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Morning Briefing for pub, restaurant and food wervice operators

Fri 17th Nov 2017 - Friday Opinion
Subjects: Craft beer market is growing up, MUP – implications of the Supreme Court decision, MUP – what it might mean for other territories, and tackling the hospitality industry’s digital skills gap
Authors: Glynn Davis, Paul Chase, Paul Bartlett and Michael O’Flynn

Craft beer market is growing up by Glynn Davis

When recently attending a drink’s retail awards evening I had a conversation with an award-winning operator of a high-quality venue that stocks a range of craft beers that any aficionado would be extremely proud to frequent. He made a point to me about how things were changing in the market. How companies such as Yorkshire-based Pivovar Group – that operates eight bars around the country – were not stocking quite the same cutting-edge craft beer selection nowadays they had made their name from selling in their earlier years.
There are others who have now taken up the mantle of being at the very sharp end of things and are constantly hoovering up the tiny batches of output from certain fashionable brewers. The retailer made the point that whenever one of these brewers releases a beer online he orders the (inevitably) tiny allocation immediately and within 20 minutes it is typically sold out. These beers are then just as quickly snapped up by his customers when they see it available in his shop via social media.
When operators are dealing with the most popular craft brewers, who are producing a seemingly constant stream of attractive limited-run beers, then the reality is they have to grab whatever bits they can get their hands on whenever it becomes available. For the bar owners at the vanguard of craft beer, and the new breed of bottle shops, getting hold of these beers is what they are all about. It’s the bread and butter of their existence.
This sort of activity is all well and good for these types of niche operators but what about those players that have grown up over the past ten-plus years during the craft beer revolution? Pivovar Group, Draft House, North Bar, and Craft Beer Company are among the small band now running portfolios of outlets and are not really going to be quite as obsessed about securing two cases or a couple of kegs of the latest 15% cloudy fig and vanilla stout from the hottest new brewery.
The reality is they are now more involved in the volume game. There is no escaping the fact that having scale is only of real value if you can take advantage of pricing at volume. This is the absolute opposite of a single-unit operator who should take advantage of offering unique and hard-to-find beers that they do not need to – and in fact could not – source in any meaningful volume.
The other point to note is the market has changed dramatically. Pivovar set up shop in York ten years ago and Jamie Hawksworth, its co-founder, recounted to me a recent visit to a bar in Chesterfield, which was rammed to the gills with eager craft beer drinkers. But what they were downing was not the cutting-edge brews but the sort of beer Hawksworth says he would have been stocking a decade ago.
It was clear to him his new competitors were doing things he’d long since galloped past and the question was whether he’d gone too far in the pursuit of cutting edge. He pondered whether the battle for beer has to a large extent been won and that there is now a need in the market place for beers that are craft but maybe not too crafty. For beers that are palatable to a growing audience of more regular, but increasingly interested, beer drinkers.
There is clearly a whole spectrum of craft beer out there – from the extreme esoteric brews to the more commodity end – and the operators that are growing their estates and increasingly appealing to a broader more mainstream audience will need to calibrate their beer selection accordingly.
Those that do look to fit in with this new dynamic will be moving into a lesser margin but higher volume model. As unseemly as this might seem to the beer geeks and operators of cutting-edge bottle shops who grew up on frequenting bars run by companies such as Pivovar this is the reality of a market and an industry that is growing up fast. Craft beer has grown from the preserve of a protective little group to something much, much bigger. We should all be pleased about that – it’s called progress.
Glynn Davis is a leading commentator on retail trends 

MUP – implications of the Supreme Court decision by Paul Chase

So now we finally know! The Supreme Court confirmed, in its judgement on Wednesday, the Scottish government’s legislation to introduce a minimum unit price for alcohol is lawful, and does not offend against European Union competition law. I don’t intend to look in detail at the legal arguments that underpin this decision, but rather to examine the broader question and its implications – where we go from here.
Interestingly, the Supreme Court states minimum unit pricing (MUP) has two objectives – to reduce the consumption of alcohol in a targeted way, that is, the consumption of hazardous drinkers living in poverty in deprived communities; and to reduce consumption at the level of the whole population. Except insofar as reducing consumption of any numerically significant demographic will contribute to a fall in average, per capita consumption, it is hard to see how MUP can be both a targeted measure and, at the same time, a whole population measure. 

The paternalistic nature of both MUP as a policy and the nature of the legal judgement itself, is evidenced by the fact it is explicitly stated this is a measure directed at people on low incomes notwithstanding the fact that hazardous drinking is predominantly a problem located in the moneyed, middle classes. They apparently can look after themselves, because a minimum price of 50 pence per unit isn’t going to affect the products they buy.
The underlying moral judgement is if people on low incomes who buy cheap alcohol, but don’t drink hazardously, now have to pay more, then that is an acceptable trade-off in terms of reducing the hazardous drinking of the poor. Paternalism is alive and well!
So what happens now? The Scottish government has minimum pricing legislation already in place and now needs to do two things – enact secondary legislation (a Scottish Statutory Instrument – SSI) and then amend licensing law to make it a mandatory condition on all premises licences in Scotland that alcohol may not be sold at less than the minimum price. There will presumably be a “big bang” date when this will come into effect, probably in the first quarter of 2018.
I am opposed to MUP because I think it is a bad policy, not because I think it is unlawful – but if the Supreme Court had decided it was unlawful that would have been helpful, but it didn’t, so we’re stuck with it now, at least in Scotland and soon in Wales too. In England the government, obsessed as it is with Brexit, is still taking a “wait and see if it works” approach. The Scottish legislation contains a requirement for ministers to evaluate the effect of MUP in five years’ time and it automatically lapses after six years (the “sunset clause”), unless Scottish ministers specifically order its continuation. Two points come to mind. Firstly, if the evaluation is carried out by the Sheffield Alcohol Research Group – the same people who massaged the statistics to produce the new “lower-risk” drinking guidelines – then I have no faith in this being a proper, objective evaluation. And as for the possibility that Scottish ministers would in any circumstances allow this measure to lapse, don’t hold your breath.
Some intriguing issues arise with regard to enforcing MUP. I imagine some enterprising individuals will establish cheap booze supermarkets in English border towns so a lively cross-border trade can arise. This trade will enable consumers to engage in a domestic form of “booze cruise” and it will inevitably fuel “white van man’s” supply of the illicit cheap booze market north of the border. It’s an ill wind that blows no-one any good! And think of the monumental task of enforcing minimum price legislation in every street corner convenience store in Scotland. The big supermarkets will put a system in place, but will small store owners even know how to calculate how many units of alcohol there are in a can of beer or a bottle of vodka?

I have four big fears. Firstly, MUP will spread to the rest of the UK. Secondly, now we have government price-fixers in the sector we will never get rid of them. Thirdly, MUP will become a modified form of alcohol duty escalator – there will be agitation for the minimum price to rise by inflation plus 1%. Fourthly, this will spread from the off-trade to the on-trade. Those in the Scottish Licensed Trade Association who support MUP, because they see it as harmless Tesco-bashing, will have a lot of explaining to do if local licensing authorities, freed from the constraints of competition law, start fixing a £1 per unit price for pubs and bars in their area. It is only a matter of time.
Paul Chase is a director of CPL Training and a leading commentator on alcohol and health policy

MUP – what it might mean for other territories by Paul Bartlett

Strong, cheap alcohol has been readily available for far too long. Almost half of all alcohol in the off-trade retails below the minimum unit price of 50p – and the maximum recommended weekly intake of alcohol of 14 units can be bought for just £2.52. 

But the price taxpayers and vulnerable people are paying is substantially more. That’s why the introduction of Minimum Unit Pricing (MUP) in Scotland is such a momentous move. In the first year alone, MUP is expected to prevent 60 alcohol-related deaths, 1,600 hospital admissions and 3,500 crimes. Overall alcohol consumption by harmful drinkers is predicted to reduce by more than 15%.

Although the majority of people enjoy drink responsibly, low-cost, high ABV alcohol has taken its toll on communities throughout the country. Drinkers in poor areas consume 34% more of this type of alcohol than those who are not in poverty. The perseverance shown by the Scottish government in addressing this means the country takes a massive leap forward in its approach to responsible drinking. 

And it’s a leap that has been well received. There’s been an overwhelmingly positive reaction to MUP, from drinkers, public health experts and politicians across the entire party spectrum. For these reasons and many more, we’ve been a strong, vocal supporter of MUP for years. We believe it is only right the industry steps up and plays its part in helping to tackle alcohol misuse, so we’ll be working closely with our customers and the Scottish government to implement MUP as quickly and effectively as possible.

Now that a precedent has been established in Scotland, will others follow? We hope so. The potential benefits to the communities we serve are massive. Academic studies in Canada, one of the few countries currently using MUP, suggest minimum pricing has successfully reduced alcohol consumption and delivered a 9% decrease in patients being hospitalised for alcohol-related diseases.

So although a “sunset clause” of six years exists for MUP in Scotland, everything points towards it being key in helping tackle irresponsible consumption and its resulting health harms. And there’s no reason why similar legislation shouldn’t be ushered in elsewhere. Ireland, Northern Ireland, Wales and England have a fantastic opportunity to follow suit and do the right thing.
Paul Bartlett is group corporate relations director at C&C Group, owner of Tennant’s Lager 

Tackling the hospitality industry’s digital skills gap by Michael O’Flynn

The digital skills gap remains a constant thorn in the side of many businesses across a number of industries. Consistent releases of new technologies, once the previous iteration was finally fully integrated, have led to a workforce unable to maintain quality alongside systems too advanced for many to comprehend in a short time-frame.

The majority of industries in the UK are currently facing a digital skills gap, sometimes described as a crisis. Yet for most, there’s a general optimism around possible fixes to the issue. More and more training courses and skills-based qualifications can be utilised by employers to ensure their current workforce fully understands how to use the systems in place, so why would hospitality be any different?

In fast-changing sectors such as hospitality or retail, employee turnover can end up higher than most others, a direct consequence of this means skills gained via training are continuously being lost in the shuffle. By 2024 it’s estimated a total of 1.3 million new staff will need to be recruited to maintain sufficient levels; 975,000 (or 75%) of these new employees will be direct replacements for departing members. 

As a result of the short-term nature of employee lifecycles, implementing a continuous training scheme isn’t practical nor does it help financially. In order to tackle the gap, the hospitality industry must change the way it views its staff. Similarly to retail, which also suffers from a growing skills gap, steps need to be taken to promote these industries as a career option rather than a destination for low-skilled individuals.

In the past year, 41% of employers said they hadn’t offered any form of training, although no reasoning was provided. One key aspect that prevents training is the constant turnover of staff – why train someone you’re going to lose in a year or two? Another 21% said the majority of their training was focused primarily on entry-level employees, and as a result, this caused the business to have an increased skills gap. A solution to this would effectively be to update their current training agenda and pass this on directly to the new starters without the need to upskill them in the future.

The digital skills gap currently costs the UK economy £63bn per year, and this figure will continue to increase over time if nothing is done to face the problem head on in a collision of skills development, current sectorial requirements, and missing knowledge needed to keep with the times.

With many different options available to close this constantly growing learning calamity, it’s sometimes quite difficult to know where to start, or even to be sure what is required from your staff now and in the future. With the hospitality industry ever changing, it is of the upmost importance your employees are kept up to date with these changes, given adequate training to upskill, allowing them to grow and develop to further pull together the seams of the growing skills gap.

Some might say the best way for companies to move forward and bridge the gap is to bring in new members of staff that have been brought up in the “digital age” where technology comes as second nature to them. In reality, while these digital natives possess a greater degree of digital skill compared with those born before them, the majority are actually lacking in business-ready skills. The ability to get online, using social media and browsing the web displays a level of technological literacy but isn’t really that useful within hospitality.

Even if digital natives were an option, this isn’t a cost-effective solution; with the initial recruitment cost, interviews, induction training, etc this amounts to an extortionate amount costing more than simply bringing in an outside training company that is able to fulfil every requirement you have relating to closing your internal skills gap within the company.

Demand for digitally skilled employees far outpaces the current supply, but with a steady stream of digital natives entering the workforce year-on-year, there’s an opportunity to naturally close the skills gap via internal mentoring schemes. Until such a time arrives where current staff are outnumbering the demand, implementing mentoring programmes between those who are already digitally trained and digital natives who display a natural aptitude towards the required abilities can present a short-term fix.

Every industry within the UK is currently experiencing some level of skills gap, with digital occurring the most across industry borders, but an ongoing lack of vital skills is harming business. In hospitality, continuous advances in technology bring the risk of leaving employees lost in the midst of a revolution. Only through a steady stream of upskilling via training and mentoring can we reach the point where the availability of able staff outmatches the requirements of the industry.
Michael O’Flynn is a director at Professional Academy, Cambridge-based business training and apprenticeship providers which is keen to push UK businesses away from opening an internal digital skills gap. Professional Academy also offers apprenticeships in hospitality, which includes digital skills training as standard

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