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Fri 15th Nov 2019 - Friday Opinion
Subjects: Sweet spot, beer battles, not so appy, and the lies keep coming
Authors: Atif Amin, Glynn Davis, Jon Clarke and Paul Chase

Sweet spot by Atif Amin

In recent years restaurant closures and company voluntary arrangements have dominated headlines in the casual dining sector. These incredibly sad stories have often shared common causes – over-expansion and a failure to adjust and innovate to address the changing nature of the relationship with the customer and their expectations.

Against this backdrop the dessert parlour sub-sector has grown significantly in recent years. At Creams, for example, we have grown our UK presence from 43 cafes in March 2017 to 89 today, making us the largest dessert restaurant chain in the UK.

The growth of our exciting sub-sector is being driven by several long-term, structural consumer trends. These include increasing demand for experience-based destinations on our high streets, fewer young people drinking alcohol, and an ever-increasing demand for in real-life (IRL) experiences that can be shared on social media. These trends show no sign of abating and this underpins our confidence customer demand for dessert parlours will continue to rise.

With everyone carrying a portable cinema, games console and shopping centre in their pockets, increasingly time-poor consumers have, ironically, never had so many purchasing choices available. This tension highlights the need for restaurants to stand out as leisure destinations, not just through food quality and value but also newness and innovation.

One way to do this is to get creative with restaurant fit-outs and furnishings, making sure customers are greeted by an environment that wows them, whether through understated simplicity or over the top flamboyance. 

Dessert parlours provide obvious destinations for customers who value IRL experiences as they allow them to create memorable, sharable moments. The investment Creams makes in retro Americana-themed decor and theatre in its cafes, for example, is designed to provide consumers with a nostalgic escape from their hectic lives. The camera has become the keyboard so constructing picturesque and video-worthy environments is where winner takes all in the battle for attention.

In recent years there’s no doubt some operators in the casual dining industry have mistakenly pursued growth through aggressive expansion rather than organically through innovation. There have, of course, been obvious innovation success stories such as vegan menu options and the now ubiquitous pumpkin spiced latte, but these successes have been few and far between and several operators have struggled to create “newness” in their offers that keep customers returning for more.

As a menu category, desserts are a real sweet spot for product innovation and almost childish creativity. Our head chef, Chris Bernard, has the enviable job of devising new menu ideas Willy Wonka would be proud of – waffles with cookie dough centres, for example – helping to create newness and freshness in the customer proposition. If our sub-sector can continue to innovate and create great experiences, I have little doubt it will continue to grow and become an increasingly established part of consumers’ leisure lives.
Atif Amin is managing director of Creams

Beer battles by Glynn Davis

Saturday, 14 September was a particularly interesting day in London’s craft beer scene. In the afternoon the London Brewers Alliance (LBA) beer festival was held at Fuller’s brewery in Chiswick, while in the evening The Kernel Brewery was celebrating its tenth anniversary in a couple of railway arches in Bermondsey.

It was also exactly ten years since I wrote a piece for the Financial Times suggesting we were on the cusp of a renaissance in brewing in the capital. My article was a bit of a flyer, to be honest, as it was based on scant hard evidence beyond the fact Sambrook’s Brewery had recently opened and Redemption Brewing Company was a few months away from producing its first beers. 

What we witnessed on 14 September encapsulated the good and the bad of what has happened in the craft beer industry in the intervening decade. The LBA event highlighted how the capital has become awash with brewers. I admit many that presented their beer on the day were unknown to me – and I write about beer and live in London!

It’s great so many enthusiastic people have entered the industry but the reality is many of them have jumped on the brewing bandwagon as a lifestyle choice. It’s the new rock ‘n’ roll, right? The problem is many of the beers produced are of questionable quality and, as we all know, if you don’t produce a decent product you’ve got no future. On that basis it’s fair to say the business models of many of these operators are precarious to say the least.

Even brewers that have been in the game for some time and produced super beers of consistent quality are struggling to create equally super economically viable businesses. When two brewers I massively respect – Brew By Numbers and Five Points – recently announced plans to crowdfund and disclosed a few figures, it highlighted how tough it is out there. If these two quality players are selling only relatively modest volumes, what does that say about the market as a whole?

Brew By Numbers and Five Points join a raft of brewers that have gone to the crowdfunding well. Far too many have raised cash to fund grand-sounding schemes only to see the money dwindle having been used for working capital to sustain what has been nothing more than pie-in-the-sky expectations.

The situation is hardly helped by fans of these breweries, who have collectively put millions of pounds into their coffers as a way of showing support. While this is laudable, the reality is they are contributing to a situation of increasing overcapacity in the industry and sustaining the life of businesses that struggle to justify their hard-earned money.

This might seem harsh but the incredible amount of breweries in the capital – about 130 at present – is creating an environment where it’s tough for any brewer to survive. There simply aren’t enough bars to take the mass of beer being produced, which is why we’re seeing more brewers looking to open their own bars and taprooms as primary channels to market.

Even the historically significant Fuller’s was unable to justify retaining its brewery and the LBA festival only took place in Chiswick after new owners, Japan-based Asahi, gave the go-ahead. 

However, it’s not all bad news in London’s craft beer scene because The Kernel Brewery’s anniversary event that night celebrated one of the great success stories.

Unlike many other breweries, Kernel has never sought to produce outlandish, “here today, gone tomorrow” styles of beer, preferring instead to focus on pale ale, IPA and stout. The company has also kept its growth aspirations low key, while founder Evin O’Riordain has maintained the quality of its output and never sought to support grandiose ideas through ill-conceived crowdfunding initiatives.

On the basis of what we’ve seen in the past ten years, it’s anybody’s guess what the craft beer scene will look like in another decade’s time. I certainly hope there will be more good news than bad.
Glynn Davis is a leading commentator on retail trends

Not so appy by Jon Clarke

Wagamama has joined a long list of operators to go through the extensive (and expensive) process of creating a mobile ordering app only to discover effort versus reward doesn’t stack up – for the business or customers.

Wagamama closed its Wagamamago app earlier this month, explaining use of the app had fallen while customers wanted “something a little different to what Wagamamago can offer”. It’s brave for any organisation to lay down the sword, so to speak, after adopting a solution that didn’t produce the desired results. Wagamamago was hailed as the “world’s first walk-away payment app” when it launched but when Wagamama realised it wasn’t working for its loyal customers, it put them first and pulled the plug to evaluate a new solution. It’s the right choice.

The announcement of the app’s closure comes less than 18 months after Wagamama launched Wagamamago promising an Uber-esque feature that enabled customers to walk out without ever pressing “pay”. Created in partnership with Mastercard, the app stored card details and took payment automatically. Richard Tallboy, former Wagamama chief information officer, who now holds the same position at The Restaurant Group, says: “We wanted to bring truly frictionless payment to restaurants as we know waiting for the bill is frustrating.”

With demand for mobile ordering rising steadily to the point it is now expected by most young people, it’s no surprise many operators think, “we must have an app”. According to research carried out by Wi5 and Kantar, more than two-thirds (71%) of 18 to 34-year-olds would rather order on their smartphone than wait five minutes in a queue to order at a till. So why didn’t order and pay work for Wagamama?
 
The experience needs to be easy
To drive buy-in and, ultimately, loyalty a mobile order and pay solution needs to be easy to use. Users will be wary of returning to the experience if they are confronted by unnecessary friction from app downloads, sign-ups and repeat log-ins.

This is a common problem with most operator-driven order and pay apps, including Wagamamago. They all require an app download, first and foremost, followed by creation of an account. By the time these steps have been completed the object of mobile ordering – to make it quicker and easier for the customer – has been defeated. Even if a customer completes the two-step process a new problem arises – keeping them engaged enough to keep using the app – it’s easy to forget about apps that aren’t used often or ditch them when you need more space on a device.

A central theme in App Store reviews of Wagamamago was frustration when accessing the app’s benefits. One user says: “Two accounts required and multiple loops equates to a slow, frustrating takeaway experience.” The app prompts users to complete a cumbersome process of registering for both Wagamama and Mastercard accounts as the payment option isn’t integrated into the app.

Operators must keep apps simple and enjoyable to encourage customers to use their technology – and keep using it.

Customers don’t want to be boxed in
Feeding into the frustrating experience of having to download an app and create an account before you can order, limiting payment options is a sure-fire way to lose users. People are used to having a variety of payment options so it feels restrictive to have that freedom taken away, especially if they can’t use the easy checkout methods associated with Apple Pay and Google Pay.

One App Store review of Wagamamago states: “It’s crazy this is the only payment method available.” Another reads: “They could have easily implemented more accessible and easier methods such as PayPal, Apple Pay or bank debit.”

Putting more of the decision-making power in customers’ hands encourages larger and repeat orders. How? By avoiding unnecessary pain points and allowing the customer to be in control of how, what, when, where and why they order.
 
An app isn’t always the answer
An app isn’t the only solution that can satisfy consumer demand for more mobile experiences. According to Wi5 and Kantar research, more than two-thirds (69%) of 18 to 34-year-olds would use mobile ordering more if they didn’t have to download an app.

By using a mobile solution that removes the need for an app, quick service restaurants can meet customers where they are and drive stronger, long-term relationships.

Wagamama has made a bold move to shut the door on Wagamamago and should be applauded for recognising the needs of its customer base in re-evaluating where it goes with technology.
Jon Clarke is founder and chief operating officer of mobile order and pay solution Wi5

The lies keep coming by Paul Chase

Following the introduction of minimum unit pricing (MUP) in Scotland and the subterfuge used by “public health” to cover up its ignominious failure, we shall shortly see MUP introduced in Wales. It has just been announced a minimum price for alcohol of 50p per unit will come into force on 2 March 2020. Last month Welsh Assembly member Dai Lloyd said a recent survey suggested the policy had been a “sweeping success in reducing the amount of alcohol people in Scotland drink”. This is utter nonsense. Whatever surveys “public health” cooks up to prove its pet policy has been a success, actual sales figures conclusively prove consumption in Scotland has risen both in terms of volume as measured in litres and unit consumption.

The Sheffield Alcohol Research Group has made similar predictions for MUP outcomes in Wales to the ones it made for Scotland. It predicts a 3.6% fall in per capita consumption in year one; 22 fewer units consumed per capita, per annum, rising to 69 units for the poorest drinkers who buy the cheapest booze; 591 fewer alcohol-related hospital admissions; 31 fewer alcohol-related deaths and 2,093 fewer alcohol-related crimes.

We’ll have to see if these predictions come true but similar predictions made for Scotland haven’t. If we assume sales data is a good proxy for consumption and we look at the first year of MUP in Scotland – comparing IRI sales data from 29 April 2018 to 27 April 2019 with the same period the previous year before MUP was introduced, we discover:

– Money spent buying alcohol rose 9.8% during the year after the introduction of MUP
– The volume of alcohol sold, as measured in litres, rose 1.7%
– There was an increase of 2,499,969 units of alcohol purchased
– Alcohol-related deaths rose 1% overall 

How does this suggest the policy has been a “sweeping success”? In the strange sub-culture under the misnomer “public health”, there’s no tab on the spreadsheet marked “real-world figures”. If there was, “public health” would have to admit MUP has failed – and far too much political and emotional investment has been put into this miserable, regressive policy to ever admit that.

There’s no doubt MUP in Scotland has had a major disruptive effect on the market and this disruption has demand and supply sides. On the demand side consumers have switched from cider, perry and wine, which have collectively sold more than 74 million fewer units, to spirits, fortified wine, RTDs, lager, ale and stout, which have collectively sold 76.5 million more units – a net increase in unit consumption of almost 2.5 million units.

On the supply side, the retail distribution system has reacted to protect volumes and boost profits. Early indications revealed convenience stores were benefiting at the expense of supermarkets as the price gap between the two narrowed but this wasn’t sustained as the supermarkets fought back! The introduction of MUP has seen supermarket own-label products virtually disappear as minimum pricing has eliminated the price proposition own-label depended on. Consumers have switched to branded products while supermarkets have switched from large packs to smaller ones to keep the price of a pack below the price points that deter consumers.

For example, in the spirits category one litre and 1.5 litre bottles have sold significantly less as volume switches to smaller bottles – particularly 70cl and 35cl. However, overall volumes have increased 7.5 million units of alcohol compared with last year.

MUP appears to have encouraged consumers to swap cider for 15% ABV strong tonic wine – in particular Buckfast – the tipple of choice for chaotic street drinkers in Scotland. Lager, ale and stout have all seen increases in volume and unit sales and a decline in own-label sales to the point most supermarkets have withdrawn them.

Consumers have reacted to MUP by trading up to more expensive and better-quality products. Supermarkets, meanwhile, have closely examined price points and what deters spending to protect volumes to produce an increase in spend on alcohol, sales volumes and unit consumption. This is what happens when virtue-signalling politicians are gulled into believing the predictions of activist academics who don’t understand how markets work and throw a price regulation into the middle of a free market populated by players who know exactly how markets work. The outcome is a policy failure that has to be disguised as a success to save a lot of red faces – and now Wales will follow suit!
Paul Chase is director of Chase Consultancy and a leading industry commentator on alcohol and health

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