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Fri 6th Jul 2018 - Friday Opinion
Subjects: Walking away from cash, cannabis kite will go up in smoke and non-alcoholic drinks sector offers opportunities
Authors: Glynn Davis, Paul Chase and Alasdair Pearce

Walking away from cash by Glynn Davis

Earlier this year Amazon opened its first Amazon Go store to the public, enabling shoppers in Seattle to pick goods off the shelf and leave. Cameras and scanners monitor the movements of each person and the goods they handle before automatically charging their account as they leave the shop with their items.

Amazon has trademarked this as “Just Walk Out” (JWO) shopping and it has sparked great activity around the world as retailers look to introduce similar customer-liberating shopping environments into their businesses. Tesco has just opened its first cashless store, which also involves a trial that allows people to walk out after they have used their mobile to self-scan all the items in their basket. The amount is then seamlessly debited from their account.

This is termed “frictionless” shopping, with all the pain points supposedly removed. What it can also translate into is “quicker” shopping. It takes us further on the journey we are all taking whereby we are given solutions to enable us to live life at a faster pace. Payments are at the heart of this, with contactless a central feature.

Growth in contactless payment has been phenomenal – at the cost of cash. In 2006 as many as 62% of all payments in the UK were made using cash but this had fallen to 40% in 2016. It is predicted it will fall to 21% by 2026, according to UK Finance. Even at JD Wetherspoon cash payments have succumbed to contactless, falling to 60% in 2016/17 as it follows a declining path of 5% per year.

My visits to coffee bars and pubs invariably don’t involve cash any more, and I find far less of it being processed around me. It is therefore not surprising a growing number of businesses in the leisure and hospitality sector are shunning cash and only accepting contactless – and other card – payments.

But even tapping a card on a reader is not fast enough it seems. The Oyster card system on London’s transport system set the ball rolling with contactless adoption in the UK but it is now investigating how it can potentially speed the process. This might involve the removal of gates, which cause far too many queues at peak times.

Businesses such as Vita Mojo were created as cashless models while others have adopted similar propositions, including Tossed. But they have also looked to take things on a step and enabled advance orders and payments on an app before collection is made at the restaurant.

Such moves chime with the trend for ever-shorter lunch breaks. A report from Wagamama found 25% of people take fewer than 15 minutes, termed a “nano lunch”, while 30% take fewer than 25 minutes for a “micro lunch” and 70% take fewer than 40 minutes for their “quick lunch”. Only 17% of people take the full hour for their lunch nowadays, which digital natives would no doubt call the “slacker’s lunch”.

Wagamama also found half of UK consumers are unwilling to wait longer than six minutes in a queue for food or hang around at other friction points such as waiting for a table or the bill. To address the latter it launched Wagamamago, the “world’s first walk-away payment app”.

When diners enter the restaurant and open the app they are given a code, which is used at the till by staff when they enter the customer’s order. This synchronises the till with the customer’s phone and enables payment via their device and frees them to leave without having to ask for the bill.

To some people such advances will feel like hospitality is being stripped out of the hospitality industry but it has to be recognised it is still early days for many of these digital technology solutions. It is likely some equilibrium will be found in time whereby the technology disappears into the background and hospitality is to some extent redefined.
Glynn Davis is a leading commentator on retail trends

Cannabis kite will go up in smoke by Paul Chase

The issue of legalising cannabis has been in the news in recent weeks. It began with the heart-rending story of a small boy having up to 50 epileptic seizures a day and his mother’s wish for him to receive medicinal cannabis oil which relieved his symptoms. The Home Secretary obliged with a temporary licence but made it clear there were no intentions to legalise cannabis for recreational use.

The only mainstream political party in the UK that supports the creation of a legal, licensed market for recreational cannabis is the Liberal Democrats. However, pressure for change is increasing, with Canada and nine US states legalising cannabis for “medicinal purposes” or full legalisation. Can change in the UK be far behind?

What are the arguments? Research indicates about three million UK adults regularly smoke cannabis – 7% of the adult population. The reputation of cannabis as a “soft drug” has become tarnished in recent years because the nature of cannabis itself has changed. Let me explain. Cannabis contains two chemical compounds – tetrahydrocannabinol (THC) and cannabidiol (CBD) – and it’s the THC that gets you stoned! But THC can also cause mental health problems in a small but significant number of users – particularly people with a history of mental illness. High doses of THC can cause psychotic episodes and paranoia. CBD, on the other hand, acts as a natural anti-psychotic medication and mitigates the chances of the mental health problems that can arise from THC use.

“Traditional cannabis” contained a balanced mix of THC and CBD but in the first decade of this century it was pushed out of the black market by sinsemilla – “skunk” – which has a high level of THC and very little CBD. Mental health referrals began to climb. Between 2006 and 2014 it is estimated the use of skunk declined 25% but THC-induced mental health referrals rose 50%. Skunk is a product of cannabis prohibition because it can be grown indoors using hydroponic equipment and doesn’t need to be smuggled-in across borders.

Those advocating legalisation argue we’ve failed to suppress the mass market for cannabis and a licensed, legal market would be a better way of managing use and reducing harm. However, this is not a simple or one-sided argument. If legalisation is to deliver better outcomes and eliminate the black market for skunk, the government would have to get the licensing model right.

How might this work? First, government would have to mandate a maximum level of THC (say 15%) and a minimum level of CBD to create a safer product. But the new, legal, “safer” cannabis would also have to be cheaper than black market skunk. There’s plenty of margin to play with as a gram of skunk currently sells for about £10 so there is a margin for producers, retailers and government, which would introduce a cannabis duty and levy VAT. It would also be necessary to ensure the product was easily available at chemists, off-licences and a network of cannabis cafes.

But let’s take a step back. If we enable a new, fully legal industry of intoxication and make cannabis safer to use, cheaper to buy and even easier to get hold of, what would happen to the level of demand? Again, research indicates a 10% reduction in price would trigger a 7% increase in consumption – at a time when it is falling. But it would be increased consumption of a safer product. Police time would be saved and government would gain perhaps £1bn a year in tax revenues.

Here’s where it gets complicated. THC-induced mental health problems didn’t start with skunk – they just got worse. So if consumption of legal cannabis remained the same, the incidence of mental health referrals would fall. If consumption significantly increased, the incidence of mental health referrals would still fall but the absolute number might rise.

You can see why this is a difficult issue for politicians. On the face of it, if we accept we can’t suppress a mass market in an open society and a failed policy of prohibition just lines the pockets of criminals, licensing sales of a quality-controlled product where we can control strength and ingredients and deliver a revenue stream for government seems a win-win situation. But think how the Daily Mail would spin this. Who would grow and produce cannabis products? The tobacco industry is best placed to do so. And who would retail them – bar or coffee chains? You can imagine the narrative of those opposed to change – Big Tobacco and Big Alcohol are behind this.

My own view is that, on balance, a licensing system offers a better chance of public protection and harm reduction than the status quo. But politically, I just don’t think this kite will fly in the UK.
Paul Chase is director of CPL Training and a leading commentator on alcohol and health policy

Non-alcoholic drinks sector offers opportunities by Alasdair Pearce

Walking through the halls at Imbibe Live this week one of my favourite finds was Punchy, a spiced rum punch available in 4% or 0% ABV “flavours”. Of particular interest was a “blind taste test” in which people were challenged to pick out the alcoholic version.

It is emblematic of how much innovation and development has gone into non-alcoholic drinks in the past few years that only a slight majority of bartenders and industry professionals detected a difference – 65 got it right, 63 failed.

Our experience backs this up and at Morar HPI we think there is huge potential for less sweet, more sessionable non-alcoholic drinks that suit premium adult occasions. Moreover, what is evident is the growing number of people who avoid the stereotypical “Booze Britain” badge and want more non-alcoholic options.

To understand this trend better, last month we interviewed a nationally representative sample of 1,500 regular on-trade visitors about their views on non-alcoholic drinks. Several key themes emerged. First, more than one-quarter (28%) of “lifestyle abstainers” regularly choose not to drink alcohol in social situations. This group is defined by its positive reasons for rejecting alcohol. We found the top three reasons setting them apart from the rest were preferring to stay in control, not liking the taste of alcoholic drinks, and health. In fact, almost two-thirds (64%) of them said non-alcoholic drinks were part of a healthier lifestyle.

So what type of people are they? There is a slight female bias (57%) but they range across age groups, regions and socio-economic classes. In other words, it doesn’t matter where you go, positive rejecters of alcoholic drinks are likely to be there and looking for non-alcoholic alternatives.

They’re also unafraid to follow the drinking crowd, with almost three-quarters (71%) feeling not drinking alcohol was becoming “more socially acceptable” and 60% saying they never “felt embarrassed when drinking non-alcoholic drinks in the company of others drinking alcohol”.

However, are these people being catered for? Fewer than half (44%) of our lifestyle abstainers said they regularly failed to see non-alcoholic brands on menus and in fridges so considering a purchase didn’t even enter the equation. Lack of availability means traditional non-alcoholic drinks such as sodas continue to dominate, with 61% claiming to have drunk them in the on-trade in the past 12 months compared with only 7% who drank a non-alcoholic beer.

Awareness of individual brands was similarly low, with 12% never having heard of BrewDog’s 0.5% ABV beer Nanny State, while only 3% had tried it. Interestingly the numbers were similar between our lifestyle abstainers and everyone else, suggesting brands have not done a good enough job to promote their offer to non-drinkers. Taste is another factor where the benefits need to be reinforced, with little more than one-quarter (27%) believing non-alcoholic beers have improved in taste, despite major efforts in the category.

A huge opportunity exists to move beyond traditional soft drinks but only if consumers are educated about the category and its benefits. With Heineken committed to spending 25% of its marketing budget on Heineken 0.0% and Guinness launching its Pure Brew lager, it can only be a matter of time before consumer awareness starts to rise. Indeed, awareness among under-30s who took part in our study was significantly higher for all brands.

Social occasions are increasingly adult and aspirational and this will require non-alcoholic drinks to reflect that. The lifestyle abstainer group is only going to grow and, with the push major brands are making in the space, operators who make non-alcoholic drinks a varied and visible choice will be in an excellent place to profit.
Alasdair Pearce is a consultant at Morar HPI’s food and drink division

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