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Tue 5th Dec 2017 - Optimism dips among sector leaders, more than two-thirds increase menu prices as costs soar
Optimism dips among sector leaders, more than two-thirds increase menu prices as costs soar: Optimism among leaders in the eating and drinking out sectors has been substantially dented since the start of the year, CGA’s latest Business Confidence Survey has revealed. The survey found only 30% of leaders of restaurant, pub, bar and coffee shop groups are optimistic about general market prospects for the next 12 months – down from 47% in the first quarter of 2017. Optimism about prospects for their own businesses has followed a similar trajectory, falling from 68% in the first quarter to 52% in this latest survey. More than two-thirds (69%) of leaders said their business had increased menu prices during the past quarter in light of soaring costs. The research, based on responses from more than 100 senior executives across the sector, including big corporates and small entrepreneurial operators, also found a third (32%) of leaders admitted their business’ performance had been below expectations in the past six months – down 5% from May’s survey. The latest Business Confidence Survey found optimism is unlikely to increase in the short term, with more than half (57%) of leaders concerned about consumer confidence during the next six months – although only one in eight (12.2%) are pessimistic about their own business’ prospects for the next year. The research revealed some more positive trends, including evidence from the CGA BrandTrack survey that consumers eat out just as often as they did four years ago – with frequency among 18 to 44-year-olds at a four-year high. Meanwhile, 71% of leaders said the decision to leave the EU had a negative impact on their business, with only 3% citing a positive impact. More than three-quarters of leaders said increasing costs of raw materials (79%) and rates (78%) had negatively affected their business. The new figures chime with other CGA research that indicates tough trading conditions. The Coffer Peach Business Tracker revealed like-for-like sales at leading managed pub and restaurant chains had risen by only 1.3% during the past 12 months, while the CGA Prestige Foodservice Price Index demonstrated sustained rises in food costs during 2017. Property and people costs have also increased this year. CGA vice-president Peter Martin said: “Our Business Confidence Survey is the clearest indication yet of the trials leaders of out-of-home eating and drinking face. With food, property and people costs all rising, consumer confidence softening, competition intensifying and Brexit casting a long shadow over the future, operators are enduring something of a perfect storm of challenges. But this is a creative and resilient sector and while leaders’ optimism has been dented this year, they will be rolling up their sleeves and fighting hard for growth in 2018.”

Pubs and restaurants see double-digit growth in November as consumer spending falls in real terms for second consecutive month: Pubs and restaurants saw double-digit growth in November as consumer spending fell in real terms for the second consecutive month, according to new data. The findings by Barclaycard, which sees almost half of the nation’s credit and debit card transactions, revealed consumer spending grew 2.8% year-on-year in November – below the annual rate of inflation of 3% and maintaining the muted levels seen throughout the second half of 2017. Brits opted to spend on leisure time with friends and family as the nights drew in, helping pubs (11%) and restaurants (12.1%) return to levels seen earlier this year after a brief slowdown in the three months to October. This pushed up entertainment spending to 9.5%, its best performance since July. Confidence in household finances fell from 64% to 56% month-on-month as inflation and the first interest rate rise in a decade weighed on sentiment. Only 30% of consumers feel confident in the UK economy, down from 37% at the end of September. A gap of 30 percentage points now exists between those who are confident and those who are not – the second widest since Barclaycard began tracking consumer confidence in 2014. In-store spending was down 0.1%, the seventh straight month in negative territory. Although online spending posted a double-digit increase of 10.8%, this was down from an August high of 15.7%, with November marking the third successive month in which growth in online spend has slowed. Essential spending growth of 3% was broadly in line with October’s figure (2.9%). Growth in non-essentials, however, rebounded as consumers tweaked their allocation of spending on the “nice-to-haves”, rising 2.8% from 2.2%. Brits plan to continue spending conservatively, with a quarter (24%) indicating they are less willing to splash out on non-essential items because of the rate hike, and a third (32%) worried rising prices – such as food and drink – will force them to spend more on Christmas this year than they did in 2016. Barclaycard managing director Paul Lockstone said: “Consumer sentiment has deteriorated over the past couple of months after a prolonged period of falling purchasing power. Against this backdrop, it’s not surprising consumers continue to spend conservatively, leading to a second successive month of contraction in real terms. While entertainment spend brought some welcome relief, growth on essentials outstripped expenditure on nice-to-haves for the third month in a row, indicating shoppers are prioritising carefully. Nevertheless, the search for value continues, with Brits seeking sales and discounts to make the most of their budget during the festive season.”

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