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Morning Briefing Strap Line
Fri 3rd Jun 2016 - Friday Opinion
Subjects: ‘Family issues’ in the mid-casual dining market, simple solutions for complex problems, and justifying the price of super-premium beer
Authors: Ian Dunstall, Paul Chase, and Glynn Davis 

‘Family issues’ in the mid-casual dining market by Ian Dunstall

The recent market reports The Restaurant Group’s Frankie & Benny’s and Mitchells & Butlers’ Harvester brands are facing challenging times should not come as a surprise. US market trends are generally a good forecast for the UK restaurant sector and a Technomic presentation hosted by Propel in 2014 provided a very clear barometer of the challenges to the casual dining sector, and the family segment in particular. 

The US experienced a five-year decline of the family-style restaurant segment, evidenced by the well-publicised challenges to born brands like Chili’s and Applebee’s. But hard times are relative – these brands still attract a significant market. Harvester and Frankie & Benny’s have nearly 450 restaurants between them and jointly claim to attract more than 57 million visits a year – not bad in a UK population of only 65 million! That’s an impressive average of more than 2,000 visitors per restaurant per week, despite their difficulties. What can other brands learn from the challenges that these brands currently face?

Market restructure
The ongoing market restructure is increasing competitive pressure, regardless of individual brand strength. Comparable with other retail sectors, the market is polarising away from the “squeezed middle” towards either premium experience or functional value. In the casual dining sector consumers are shifting towards fast-casual concepts for their daily functional needs and indulging in more polished casual offers for their more selective social occasions. And there is scale growth in both sectors from exciting new operators and concepts, both independent and brand.

Mitchells & Butlers appears to understand this, and its declared strategy of shifting a proportion of Harvesters to the more polished Miller & Carter concept, whilst investigating possibilities in the fast-casual sector, seems shrewd strategic estate planning. The Restaurant Group is more challenged in this respect as it lacks the relative market segmentation – its dominance in the leisure park market means its alternative brands in the portfolio are in a similar market segment.

Changing consumer needs
For all of us, the needs of our guests are changing rapidly. We hear a lot about the changing demands of the millennial market. The relevant point for these two brands is millennials (spanning an age range from late teens to mid-30s) are now ageing into the family market and will be bringing their needs and aspirations into their new family household. If these brands do not respond to their changing needs, they will not attract the next generation of young families. As young adults these millennials have experienced the breadth and interest from a more sophisticated range of foodservice concepts, many with emphasis on authenticity, quality, healthier choices and greater food credibility. As guardians of their new family’s diet and lifestyle they will demand these same values in their future family dining occasions.

Relentless brand evolution
Strong brands can be ageless. Time and maturity is not a barrier to long-term brand success. Polished brands (eg Cheesecake Factory, born 1978) and more fast service brands (Domino’s, born 1960; Starbucks, born 1971) have successfully evolved themselves and retain their brand strength and appeal. But to do this they have had to be radical in their regular brand reinvention to remain relevant to changing market needs. Headlines from previous brand articles illustrate the scale of this reinvention, eg: Howard Schultz – “the bulk of Starbucks innovation will be technology-focused amid ‘seismic’ change in consumer behaviour” and Domino’s – “now fundamentally a digital business”.

The reality is many mid-market casual dining brands, especially in the family market, have not aged so gracefully. Harvester (born 1983) and Frankie & Benny’s (born 1995) need to ensure they do not similarly decline from fame. We all remember the simple economic model from school days that chart a brand’s lifecycle from birth to maturity. Maturing brands inevitably require constant innovation and occasional reinvention and there are many positive case studies in the market that give us heart that it can be achieved. Wagamama (born 1992), Nando’s (born 1987) and PizzaExpress (born 1965) are good examples of well-evolved brands. Think also of McDonald's (born in the UK 1974) that in the UK at least appears to be retaining popularity, albeit it is taking a herculean effort of innovation (from menu and drinks range and supply chain, design evolution, service technology upgrade and marketing communication innovation) to retain its leadership position.

Build the brand on strong foundations
Great foodservice brands need to be relevant to their customers’ needs, and deliver their concept in a distinctive and differentiated style. They require a strong and compelling brand position and an exciting menu proposition. Both Harvester (spit roast chicken, grill and salad) and Frankie & Benny's (American Italian) are brands built on very positive brand position and menu foundations that can potentially remain highly relevant to today’s market. Both brands retain a large customer base of loyal users. Having observed the evolution of both brands over the years (and occasionally dabbled in the development of Harvester during my time at Mitchells & Butlers), I believe Harvester has been more effective in its ongoing development. Both brands need to remember their core brand positioning strengths, and continually refocus on evolution and execution to deliver the brand position in a style relevant to today’s market needs.

The diseconomies of brand scale in foodservice
Clearly there are many economic advantages of operating scale brands of 200-plus locations. But there are also fundamental disadvantages to continually counter. The requirements of central menu management and supply chain naturally reduce response time to changing seasonal trends compared with nimble small-scale concepts. And there is the ongoing threat of big brand mediocrity to guard against. These large-scale brands require a paranoid obsession with product and service quality to counteract their relative inability to source more artisan local products.

But success is still a strong long-term option
Despite the shifting market structure, the need for popular family dining brands will remain a core of the UK eating out market. 57 million customers a year can’t be wrong! Both Harvester and Frankie & Benny’s can retain their leading roles in this sector. Both brands were built on solid foundations. But for both brands there is an exciting journey of ongoing brand revitalisation ahead.
Ian Dunstall is a brand consultant supporting brands and start-ups in the foodservice market. He will be a speaker at the Propel Brands Masterclass on Friday, 10 June
 

Simple solutions for complex problems by Paul Chase

One of the interesting things about the EU referendum is the public clamour for “the facts”. People are bamboozled by claim and counterclaim and long for someone just to explain things to them in a simple, factual manner, without spin or bias. I’m not proposing to discuss the “Neverendum” in this article, but this desire for “simple facts”, and for simple solutions to complex problems that will supposedly arise from simple facts, has a much wider resonance. There are three examples of it currently in the news – the Scottish alcohol consumption figures, leading to a renewed call for minimum unit pricing (MUP); the challenge posed by the National Obesity Forum to born science on nutrition; and the banning of so-called legal highs, otherwise known as New Psychoactive Substances (NPS).
 
Scotland has for a long time had a greater level of alcohol consumption per head than England and Wales and the news consumption per head of population has risen in Scotland for the second year running was coupled in the media with the observation Scots drink 20% more alcohol than their English and Welsh counterparts. This gives the erroneous impression consumption in Scotland has risen by 20%. It hasn’t. It has risen by 2%. And that 2% rise in consumption is over two years – 2014 and 2015. This needs to be placed in the context of a 9% fall in alcohol consumption between 2007 and 2013, so the simple fact is alcohol consumption in Scotland is still 7% lower than in 2007.
 
But this tiny upturn has been blamed by campaigners on the alcohol industry’s desire to arrest the decline in sales. At the same time we have seen a big increase in the amount of alcohol consumed at home – 74% of alcohol is now bought from off-sales retailers – so, blame the dastardly supermarkets? Well how about we look instead at the lowering of the drink-drive limit in Scotland as something that has driven people out of pubs and into home drinking – where we know people pour themselves bigger measures than when they drink in the supervised environment of the pub.
 
According to Alcohol Research UK, weekly alcohol consumption per head in England and Wales in 2015 was 17.4 units; in Scotland it was 20.8 units. This is moderate drinking by anyone’s standards except the anti-alcohol zealots of Alcohol Concern and Alcohol Focus Scotland. And what is the Scottish health community’s solution to this over-hyped, over-inflated problem? Why, minimum unit pricing of course!
 
And what of the National Obesity Forum’s assertion this week high fat diets are good for you and low carb and low sugar diets are the answer? This assertion from a bunch of Atkins Diet cranks is another example of how tiny special interest groups feed into the public’s desire for simple solutions. Identify one ingredient – sugar – and tell people to consume as much bacon and eggs, beef dripping and lard as they want – just cut down on the sugar, and you’re giving people another simple solution to a complex problem. And government bows to this kind of campaigning by introducing a tax on fizzy drinks – something that will have no effect whatsoever on levels of obesity.
 
My third example – the ban on “legal highs” – kicked in this week. Readers are probably aware of substances like Spice, which is a synthetic drug that mimics the effects of cannabis, and M-Cat, which has similar effects to strong amphetamine drugs. These and many other compounds are available on the internet and at so-called “head shops” on the high street. They have been linked to about 400 deaths over the past few years, and Spice in particular is blamed for an upsurge of violence in our prisons. The problem for the government is every time it banned a new legal high the chemical composition was changed slightly so it became legal again. The government’s response was to ban everything except those intoxicants that were explicitly legal – essentially alcohol, nicotine and caffeine. I can understand the government’s desire to be seen to do something about this problem, but there are problems with this prohibition-style approach.
 
Firstly, many of these drugs mimic the effects of existing illegal drugs – cannabis, cocaine and ecstasy. Given that successive governments have ruled out decriminalising or medicalising their supply, prohibition becomes the only option. So, first criminalise the three main recreational drugs, and then when that leads to the creation of a market for cheaper, “legal” synthetic alternatives, criminalise them too. Sale of these drugs will now move to the dark web and it is unlikely anyone who wants them won’t be able to get them. There is no simple solution to the drugs problem, but we must surely be able to come up with something more intelligent than repeating a failed strategy of prohibition because the public expects something to be done.
Paul Chase is a director of CPL Training and a leading commentator on alcohol and health policy 

Justifying the price of super-premium beer by Glynn Davis

Despite the massive choice of pubs and bars around Soho in central London, I frequently find myself holding end of day “meetings” in that odd beast of a pub Duck & Rice. The allure is the two gleaming copper tanks positioned prominently in the pub’s doorway. They hold unpasteurised, unfiltered brewery-fresh Pilsner Urquell that has been shipped over in trucks from Pilsen in the Czech Republic and that is dispensed in a condition equal to if it had been drawn straight from the barrel at the brewery.
 
When the hazy Pilsner Urquell branded tankard lands on the bar you know you’ve received a full-on branded experience you feel is worth spending the £5.50 price tag on. This is undoubtedly music to the ears of Gary Haigh, managing director of Miller Brands UK – the British subsidiary of SABMiller and owner of brands including Pilsner Urquell, Peroni and Kozel, which has just been bought by Asahi Group of Japan. It is clear to me why Pilsner Urquell costs this amount of money but I would not be able to assign quite the same sort of value to Peroni. But regardless of my own thinking on such matters Haigh is talking up the story of how we are now in a beer market where “super-premium” is a category – in the same way the spirits industry has successfully segregated its brands into bands and the top-end has gained this super-premium status.
 
When talking prices in the London market Haigh puts standard lager in the £2.25 to £3.25 bracket, premium in the £3.25 to £4.15 range, and super-premium at anything above this level. We’re talking double the price of bog-standard beer so no wonder super-premium is proving rather an attractive segment for Miller Brands and it is keen to develop this part of the market. They’ve seen the ability of craft brewers to charge more than £5 and fancy a bit of the action. They know it takes more than putting together a glossy ad campaign and simply telling consumers the product is “reassuringly expensive” without any real justification for such statements. Most of those drinkers have left the building. Hence Miller has come up with a tick sheet of components that comprise a super-premium beer: authenticity; great taste; brand story; visual identity (ie decent glassware); and the overall experience.
 
While Pilsner Urquell – especially when sold from the tank in Duck & Rice – ticks all the boxes for me to be classified in my mind as super-premium I’m afraid I’d question how far this super-premium methodology would stretch to other brands in the portfolios of the big international brewers. Miller Brands and SABMiller have been terrific stewards of Pilsner Urquell, which still commands tremendous respect in the marketplace, but I’m unsure how many beers under the ownership of large multi-national operators would be worthy of being placed in the super-premium category.
 
Miller has in fact placed Peroni in this category and in so doing it might well be calling time on what has been described for the past decade as “world beers”. The Italian brand has been king in this field, with sales way beyond all the other beers in the category. But the problem with “world beers”, according to Haigh, is the classification does not give sufficient reason for customers to pay big money for the product. It has been merely a proxy for premium international lager – that is shipped in from overseas or even produced under licence in the UK.
 
The problem I have with the super-premium tick sheet is it seems to have been devised purely to support charging a high price level for a beer. The components all have value in terms of contributing to what constitutes a product that consumers will deem to be of sufficient value to expend more money on than the alternatives but to go through a process this way in order to justify a price level seems rather clinical. The use of such methodologies undoubtedly differentiates large international breweries from the craft brewers. I’d be mightily surprised if any craft brewer has run through a tick sheet to justify the high price points they plan to charge for their beers. They undoubtedly know they don’t need to run through such a process as the value of their products is already obvious to drinkers – they don’t need the hard sell.
 
This is not lost on the big boys and is why we have the scenario of them buying the likes of Camden Town, Meantime Brewery, Ballast Point and Lagunitas. Unlike many people, I don’t have a problem with the shopping trips the big brewers are currently undertaking – so long as the quality of the products they are buying is maintained. Whereas previous brewery purchases resulted in the denigration, and in many cases the death of, the acquired brands I reckon we are living in a different era today and the big operators now recognise the value-destroying folly of employing such strategies.
 
But what I do have an issue with is the process of constructing a justification for charging super-premium prices for beers that don’t really deserve it. That’s not a long-term way to win over drinkers who are increasingly turning away from anything that is deemed to be too manufactured.
Glynn Davis is a leading commentator on retail trends

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