographical dimension to this issue, too. It was put in sharp focus by a recent Centre for Cities report, identifying the tendency for graduate jobs to cluster in advantaged cities with knowledge-based economies – those that have prospered most, and will continue to do so, due to the quality of their employment base. Outside the capital, these prospering cities are the routine base camps for growing chains coming out of London, such as Brighton, Cambridge, and Reading. At the other extreme are northern and Midlands towns historically dominated by declining low-knowledge industries, where jobs have been replaced by lower-skilled, more routine employment, places like Burnley, Bradford and Birkenhead. 

On-trade outlet data for these two sets of sharply contrasting sets of towns is telling. Figures from CGA Peach shows that the number of food led outlets in Brighton, Cambridge and Reading grew by 18% from 2005 to 2014, while in Burnley, Bradford and Birkenhead they declined by 2%, despite the societal trend to more eating out.

Away from the supply side, there are hugely significant demand consequences of the rapid rise of the higher-educated, and they are inextricably linked to the macro-trends of individualisation, independence, and aspiration.

If we accept that higher education teaches and empowers you to think for yourself, then logically it cultivates the confidence to fashion your own identity, to have less need to be part of the crowd, or to be told what to buy, or when to buy it. Hence we see Millennials’ interest in unique and diverse products – multiple choice is their mode – and their social media-enabled self-sufficient approach to “self-service” product knowledge. Perhaps most obviously, more education sows the seeds for more discernment and for higher aspirations, fuelling the premiumisation trend evident in so many markets.

For a category case-study, consider the transformation of coffee consumption in the UK where, in the view of Jeffrey Young, managing director of Allegra Strategies, “artisan cafe culture is becoming the norm”, and where the instant coffee category, skewed to the older generations, is in retreat. 

Similarly these factors have been key pre-conditions for the growth in craft beer, a category skewed to higher-income, younger consumers, who are also likely to be higher-educated. Part of the success of “craft” beer is that it enables its drinkers (“us”) to position themselves away from mainstream brands (“them”). 

This is just as relevant to fast food, or soft drinks, as it is to beer. There is no shortage of evidence that the big beasts of the brand world are facing a market share challenge from a myriad of small, emerging and often more premium alternatives, an explosion of choice that has been facilitated by the boom in receptive, higher-educated consumers. 

We are essentially seeing the consumption consequences of Tony Blair’s mantra, “Education, Education, Education”. The graduate boom is, so far, still specific to the younger age-cohorts, but unless we see an unlikely reversal of the strategy by future governments, ultimately the symptoms described here will apply to all generations.

That is not just going to be a tough examination for businesses, categories and brands that were traditionally strong among the old blue collar population, but also for those that “overtrade” with the mainstream over-50s, such as pub dining. 

You can start your answer now …

David Martin is managing director of Red Circle Insight, a market and customer insight resource

Two pillars of a pioneering venture by Martyn Cornell

Down a quiet street in Tottenham, North London is a sheltered housing scheme called Portland Place. At the entrance to the scheme stand a pair of brick gateposts supporting big, heavy, wrought-iron gates, all obviously much older than the flats and bungalows that lie beyond. There is nothing to tell you what those gates represent: but they are, in fact, the last physical remains of the Austro-Bavarian Lager Beer Brewery, a brave but ultimately doomed attempt to interest the British beer drinker in continental styles of brewing, all of a century before pale, chilled brews from the continental tradition finally did triumph on this side of the English Channel.

In the second half of Victorian England, lager was, in a surprising number of ways, the craft beer of the age. It was certainly expensive – Anton Dreher’s Viennese Marzen beer sold for six (old) pence a pint in the Vienna Beer Saloon in the Strand in 1869, at a time when ordinary mild ale was just two pence a pint, a price that caused considerable criticism in British newspapers. By the 1880s it was sold in places such as the Tivoli, another German-style drinking establishment in the Strand described as “an open-fronted tavern”, which sold “Vienna steaks”, beef patties effectively identical to hamburgers.

By 1881, according to one German writer, it had become impossible to walk down any street in London without seeing a sign advertising LAGER BEER. It was in this spirit that the Austro-Bavarian Lager Beer Brewery and Crystal Ice Factory was registered in June that year to build a new brewery at Grove House, a former boarding school in Tottenham which had a railway line on its western side and a main highway – later designated the A10 – on the other. The eight-acre site had its own well, and all the employees, “down to the ordinary labourers”, were German.

According to the medical journal The Lancet, reviewing the company’s products in 1884, its beers included a Pilsner, “a light table ale”, and a Bock and a Munich lager which “are akin to porter and stout”. The Lancet also revealed that the beers were available on draught, “aerated by a force pump, which brings it to the tap.” The Lancet liked the idea of lager being available in Britain: “considering its lightness and excellence, we are glad to see its popularity increasing so rapidly.” However, the “peculiar flavour” of the beers, The Lancet said, “compared by some to garlic and by others to curry, is, we believe, generated by the manufacture, and is liked by those who are used to it.”

Although imports of lager had almost doubled between 1879 and 1881, to just under 14,000 barrels, the Austro-Bavarian Brewery does not seem to have been hugely successful, since in 1886 the company that owned it had to be liquidated and it was re-launched as the Tottenham Lager Beer Brewery. In 1890 the brewery acquired the old Vienna Beer Saloon in the Strand, now known as Darmstatter’s, after the man who had bought it around 1880. Darmstatter’s was renamed again, as the Tottenham Lager Beer Hall. Five years later, however, in 1895, the Tottenham Lager Beer Brewery itself went into voluntary liquidation, tens of thousands of pounds in debt, and the lager beer hall on the Strand was knocked down and rebuilt as an English pub-restaurant called Fleming’s The brewery rose again in February 1896 as the Imperial Lager Brewery, but closed finally in 1903. All the same, an operation called the Imperial Cold Stores Co seems to have run on the site until the 1980s, a last echo, together with those gates, of Britain’s first purpose-built lager brewery.

That was not (yet) the end for lager sales in Britain, however. An excellent e-book called Gambrinus Waltz: German Lager Beer in Victorian and Edwardian England, by Ray Bailey and Jessica Boak, details the lager bars that sprang up in the West End of London from the late 1870s, and the way lager had become a staple in stylish cafes and restaurants by the end of the 1880s. The Spaten brewery of Munich, one of the pioneers in the 1830s of the new style of lager brewing that had conquered Europe in the following 20 or so years, being imitated by, among many others, the founders of the Pilsner Urquell brewery in Bohemia, Jacob Jacobsen of Carlsberg in Copenhagen and Gerard Heineken in Amsterdam, opened a beer hall in Charing Cross Road in 1891 that became so successful a larger venue was opened in 1895 in Piccadilly Circus. The most famous lager outlet in London, however, was the Gambrinus in Glasshouse Street, just off Regent Street, which was highly popular with the fast set.

So where did it all go wrong for lager, the great fashionable drink of the late Victorian and early Edwardian era? The problem, according to Bailey and Boak, was the steady rise of Germany, land of lager, as an economic and military threat to Great Britain. By 1909 or so, the lager bierhalls of London were beginning to be spoken of as homes from home for German spies. When war actually broke out in August 1914, the Gambrinus was swiftly turned into the Café Brasserie, the German waiters replaced by Frenchmen, and the lager on sale was brewed in Holland.

It would be another 50 years before lager began to make any sort of impact on the British pub scene, for reasons which seem more likely to do with British conservatism than with world wars. Eventually, though, the victory was overwhelming: the pioneers of the Austro-Bavarian Lager Beer Brewery could only have imagined it in their dreams, but today, in the pubs of Tottenham and elsewhere around Britain, three pints in every four is lager.

• Gambrinus Waltz: German Lager Beer in Victorian and Edwardian England by Ray Bailey and Jessica Boak is available for Kindle for £2 from the Amazon UK website
Martyn Cornell is managing editor of Propel Info

Tails wagging dogs by Paul Chase

When one views the manifestos of the political parties currently competing for our votes it should come as no surprise that the further to the ‘left’ the party, the more in thrall that party is to ‘healthist’ ideology. This is because the new public health movement (NPHM) isn’t really about public health, it’s about social control; it’s about the denial of freedom of choice and the imposition of lifestyle regulation. The NPHM is instinctively anti-business and believes that only the state can provide solutions to our public health dilemmas. This is evidenced by their mealy-mouthed rejection of the achievement of taking one billion units of alcohol out of circulation ahead of time, under the voluntary industry responsibility deal. It is also evidenced by their suspicion of, and ambivalence towards the advent of electronic cigarettes – a private sector solution to a public health problem.

It looks like we’ll have another hung parliament. This prospect has created a variety of tails queueing up to wag the dog. And with the exception of UKIP and the DUP, these parties are uniformly left-wing. The SNP, Plaid Cymru and the Green Party all have the following in common: they are deficit-deniers; they are unilateral nuclear disarmers, and they all believe in minimum pricing and a greater involvement for ‘public health’ in licensing and in reducing the availability of alcohol.

The Labour Party, which has moved to the Left under Ed Miliband’s leadership, has also bought in to the healthist ideology. The World Health Organisation, which is a disguised version of the old Trotskyite Socialist International, advocates a “health in every policy” principle, and Labour has fallen for this soundbite and proposes to set limits for the amount of sugar, fat and salt in food marketed “substantially to children”. Well, good luck with that one! The point about “health in every policy” is that it’s a disguised way of saying that so-called public health concerns must trump every other consideration – so that public health becomes the organising principle of our society to the detriment of the economy and jobs. The NPHM is a repository for these frustrated, infantile leftists who are dismayed at the demise of the old Soviet system, have no alternative to capitalism, but who now seek to advance their statist, social control agenda using ‘public health’ as the vehicle.

Labour wants to crack down on high-strength, low cost alcohol that “fuels binge drinking and underage drinking” – even though the incidence of both have fallen quite dramatically. This is another example of seeking today’s solution for yesterday’s problem in order to strike a symbolic pose. Labour also wants a public health licensing objective. Add to this their determination to give local authorities power to limit the number of fast food outlets locally and their nanny state, petty Gauleiter direction of travel becomes clear. Just for balance, I should mention that at least a Labour government would get rid of local Police and Crime Commissioners, and we could save a modest amount of money that would otherwise be wasted on failed local politicians seeking a last-gasp opportunity to graze on the public funding meadow.

What of the Conservatives? There are signs that notwithstanding the 2012 Alcohol Strategy that contained measures taken straight from the Daily Mail playlist, that the Tories do ‘get it’ in relation to the contribution that our sector makes to the economy and to employment. Three successive years of alcohol duty cuts and the abolition of the duty escalator have been well received. The Tories have rejected, for now, locally set licensing fees and have recently suggested that fees for Class A and B properties would be frozen at the current level to help reduce costs. This is altogether a much more licensed trade-friendly environment. Unfortunately, their previous extension of the status of ‘responsible authority’ to include local health authorities opens the door to the introduction of a health objective, and I suspect that the Tories have painted themselves into a corner on this one.

The Liberal Democrats deserve a mention (well I suppose!), if only because they have in general been even more hawkish than Labour in advocating measures such as automatic loss of premises licences for even one failed test purchase. And I still haven’t forgiven them for trying to nationalise 75,000 pubs in 1908!

For me the biggest issue in the general election is, or ought to be, the deficit. Our National Debt has risen from £700 billion in 2008, to £1.5 trillion by 2010 and is now just south of £1.9 trillion. Interest payments on this debt alone gobble up £30 billion a year of taxpayers’ money. If we could create an annual budget surplus that would enable us to reduce our structural deficit – the National Debt – by just 10% a year then the savings on our interest payments would go a long way to solving the funding crisis in the NHS over the lifetime of the parliament – and perhaps we would see an end to ridiculous claims that “binge drinking will bankrupt the NHS”. The problem with hung parliaments and coalition governments is precisely that they encourage a combination of economically illiterate, wide-eyed idealogues to believe that if only their tail could wag the dog then their Trotskyite business-bashing pipe dreams could be advanced.
Paul Chase is a director of CPL Training and a leading commentator on on-trade health and alcohol policy

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