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Morning Briefing Strap Line
Fri 31st Jan 2020 - Friday Opinion
Subjects: Delivering decisions, the centenary of prohibition, and unlocking great reputation and customer loyalty
Authors: Glynn Davis, Paul Chase and Sally Whelan

Delivering decisions by Glynn Davis

When Facebook acquired Instagram for $1bn in 2012 it was deemed to be an extravagant amount for a loss-making business. Two years later it splashed out a seriously chunky $19bn for WhatsApp, which was a simple proposition employing a handful of people and regarded as an equally questionable deal.

Not even Facebook founder Mark Zuckerberg could have foreseen those acquisitions would prove the powerhouses of his business – today each is worth many multiples of their original purchase price. Instagram and WhatsApp have helped Facebook become the behemoth it is and public enemy number one for regulators and governments looking to tax the company and clamp down on its increasing power and influence. 

If the US competition authorities could go back in time they would veto both purchases, but at the time the deals were signed for defensive purposes – to protect Facebook’s market share – as much as for growing the business.

Even competition bodies can’t see into the future and to speculate in such a way can be dangerous. Findings and conclusions should only be drawn from hard evidence, which is why I find it worrying the UK’s Competition and Markets Authority (CMA) has decided to investigate the inclusion of Amazon in the £450m investment round in Deliveroo announced in June.

The deal would give Amazon a minority stake in the delivery business, something Amazon attempted to do via its Amazon Restaurants operation, which it shuttered in the UK in 2018 and closed completely last year. 

The CMA’s key argument is the move would limit competition in the delivery sector, whereas Deliveroo has countered this by saying the cash injection by Amazon would do the opposite by improving its chances of competing vigorously in the market.

This point is particularly pertinent after the Just Eat acquisition by was agreed, creating what would be a powerful force in the market. To create the necessary competition would surely require a well-funded Deliveroo? Seemingly to mollify the market amid criticism of the Deliveroo investigation, the CMA also announced it would launch an investigation into the Just Eat deal.

The CMA originally suggested there was a “material likelihood” Amazon would re-enter the market if there was no tie-up with Deliveroo – thereby increasing competition. However this is pure speculation, according to Index Ventures, one of Deliveroo’s investors. The CMA also states Amazon could exert material influence over Deliveroo to the point the businesses would cease to be distinct. 

Could these potential actions be foreseen by anyone? Clearly not. The only reasoning behind such interventions by the CMA has to be the result of increasing pressure placed on regulators to make big calls that mark them out as actively stymying the creation of the next Facebook or Google. The problem is this clearly brings bias into the argument as regulators become overly negative and put a potential brake on growth and innovation.

Please don’t think I’m anything other than neutral on Deliveroo or any of the other food delivery companies, my argument is purely against the dangerous ground the CMA is playing on. If the CMA’s decision-makers can predict the next Facebook, they should arguably be running an investment fund rather than a government department.
Glynn Davis is a leading commentator on retail trends

The centenary of prohibition by Paul Chase 

On 17 January 1920 a ban on the manufacture, transportation and sale of beverage alcohol throughout the US came into force with the ratification of the Volstead Act – named after the congressman who introduced the legislation. This month marks the centenary of the beginning of a remarkable social experiment. National prohibition of alcohol from 1920 to 1933 – the “noble experiment” – was enacted to cut crime and corruption, solve social problems, reduce the tax burden created by prisons and poorhouses, and improve health and hygiene in America. The results of that experiment clearly indicate it was a miserable failure on all counts.

The evidence affirms economic theory, which predicts prohibition of mutually beneficial exchanges is doomed to failure. The lessons of prohibition remain important today. They apply not only to the debate on the war on drugs but also to the mounting efforts to drastically reduce access to alcohol and tobacco, sugar levies to tackle obesity, and such issues as censorship and bans on abortion and gambling. Market manipulation for social ends is a recipe for disaster.

In the US, loathing of saloon culture was part of a generalised fear of social disintegration. The key to understanding the strength of the temperance movement in the US at the turn of the 20th century was the sheer awfulness of saloons – by all accounts they were pretty grim places! It was no coincidence the organisation that led the assault on alcohol was the Anti-Saloon League. Saloons were synonymous with drunkenness, gambling, prostitution, drugs and political corruption – politicians used them as places to buy votes by offering jobs and other inducements. The temperance movement was divided between those opposed to alcohol as such and campaigners whose principal objection was saloon culture and wanted to eliminate those dens of iniquity. 

No such division exists today – indeed latter-day prohibitionists often pretend to approve of pubs as bastions of moderate drinking – attempting to play divide and rule with the licensed trade. But the same fear of alcohol as a cause of social disintegration still fuels today’s neo-prohibitionists and their support for policies such as minimum unit pricing.

Prohibition ultimately failed because at least half the adult population wanted to carry on drinking, policing of the Volstead Act was riddled with contradictions, biases and corruption, and the lack of a specific ban on consumption. In truth, while there was a desire to curb the antisocial effects and moral degradation of saloon culture and strike against the forces perceived as threatening social stability, there was no national will to stop the act of drinking itself. Today’s neo-prohibitionists complain of the normalisation of drinking but the great paradox of America’s experiment with prohibition is it achieved exactly that. The old-style saloons disappeared to be replaced by a more congenial bar culture; drinking at home became much more common; drinking among women became more common; drinking became regularised, normalised and eventually an accepted part of polite society – by the 1950s cocktails were seen as the height of sophistication in many middle-class homes.

Prohibition of alcohol hasn’t just been restricted to the US. With little publicity there’s a massive prohibition experiment going on in India, where alcohol sales have been banned in Bihar, Gujarat, Mizaram and Nagaland – involving populations exceeding that of prohibition America in the 1920s. Historically, alcohol was banned in Canada (1918 to 1920); in the Russian Empire and its successor the Soviet Union (1914 to 1923); Norway (1916 to 1927); Sweden (1919 to 1986) and, of course, currently in most Muslim countries. 

The apostles of prohibition haven’t gone away. They will always find support because while most people are opposed to blanket bans on all pleasurable activities involving consumption, I suspect most people would like to ban at least one pleasurable activity – almost always one they don’t engage in themselves! Today’s neo-prohibitionists are too politically savvy to call for outright prohibition but seek to achieve it by stealth – salami-slicing away the profitability of alcohol’s production and sale and reducing it to a sunset industry. Tonight I’m going to imbibe and do my bit to resist the killjoys. I invite you to do likewise – cheers!
Paul Chase is director of Chase Consultancy and a leading industry commentator on alcohol and health

Unlocking great reputation and customer loyalty by Sally Whelan 

Operators know guests who enjoy their experience are far more likely to return and share positive reviews – online for the world to see and through word of mouth to family and friends. They also know their employees can make or break that customer experience, which has a direct impact on reputation, customer loyalty and profitability. This is where one of the biggest challenges in the industry hits operators hard – the widely cited 73% employee turnover rate and the associated costs to replace and train team members. 

There’s no doubt more work is required from educational establishments, industry bodies and government to elevate the industry into an aspirational career rather than a stopgap for students. But it should be the work of every operator to spot, train and retain bright young talent, which comes down to fostering employee engagement. 

There are different views on what exactly constitutes employee engagement but picture a smiling team member warmly greeting your guests as they walk through the door, intuitively knowing the professional couple are on a date and would prefer one of your quiet, intimate and cosy spots in the restaurant. 

The server promptly takes their drinks order, possibly making suggestions after understanding their preferences, and passionately explains the house specials. It’s a busy night but that team member manages to make each guest feel welcome, expertly guiding them in their choices and experience throughout the night. This employee is a team player, willing to go the extra mile to support the crew while delivering the best possible guest experience.  Employee engagement is about enthusiasm, passion, care and a willingness to take positive action to further a restaurant or pub’s reputation and interests. 

So how do operators create an engaged workforce? The first step is to invest in the individual – with that in place strategy and actions will flow. Listening to your team members is a key factor as this will give you clues on how best to engage them. Create more opportunities for ongoing employee feedback through anonymous surveys that elicit honest responses on everything from leadership to communication methods and timings, onboarding, further training, recognition, career prospects and growth. 

You’ll be able to start tracking positive and negative trends you can leverage as learnings across your team and management structures. Create opportunities for team-building activities, train your managers to increase employee communication and engagement, invest in training beyond onboarding and create an exciting career path that has clear pay rises and promotions. 

You might ask how you’re supposed to find the time, resources and budget for all this? In our recent survey we found a disengaged server would result in 27% of diners choosing not to return, while 63% of diners would write a negative online review after bad service. How much money do you need to spend to get new customers rather than retaining the customer base you’ve worked so hard for? On the flip side, after interacting with an engaged and positive server more than one-third (36%) of diners would spend 10% more time in a restaurant or pub and 22% would spend double this, highlighting the incremental spend opportunity to operators who get this key aspect right. Almost three-quarters of diners would write a positive review online after good service, which equals greater footfall.  

Frankly, operators can’t afford not to invest a bit more in employee engagement. A noticeable trend we’ve identified across our client base is a positive correlation between employee engagement (ENPS) and customer satisfaction levels (NPS), which means employee engagement could be one of the keys to unlocking operator reputation and driving customer loyalty, essential ingredients to running a profitable and reputable business that stands the test of time and economic challenges. 
Sally Whelan is founding director of guest experience management expert HGEM

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