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Morning Briefing Strap Line
Fri 16th Jun 2017 - Friday Opinion
Subjects: Ei Group and the shifting pub environment, IKEA’s growing food sales, a future-forward industry and beyond parody
Authors: James Armitage, Glynn Davis, Cat Jennings and Paul Chase

Ei Group and the shifting pub environment by James Armitage

Most people would agree “great British pubs” continue to play a fundamental role in our culture, and the significant contribution they make to local communities hasn’t changed. What is increasingly apparent, though, is that the environment in which we operate is shifting considerably. As such, the industry has to adapt – and that goes across the board – whether you’re a freeholder with one pub, through to us at Ei Group, the largest owner and operator of pubs in the UK.
 
We already had our sights set on developing our business by utilising detailed insight to ensure its continued success in the modern world, and with the Pubs Code coming into force, we needed to make sure those changes accommodated the new legislation. Part of what drove our desire to evolve were the challenges presented by the wider on-trade market. As pub operators, we now compete with many other occasions and competition is tougher than ever before.
 
We compete with people’s homes and what some have dubbed the ‘”three S’s” – sofa, social media and supermarkets. Easy access to quality fast food and entertainment at the touch of a button, along with the fact the off-trade faces a far lesser tax burden than pubs do, makes a night in far more affordable and appetising. But our competition doesn’t end there. There are a plethora of interesting restaurant concepts, pop-up bars, a burgeoning demand for street food and creative experiential events that appeal to today’s consumers who are hungry for “experiences”. Suddenly, pubs have got to shout really loud and provide a compelling reason to be first choice.
 
For individual pubs, that means making sure your offer is spot on for your local demographic and you market your venue cleverly. For us at the helm of a large pub company, it’s meant innovating in a very different way. While we are evolving as part of our five-year strategy, Ei Publican Partnerships (our leased and tenanted business) will continue to remain the largest part of the group for many years to come. Our purpose is to work in partnership with our publicans to grow pub profit, supporting pubs as sustainable community assets with our vision to be the first choice company for publicans.
 
We also have more than 300 commercial property agreements, and while the majority of these trade as pubs on a free-of-tie basis, our tenants also include a host of leisure retailers, independent operators and well-known high street brands. At the same time, we have diversified into new territory by creating our own Ei managed operations division. As part of this we launched the Bermondsey Pub Company, which is establishing itself as a network of premium pubs with interesting interiors, great food and a range of quality drink options. We also introduced the directly managed house concept, Craft Union Pub Company, which is growing apace and is fundamentally about creating great pubs with affordable prices at the heart of local communities.
 
But it’s fair to say the concept that has attracted most interest from our industry is our Ei managed investments business unit, an innovative partnership model allowing us to work with carefully selected managed house operators to share in the benefits of trading in high-quality and specialist retail segments. It’s great for them because we’re able to use our size and scale to help them grow their businesses and provide access to some incredible properties across the UK. And the big plus side for us is we can learn from the masters as well as our managed business and take those learnings back into our leased and tenanted estate – helping share insight and guidance, experience and best practice to those publicans on the ground who are being affected by the new challenges and ever-increasing competition.
 
It also means the diversity in the type of pubs we’re running is truly exciting and allows us to tap into new and different segments of the market. Our expert partners include Rupert Clevely, with Hippo Inns, Karen Jones, with Frontier Pubs, and Peter Borg-Neal, with Hunky Dory Pubs. Ei managed investments has grown rapidly since its launch in May 2015 and there are now 25 pubs operating across the eight different ventures.
 
All of this has been a steep learning curve for us, but we have a truly outstanding team of people who are eminently passionate about pubs, and they have worked tirelessly to get our new projects off the ground with success. Of course we are aware of, and ready for, any possible headwinds that might come our way from the Pubs Code and the political changes our country is facing, but we are optimistic about the future, and excited to be on a journey of evolution that the whole pub trade is experiencing.
James Armitage is group services director at Ei Group 
 

IKEA’s growing food sales by Glynn Davis

IKEA is a pretty formidable retailer that has had a major impact on the way we buy furniture and homewares – remember its “Chuck out your chintz” campaign? The number of people who at some point have bought one of its Billy bookcases is phenomenally large. It has certainly been a bitter adversary for its many competitors in the furniture and home categories for many years as it pioneered the selling of goods by creating room interiors in its big stores.
 
Just think if it was able to do a similar thing to the restaurant industry? Well, it has plans to do exactly that. Over recent years its food proposition (comprising its Swedish food markets and in-store restaurants) have rather quietly been having an increasing impact on the leisure industry after IKEA realised the revenues in this division were rather more meaningful than it had given credit.
 
It had slightly derogatively called its best-selling Swedish meatballs “the best sofa-seller” but then it found sales of the golf ball-sized taste capsules ran to more than a billion per year. This changed its stance somewhat and it reckoned its balls should be taken a bit more seriously. They had been lost somewhat in the overall vastness of the business where food accounted for only about 4% of sales. But hold on a minute, since total revenues hit approaching $40bn per year, this food element is approaching $2bn – not an inconsiderable sum.
 
IKEA management took the decision it should bring about changes to drive up sales – with one big initiative involving the reconfiguring of the restaurant spaces (they typically hold an impressive 600 diners and one Korea store accommodates a hefty 1,000 people). The idea has been to incorporate different eating areas in the restaurant spaces that reflect the various requirements of shoppers on varied dining missions. This work has helped increase food sales by about 8% annually since the initiative began.
 
Also playing its part in this growth is the translation of the company’s ethos for limited waste and sustainably sourced goods with its furniture on to its food offer. It changed its supply chain and signed deals with farmers and producers whose models were ethically minded. And when it undertook data analysis of consumption patterns – to help drive better forecasting – the result was a 30% reduction in food waste in the test markets.
 
These sorts of initiatives chime very much with today’s increasingly socially conscious shoppers who include the younger demographic. But what they also demand is extremely competitive pricing. Just as with its furniture, dining at IKEA does not bust the bank. Pricing is what IKEA has become famous for after all so it is only natural that its food should also fit into this model.
 
It might seem surprising but actually the business’s success is not based on cheap prices but on unique product. This is what drove shoppers to IKEA in the first place and cheap prices were simply a manifestation of the large sales volumes it enjoyed, which enabled it to keep prices at very low levels. This virtuous circle has been the key to its success but the foundational plank to all of this is having unique products.
 
This is also at the heart of much of its food proposition. Its Scandinavian pastries, Lingonberry jam herrings in curry sauce, and Dime Bar cakes are examples of its offer that are not readily available in other cafes, food stores and restaurants. Apparently, its innovation labs are also working on the meatball of the future that will have its own unique elements!
 
I for one am absolutely in the 30% of IKEA customers who visit its stores just for the food. When you combine this interesting fact with the growing levels of food sales at its stores then it is little surprise the company took the decision last year to trial some pop-up restaurants in London, Paris and Oslo. Part of the appeal was it brought the IKEA food offer into small city centre stores rather than enormous out-of-town sheds. On the back of this successful experiment, IKEA has recently stated it is considering opening standalone restaurants or cafes. To move from enormous furniture stores to small restaurants is certainly a giant leap but if anybody has the balls to do it I’d say it’s IKEA.
Glynn Davis is a leading commentator on retail trends 

A future-forward industry by Cat Jennings

Over the past few years so much has evolved from a technology and customer experience perspective in the foodservice and hospitality sector. There have been some rapid changes and it’s exciting to see some of the current innovation in the industry.

A brave new world
What struck me is how much the competitive landscape has evolved and companies are having to take more innovative approaches, from customer service to marketing, to get cut-through in a crowded market place. It’s not surprising to hear some of the chief executives and directors I’ve spoken to recently say they are not getting the same level of bookings as they did from press coverage a year or two ago. What has become clear is word of mouth and influencer endorsement are becoming increasingly important and it takes many factors nowadays to affect people’s decision-making on where they go to stay, what to buy, where to eat. 

Rather than a negative, this serves as a fantastic opportunity to get a greater share of voice. You can now make a considerable impact and get greater returns just by being disruptive. This can easily be done through brilliant content, creative experience and focusing on interesting topics that people want to read and share.

The evolution of eat, drink and sleep
It is clear to me the hospitality sector has become one of the most creative industries to work in. I’m proud to have client partners who are keen to experiment and pilot novel approaches. Speed’s mantra is to stay two steps ahead and we do this through social listening and media monitoring to identify trends and use PR techniques to give our clients opportunities for thought leadership.
 
Three key trends we’re watching closely are:

1) Automation nation
To balance the cost of overheads and increasing competition from at-home dining, restaurants and hotels are honing-in on the convenience and efficiency benefits they can offer to consumers, whether it be through kiosk-only outlets, chatbots that facilitate online reservations, or drones that can deliver frozen yogurt to your doorstep. One company doing this particularly well is Supper in London, which combines Michelin restaurant-quality dining with the convenience of eating at home.

2) Reduce, reuse, upcycle
Chefs are tackling food waste head on. Much like the nose-to-tail approach taken with meat, they are looking at innovative ways to maximise the whole vegetable and how they can get creative with space to grow their own ingredients. The recent WastED pop-up on the roof at Selfridges was a fantastic example of how restaurants can reimagine by-products and create a menu of waste-based dishes. 

3) The experience dichotomy
Driven by a sense of exploration or simply FOMO (fear of missing out), Brits today are on the hunt for new experiences. In turn, restaurants are offering novel, fun and memorable meals through pop-ups, entertainment-themed venues and “secret” offerings. It’s all about connecting with the Insta-everything generation. To see this trend brought to life no better example can be found than Edible Cinema – a clever eating experience inspired by popular movies.

Food for thought
The fast-paced nature of evolving food trends presents businesses with communication challenges and opportunities. Operators need to be open to the idea of consumer-centric trading, to constantly look for ways to innovate and to engage openly and honestly with their customers. To do this to significant effect, there are three things I would advise:

Social listening and creative hijacking: Getting mindshare by being opportunistic with causes your customers care about will ensure your business is always front of mind, stands out from the competition and benefits from consumer brand loyalty. Think personalisation and originality.

Story sharing: Look for opportunities to partner with like-minded organisations to co-create a value proposition that will resonate with your consumers and take them on a journey with you. There are many ways to bring this to life from multi-platform storytelling clever event marketing, strategic media buying or smart social and digital strategy and execution.

Stop spinning: Don’t think of PR as means to de-risk activity or put a positive spin on something. It’s our role to guide brands to do the right thing from the outset. Rather than hide or not comment, use negative situations as an opportunity to improve the customer experience and, as a result, their loyalty.

I’m pleased to see the foodservice and hospitality industry starting to shift and have more of an appetite to become future-forward by establishing PR propositions that are true to them and their customers. It’s what the authenticity movement is all about – so embrace it!
Cat Jennings is the new director of the foodservice and hospitality division of Speed Communications

Beyond parody by Paul Chase

As the dust settles on the general election result we can see a period of great political uncertainty lies ahead. But in an uncertain world, the one thing you can rely on is the public health racket will carry on regardless with their efforts to achieve world domination!
 
It has become a cliché to say “alcohol has become the new tobacco” – that the methods used to damn tobacco smoking, and to control the advertising and availability of tobacco products, has provided a template for the same project in respect of beverage alcohol. But the ambitions of “public health” don’t stop there. Whilst remorselessly campaigning for minimum unit pricing as a panacea for all alcohol-related problems, people variously described in the media as “doctors” or “experts” have called for a minimum price on sweets to cut obesity in children. It’s a magic formula you see. As Professor Sir Ian Gilmore of the Alcohol Health Alliance once put it “price changes culture”.
 
According to the Daily Mail:
– Doctors have called for a minimum price on sweets to tackle the nation’s obesity crisis 
– The move would raise the price of the most sugar-laden snacks in a bid to deter children
– Experts believe raising prices of sweets and chocolate is one of the best ways to tackle the problem
 
All this harks back to what “public health” regards as a watering down of the obesity strategy of the Conservative government, and represents a further attempt to build on the “sugar tax” on fizzy drinks. It also fits into a wider “public health” agenda to leverage government control on all the “industries of addiction”, which in its view drives ill-health globally, and to force the food industry into a mass reformulation of products. The fight to eliminate sugar and salt from our diet – essentially to render food tasteless – is well and truly on!
 
The notion of a minimum price for sweets seems to me beyond parody – not least because it is based on a false premise that the numbers of children who are overweight or obese is dramatically increasing, when essentially it has flat-lined. The headlines about rising childhood obesity have one fatal flaw – they aren’t true.
 
The official figures show about one-in-five year six children are obese. This figure hasn’t changed significantly in five years – 2010/11: 19%; 2011/12: 19.2%; 2012/13: 18.9%; 2013/14: 19.1% and 2014/15: 19.1% (all official Health and Social Care Information Centre figures). Now, it isn’t good that one-in-five kids are obese at year six, but to frame it as a “growing crisis” is simply not true. Data from the Health Survey for England going back to 1995 shows rates of obesity among kids aged two to ten peaked in 2005 and have fallen by a third in the past decade. Among 11 to 15-year-olds, the peak arrived in 2004 and rates have since fallen by a fifth (Diet & Fitness, C Snowdon).
 
The number of adults overweight or obese has likewise flatlined at about 60% of the population. Nearly always “overweight” and “obese” get combined in order to make the number more scary, but paradoxically overweight people have greater longevity than people of a healthy weight or obese people; suggesting some problems with the definitions!
 
It shouldn’t surprise anyone the proposal for a minimum price for sweets comes from Scottish doctors – Scotland is the home of minimum pricing and the SNP government is completely in thrall to temperance thinking and more generally to the world view of those who see the food and drink industries as conspiracies that have addicting the population to alcohol/sugar/salt at the heart of their commercial strategies. We’re back to one-dimensional capitalist bad guys.
 
The proposition for minimum pricing for sweets comes from the Lothian division of the British Medical Association (BMA) and is proposed as a motion to be heard at the BMA’s representative meeting to be held later this month. It states: “This meeting believes in line with rising obesity and increasing burden of type 2 diabetes on the NHS that the government taxes sugar and brings in minimum pricing for all confectionary products and sweets.”

The BMA’s agenda committee has also tabled a similar motion. Doctors will vote on the motions at the meeting, which takes place in Bournemouth, and if approved could become BMA policy.
Beyond parody? You couldn’t make it up.
Paul Chase is a director of CPL Training and a leading commentator on on-trade health and alcohol policy

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