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Morning Briefing for pub, restaurant and food wervice operators

Wed 2nd Dec 2015 - Greene King provides detail on brands expansion
Greene King provides detail on brands expansion: Value brand Hungry Horse will remain Greene King’s largest brand as the company seeks to optimise its brand portfolio by converting sites from its enlarged post-Sprit acquisition estate to its strongest formats. The company plans to grow its 244-strong estate to between 280 and 320 sites. Former Spirit brands Chef & Brewer and Flaming Grill, which trade in the mainstream and value-end respectively, are expected to grow to between 180 and 220 sites – the two brands have 136 and 142 sites respectively at the moment. The premium Metropolitan format, which trades primarily in London and includes Greene King’s 2011 Realpubs acquisition, is forecast to grow to 100 plus sites from the existing 66 venues. Meanwhile, the mainstream Farmhouse Inns brand, which is an evolution of the Cloverleaf carvery business acquired in 2011, is expected to expand to between 55 and 75 sites from its current 36. Overall, the five key brands and formats will grow to between 800 and 950 sites from the current 624. Greene King said the five drive brands had been selected for their consumer relevance, growth potential, financial attractiveness and relative position to other brands and formats. Net incremental capex of £40m to £50m a year is planned over three years from the 2017 financial year to make the conversions. The company stated it would continue with selective acquisitions, transfer and new-builds and added ten new sites in the First Half of its current financial year – average weekly takings are £42,200 versus the existing managed estate average of £19,100. The company said there would also ongoing development of the Greene King locals estate of 800 pubs, with focus on three formats.

Digital is increasingly THE key battleground in marketing: Greene King has reported that digital marketing is increasingly the key battle battleground as it works to “build its marketing muscle”. It stated that traditional marketing is still important with a need for quality communications on site, merchandising and TV advertising. But it also reported the benefits of a digital focus. It reported website updates led to a 52% increase in traffic, creating better brand awareness. The first half had seen a 54% increase in in-depth customer feedback and a 51% increase in loyalty card holders. It had found the adoption of Spirit Pub Company’s ‘quality not quantity’ approach had led to a 23% increase in customer engagement. Chief executive Rooney Anand added: “In terms of digital, and learning from Spirit, we expanded our routes to market including the launch of Loch Fyne Seafood & Grill menus on Amazon, whereby customers can pre-purchase a two or three course meal voucher online. Aiming to stay close to our customers, we relaunched our ‘Hungry for Feedback’ initiative in Hungry Horse, offering a free dessert or starter for every review, and added TripAdvisor reviews to Chef & Brewer online pub pages. We actively monitor the feedback we receive through these and other channels and use it to continuously refine and improve our customer offer. Overall, digital initiatives in the Greene King estate led to an 18% increase in online table reservations and a 61% increase in Facebook followers.”

Broadening the offer: Greene King chief executive Rooney Anand has reported the company has driven sales in the first half with a particular emphasis on increasing value. He said: “We remain committed to exceeding customer expectations through consistent execution of unbeatable value, service and quality. In the period, we expanded the number of known value items across the Greene King estate, driving repeat visits among core customers and positively impacting volumes and gross margins. On service, a focus on operational simplicity and investment in people led to a 7.1%pt increase in NPS to an all-time high since measurement began in 2011. Quality improvements included a refreshed ‘Steak Education’ programme in Flaming Grill and, in the Greene King estate, improvements in core dishes, which contributed to a 3.3%pt increase in customer quality scores. Recognising the growing demand for eating out throughout the day, we relaunched our value- orientated breakfast offer in Farmhouse Inns, introduced a breakfast offer in Old English Inns and extended breakfast service hours in Hungry Horse. These initiatives helped to drive 4.5% like-for-like sales growth in breakfast in the Greene King estate and a 9.9% increase in sales before 5pm driven by increases in both food and drink sales. A similar focus in the Spirit estate included the launch of a premium sandwich menu and the continued evolution of the snack menu in Chef & Brewer.” In the final six weeks of the first half, like-for-like sales growth was 4.3%, including 12.9% in Metropolitan, aided by the Rugby World Cup and warmer, drier weather. Like-for-like sales in the Spirit managed estate showed a similar improving trend, with growth of 1.2% in the period and growth of 2.1% in the last six weeks of the period. Like-for-like growth was driven by Farmhouse Inns and Metropolitan in the Greene King estate, and by Chef & Brewer and Taylor Walker in the Spirit estate.

National Living Wage will cost £6m a year: Greene King has forecast that the National Living Wage will cost the company £6m a year by 2018-19. Rooney Anand said: “Our people are core to our business and we constantly strive to pay them appropriately for their hard work while maintaining a high level of investment in development and training. As an employer of 42,000 people, with half under 25, the introduction of the National Living Wage will affect our cost base. We are confident of being able to mitigate most of this impact and options to do so include enhanced labour scheduling – the right people at the right time – and improving labour utilisation across the whole day. We expect the benefits of mitigating actions to be fully achieved in 2018/2019 and, including addressing wage differentials, we estimate that the incremental impact, over and above general wage inflation, will be £2m in 2016/2017 and will reach an annualised run-rate of £6m per annum in 2018/2019.”

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