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Wed 6th Jan 2021 - Propel Wednesday News Briefing

Story of the Day:

Borg-Neal – Five key steps needed to ensure that hospitality can play a lead part in a post-covid economic recovery: Peter Borg-Neal, founder and chairman of Oakman Inns, has set out the five key steps that are needed to ensure that hospitality can play a lead part in a post-covid economic recovery. On the back of the latest support from the chancellor Rishi Sunak, Borg-Neal said that although this is a “useful lifeline”, it is only a “lifeline” and more help is required from the government. He said: “It is important to not be churlish and recognise that today’s announcement from Rishi Sunak is a useful lifeline that will provide some short-term support for our beleaguered sector. However, it clearly is only a lifeline. It is important that we clearly and calmly communicate what will be required to ensure that hospitality can play a lead part in a post-covid economic recovery. In my view there are five key steps that we need the chancellor to take. Firstly, confirmation that the Coronavirus Job Retention Bonus will be reinstated or replaced. This money was promised from the dispatch box and businesses have it in their cash flow forecasts. Secondarily, an extension of Business Rates relief for the sector for another year. This would represent a saving equivalent to 50% of rent and can be utilised to fund those arrears. Thirdly, the reduction in VAT on food to 5% must be made permanent. Hospitality has been severely overtaxed in recent years and reducing that burden will enable rapid recovery whilst supporting tourism – the UK’s third largest export. Fourthly, hospitality businesses should be allowed to use their corporation tax losses incurred during the pandemic to offset other tax liabilities including VAT and PAYE. This will eventually be self-funding. Finally, the Eat Out To Help Out scheme was a fantastic success which stimulated demand helping the whole of the economy – particularly the supply chain. It was brilliantly executed by the Treasury and hugely popular. Let’s do it again when we can reopen.”

Industry News:

Reilley – Rent situation the government’s Trojan horse: Loungers chairman Alex Reilley has said that the rent situation facing the sector is the government’s “Trojan horse” and unless it comes up with a plan it “will have wasted billions of pounds keeping people employed by businesses that you will have allowed to fail”. In a twitter thread, Reilley said: “The vast majority of hospitality businesses will have traded between 0-14 days since 4 November. On the (optimistic) basis they can trade again by early March, that’s 0-14 days trade in four months. That’s on top of more than three months of full lockdown. That’s at least seven months out of 12 where hospitality businesses have been ordered to close. The debt moratorium is going to end at the end of March. Thousands of hospitality businesses, who won’t have been able to trade for seven out of 12 months will be exposed to landlords who won’t accept anything less than 12 out of 12 months’ rent. They will serve winding up petitions, locks will be changed, and some will cut their nose off to spite their face. That will be the end for thousands of businesses. @AlokSharma_RDG @scullyp @RishiSunak @BorisJohnson this is your Trojan horse and unless you come up with a plan you will have wasted billions keeping people employed by businesses that you will have allowed to fail.”

Trade body – who does the government blame for sharp increase in covid transmission with the sector closed?: A trade body has pointed out that the hospitality sector can’t be blamed for the recent sharp increase in covid transmission rates. Michael Kill, chief executive of the Night Time Industry Association said: “The industry has relentlessly told government that the continued opening of schools and universities, alongside retail and other public facing sectors, with continued restrictions against the night time economy and hospitality industry over the festive period will result in an explosion of the transmission rates in January, leading to further, more stringent lockdown. Businesses within our sector are being shamelessly left to collapse, viable businesses and individuals have been abandoned by the government. While the majority of the night time economy and hospitality sector have been closed, who does the government blame now for the sharp increase in transmissions. Our industry wants to support the government in its public health strategy, to save lives and get businesses back open as soon as possible. We will continue to offer the government our support, our expertise and our spaces, for free to ensure that as many of the businesses and individuals within our sector survive this crisis. But to do this, these businesses and individuals need the government to compensate them for the revenue they have lost over the time they have been closed, nothing less will suffice.”

Nicholls – We have passed the tipping point where we can save all hospitality businesses: Kate Nicholls, chief executive of UKHospitality, has said that we have “past the tipping point where we can save all hospitality businesses”. Speaking to Sky News, Nicholls said that the new lockdown would “undoubtedly” cause businesses, that would otherwise be healthy, to fail. Nicholls said: “January is going to be a critical month, we really need an urgent signal from the government now that they will extend the Business Rates relief, they will extend the lower rate of VAT beyond the 1 April, so these businesses have a chance to be able to get investment in and sustain them. But I feel undoubtedly we will see business failure and we will see higher levels of unemployment as a result.”

Soley – Without further long-term support all the government’s short-term financial interventions will be wasted: Chris Soley, chief executive of Camerons Brewery, the north east-based brewer and pub operator, has said that without further long-term support to help the hospitality sector recover for years to come, all the government’s short-term financial interventions will be wasted. He said: “The further grants announced today by the chancellor Rishi Sunak are a much welcome additional support at a time of crisis for our sector but we need substantially greater assurances of financial measures to help our beleaguered industry through to recovery. By the end of March, we will have been effectively shut down for a year and despite the grants, furlough, rates reduction and VAT cut on food, we have continued to sustain heavy losses and haemorrhage cash. Make no mistake, this is just a sticking plaster to avoid immediate mass business failures and mass redundancies. We were one of the first sectors to shut down and will be one of the last to re-open. Without further long-term support to help us recover for years to come, all the government’s short-term financial interventions will be wasted. We have burdened our businesses with huge debts to avoid failure and will need to find a way to pay this debt back. We therefore need extensions of the Business Rates holidays for pubs and breweries through 2021 and into 2022. Extension of the VAT cut to 5% on both food and alcoholic beverages alongside this. We need government intervention into the landlord and tenant relationship to avoid a catastrophic failure of businesses at the end of the lease forfeiture moratorium where there has been an impasse over fair rent levels throughout shutdowns. We also need the beer duty level reduced to allow our breweries to rebuild their balance sheets. These measures need to be announced very soon so that we can start to formulate our economic recovery plans and demonstrate a way out to our employees and funders.”

Record 500,000 sign up for Veganuary: A record 500,000 people have signed up to the Veganuary challenge to eat only plant-based foods for a month. The milestone is double the number who pledged to go vegan for January in 2019. A quarter of those taking up the challenge – 125,000 – are in the UK, and this year British supermarkets including Tesco have run television and radio adverts promoting Veganuary for the first time. Other supermarkets such as Aldi, Asda and Iceland have produced dedicated pages including information and recipes in 2021, again for the first time. New research from the investment bank UBS on plant-based alternatives to meat, such as veggie burgers and sausages, shows a rising number of people are trying the new products. The proportion of people who have tried the alternatives rose from 48% to 53% between March and November 2020, according to UBS’s survey of 3,000 consumers in the UK, US and Germany. It also found that half of those who try plant-based alternatives to meat continue to eat them at least weekly. Veganuary is a global campaign that has recently focused on Latin America, where 150,000 people have signed up this year, along with 80,000 in the US and 50,000 in Germany. “It really feels to me that plant-based eating is no longer controversial,” said Toni Vernelli from Veganuary. “Pretty much everyone has accepted we need to be reducing animal products in our diets for environmental reasons. The way British supermarkets have embraced Veganuary this year is truly game-changing. They are not simply using it as a marketing opportunity, but are promoting the many benefits of plant-based eating. As bastions of our food supply, they know that the only sustainable way forward is plant-focused.”

UKHospitality Cymru calls on Welsh government to use new funds to spark economic revival: UKHospitality Cymru has called for Welsh Government to use new Treasury support finance of £227m to provide emergency backing for the threatened hospitality businesses and jobs in Wales that need it most. UKHospitality Cymru executive director David Chapman said: “We live in dark days at the moment – a very dangerous time for the spread of covid. Today’s Treasury announcement reflects that serious position but also recognises that our beleaguered businesses are once again forced to close for a precarious third lockdown period. Until now UKHC’s appeals for survival funding have been positively listened to by Welsh government. Now we need to see the consequential payments in Wales allocated to our industry in full and, critically, getting to the key businesses and the supply chains they sustain. They need this help desperately. While furlough has been vital, it has also meant larger hospitality employers have had to pay 20% of wages for months of enforced closure. Reserves are gone, borrowing is high and the future is perilous. Substantial investment now would yield major returns for the economy when conditions improve. Let’s also keep our eyes on the future and build together a spring springboard for strategic recovery, for the hospitality industry’s survival, reopening, protection, growth and future prosperity in 2021and the years to come. Put hospitality at the heart of Wales’ economic recovery. Make our industry one of the five new shining beacons of the Wales economy. Give us the status and the supportive investment that the industry needs to build.”

JD Wetherspoon pub subject of graffiti attack for second time: A JD Wetherspoon pub in Sherwood has been vandalised with a graffiti tag relating to the chain’s condemnation of lockdown measures. A bright yellow tag which reads ‘70,000 dead’ has been painted on the window of the Samuel Hall in Mansfield Road, Sherwood. On the same window is an advertisement for the pub chain’s magazine, ‘Wetherspoon News’, in which Wetherspoon founder Tim Martin denounces the government’s handling of the coronavirus pandemic.The graffiti tag, which has seemingly appeared over the past few days, is thought to reference the UK’s coronavirus death toll which surpassed 70,000 as of 25 December. It is not the first time the Samuel Hall Wetherspoon has been the victim of a graffiti attack. On March 28 last year the pub in Sherwood was tagged with the words ‘pay your staff’, following backlash over staff pay back at the start of the year. Speaking of the incident, Wetherspoon spokesman Eddie Gershon said: “We condemn this act of vandalism at The Samuel Hall pub. Wetherspoon is fully aware of the covid-19 situation and has taken every action to ensure that customers and staff are safe in its pubs. Columnist Stephen Paton, writing in The National, stated: “It’s good to see Wetherspoon being reminded that public discourse isn’t just for those with the wealth and real estate to push their agenda. Not when the death toll in Britain is now more than 74,000.”

CAMRA – pubs and breweries need more financial support to survive new lockdown: The Campaign for Real Ale has called for more financial support for pubs and breweries. Chairman Nik Antona said: “The national lockdown is yet another devastating blow for an already struggling industry, which follows hot on the heels of nearly a year of restrictions, curfews and forced closures. It is clear now more than ever that the government must introduce a new, long-term and sector-specific financial support package to help these businesses survive the coming months. While one-off grant support is welcome, it is nowhere near enough to cover the haemorrhaging costs for pubs and breweries that don’t see any end in sight. What is particularly concerning in the latest announcement has been the confusion around whether pubs will be able to operate on a level playing field with supermarkets and off licences during this lockdown – as they have been able to previously. Takeaway sales, in sealed containers, for people to take home, were a real lifeline for the trade in previous lockdowns and restricting that route to market now would be a death knell for many pubs. This will once again provide an unfair advantage to supermarkets and off-licenses that don’t face similar restrictions. The government must recognise that local pubs are a force for good and play an important role in bringing people together, tackling loneliness and social isolation, and supporting their local communities. When this nightmare is over, they will be vital to the nation’s healing process – so long as they are still standing. A new, dedicated and decent financial support package must reach our pubs and breweries quickly to save them from permanent closure and help hard-working licensees through this incredibly difficult time.” 

Trade body welcome £9,000 grants, calls for immediate payment: The British Beer & Pub Association (BBPA) has welcomed an announcement by the Chancellor that pub businesses are to receive a one-off grant worth up to £9,000 per property to help them through the latest lockdown. The trade association said the announcement was a lifeline to pubs across England who otherwise were at very real risk of closing for good. The BBPA is now urging the government to deliver its new grants to businesses immediately. It is also calling on the government to provide the same levels of grant support to brewers. Emma McClarkin, chief executive of the British Beer & Pub Association, said: “We welcome this much-needed support from the Chancellor, worth £277 million to UK pubs. It is the lifeline we have been campaigning for to save our pubs and help them survive through to the Spring. Without this support, pubs across England were at real risk of being lost for good at the beginning of this year. We had been anticipating permanent closures in the very short-term without it. Given that the future of so many pubs hang by a thread, it is essential that the government deliver these grants to pub businesses immediately. If the grants take weeks or months to get to the pubs they are meant for, it will be too late. We stand ready to work with government and local authorities to ensure the grants are delivered at pace. We also need confirmation from government that the new State Aid rules will allow businesses access to these grants. The grants will mean many pubs may now be able make it through until Spring. The government now must also provide the same levels of support to brewers who have suffered months of closure of a major trading channel in pubs, but are not eligible for the support announced today. In the coming months, the government must also share how it will help our sector to play a leading role in the economic recovery when it can reopen, by extending stimulus support such as the Business Rates holiday and VAT cut, along with further initiatives including a beer duty cut. The sooner we hear of the long-term support for the sector the better.” 

Summer music festivals face cancellation without government support: Summer music festivals face cancellation unless the government steps in to provide support, the British music industry has warned. The live music industry is banking on a summer comeback as the vaccine is administered to millions of people. Last year the pandemic resulted in a 90% fall in revenues for festivals. However, UK Music, the umbrella organisation representing the commercial music industry, said the government needed to act fast to support the live music industry – including guaranteeing cancellation insurance – or festivals would have to be cancelled. “Government is rolling out the vaccine and is openly speculating about returning to normal by the Spring,” said Jamie Njoku-Goodwin, the chief executive of UK Music. “But there is a serious risk that even if this proves to be a reality, lack of notice and available insurance options will mean much of the 2021 summer music season can’t go ahead. The clock is ticking, and any day soon we could see major festivals and events start pulling the plug for lack of certainty. There will need to be a concerted effort from industry and the government together.”

Philip Turner – last year highlighted the importance of community: Chestnut Group founder and managing director Philip Turner has argued that the pandemic has highlighted the importance of pubs as a focal point of local communities. In an email to his customers, Turner, whose company has 12 sites in East Anglia, stated: “Our properties operate within and act as communities to our guests, our team members and suppliers. The importance of community was highlighted in 2020 as society was stripped back, exposing vulnerabilities. We established The Giving Tree in April 2020, using our people and properties to provide food and help to those in need. 80 Chestnut team member volunteers raised £60,000, produced in excess of 25,000 meals which were delivered to more than 40 organisations across Essex, Norfolk, Cambridgeshire and Suffolk. The energy to help others was replicated by many others in our industry, a huge credit to those that manage to put other people’s problems ahead of their own. Our team keeps growing – I am incredibly proud of what they have achieved in 2020 and thanks to your support (and some government assistance) we have managed to maintain full employment for our team. Covid-19 has dealt some hefty blows to our society, and has caused fractures through our industry – some of which may never heal. Immunity to the collateral impact of the virus is impossible, and as we face another lockdown we are re-focusing efforts on the well-being of our team. For Chestnut, “there is no education like adversity” – we are proud of what we have achieved, but remain committed to being better.”

A total of 2.7 million have already given up on Dry January: Nearly one-in-four of those who attempted ‘Dry January’ this month have already given in to temptation, according to a snap poll by KAM Media. Only five days into the New Year and around 2.7 million people have given up and consumed alcohol. “30% of UK adults intended to take part in ‘Dry January’ according to research we did in December. By January 1st that figure had dropped by 17%. Our most recent poll, conducted on 5 January shows that only 25% of those who actually attempted ‘Dry January’ are still going strong. Given the new lockdown restrictions, it probably doesn’t come as a huge surprise to most!,” said Katy Moses, managing director at Kam Media. Generation Z and young Millennials are keenest to take part in ‘Dry January’ with 48% of those under the age of 34 years attempting to take part. “2020 was such a tough year for many people that you may think people would be less likely to give up alcohol but the number of UK adults attempting Dry January this year remained on a par with last year, but people are giving up much sooner,” added Moses. 75% of those taking part in Dry January expected non-alcoholic versions of beer and wine to help them get through the month. According to KAM’s new Low and No research, consumer awareness of the availability of low and no alcohol variants has sky-rocketed in the last year. “Last year only two thirds of consumers had even heard of non-alcoholic beer, now that figure is three-in-four. Awareness of non-alcoholic spirits and wine has also grown significantly. Sales have boomed in low and no categories this year, we expect them to play an increasingly important role both at home and in the on-trade,” said Moses. KAM Media will reveal the full results of their new research into Low and No alcohol – from the customer perspective – on 19 January via a webinar. Sign up here:

New York landmark Sammy’s Roumanian Steakhouse closes down: Landmark New York City restaurant Sammy’s Roumanian Steakhouse has closed its iconic basement-level doors as the coronavirus pandemic continues to cripple the restaurant industry. The Lower East Side fixture was famous for its latkes spreads, chopped liver, and vodka bottles frozen in blocks of ice and was known as a boisterous party spot frequented by celebrities. The Jewish Romanian restaurant announced the closure on Sunday. “It is with great sadness that we announce that the rumours are true and we have had to shut the doors to the infamous basement,” the eatery announced on Instagram. However, owner David Zimmerman ‘intends to open the restaurant in the future’, but it’s unclear if it’ll revive in its current home on Chrystie Street in Manhattan. “We have got to be somewhat back to normal,” Zimmerman said to Gothamist when asked about a reopening date. “Sammy’s Roumanian is more than just a restaurant. It’s a community. A celebration of tradition. An experience difficult to put into words. It’s where families come to dine weekly, where partygoers begin their night (if they survive the frozen vodka), and where Simchas are celebrated,” the restaurant wrote on Instagram.

Company News:

Goodbody – recovery has been delayed at The Restaurant Group but risk to reward remains attractive: Paul Rudy, leisure analyst at Goodbody, has argued the risk to reward ratio at The Restaurant Group remains attractive despite the delay to recovery caused by the current lockdown. In a note, he stated: “An increase in covid related restrictions in late December concluded what was a terrible year for the eating and drinking out sector in the UK. The Restaurant Group did a good job in difficult circumstances, raising equity, achieving a CVA to right-size the estate and limiting cash burn in so far as was possible. The first quarter of 2021 will continue to be severely impacted by government restrictions. We would expect some early evidence of recovery in Q2, with a more robust recovery taking hold in the summer, given pent up demand and reduced restaurant supply. Forecasts are reduced meaningfully for FY21 as a result, with Ebitda reducing from £104m to £27m. For FY22, we expect a strong recovery in sales and margins, helped by the fact that the estate is smaller and more focused on growth. We forecast Ebitda in that year of £111m, at the lower end of the £110 to £125m illustrative range flagged by the company on recovered sales. Net Debt in FY22 remains elevated at 2.9x Ebitda, but we expect the company to generate c.£50m of cash flow that year. Our Price Target T reduces from 95p to 85p, as a result of continued government restrictions which results in higher net debt. The Restaurant Group will likely refinance its £225m Wagamama bond in FY21. A refinance on reasonable terms will be a positive catalyst, but risk remains around leverage and there will be cap on the equity valuation until completed. We continue to believe that the smaller, more focused RTN estate is well placed to capture the recovery in eating out which should take hold from mid-2021 onwards. Post-recovery, the Wagamama business has attractive medium-term growth prospects, both in terms of store rollout and increased delivery potential.”

McDonald’s to boost its chicken offer in the US: McDonald’s will launch a crispy chicken sandwich in the US on 24 February. The new sandwich menu item will feature a new crispy white meat chicken fillet served with pickles on a toasted potato roll. The new chicken sandwich will come in classic, deluxe and spicy versions. McDonald’s is hoping to capture some traffic from the specialist chicken brands Popeyes and Chick-fil-A with the new chicken offer. “Our chicken-only competitors here and abroad have strong brand equity and credibility. Developing a reputation for great chicken represents one of our highest aspirations,” McDonald’s USA president Joe Erlinger said at a recent investor event. The new McDonald’s strategy is founded in part on the long-term popularity of Chicken McNuggets, which it has sold since the 1980s, and 2020’s limited time Spicy Chicken McNuggets, which contributed to September US comparative sales that were the highest in nearly a decade.“As commonplace as chicken is, it’s a growth area. You want to participate in that growth,” said Mark Kalinowski, an independent restaurant equities analyst. McDonald’s also lacks equipment used by poultry specialists – pressure cookers and hand-breading stations inside stores. It is “very hard to do something with the equipment that they have and the complexity you have in the kitchen, it’s very hard to manage that,” Restaurant Brands’ chief marketing officer Fernando Machado said of McDonald’s. Popeyes’ chicken is also marinated for 24 hours in the restaurant, he added. “If it were easy to do, we could do it at Burger King,” he said of Restaurant Brands’ burger chain. “Customers have to drive past two or three McDonald’s to get to a (Chick-fil-A) or a Popeyes,” said Richard Adams, a consultant to franchisees. “That’s an opportunity to pull in those customers with a comparable product.”

Dark Hedges hotel on the market: A hotel named after the world famous Dark Hedges in Co Antrim has been put up for sale after falling into receivership last year. The Hedges Hotel near Armoy was acquired by two investors in early 2015 after Game of Thrones helped the site became a huge tourism draw.The hedges were believed to have been planted along the entrance to Gracehill House by the Stewart family in 1775, who owned the manor estate. The tree-lined route became a tourism hit after it was depicted as Kingsroad in the second series of HBO’s global TV series. It’s understood Stephen Gray and business partner Jonathan Gwynne invested around £5 million in the hotel, golf course and manor after they acquired the Gracehill House estate in 2015. Part of the estate, including the 16-bedroom hotel, was incorporated as Dark Hedges Ltd in 2016.The company reported shareholder funds of £1.6m for the year ending 30 April, 2019. But by June 2020, with the hospitality industry in lockdown, receivers were appointed.

Leon launches vegan subscription and burger at-home kit: Leon has launched a new vegan subscription service and burger at-home kit in a bid to help people eat more plants this January. Available from today (Wednesday 6 January), the new monthly subscription service (£6) will give guests 30% off every vegan menu item in Leon restaurants nationwide. In addition, Leon will be randomly selecting one in every 500 subscribers with an exclusive Green Card which will entitle lucky guests to free vegan food for a whole month. The Leon vegan subscription will also reward customers as they redeem their card throughout the month, with free Aioli jars and Leon cookbooks. The brand is also launching its first ever Leon Love burger at-home kit on the morning of Friday (8 January). In partnership with Meatless Farm, the new kit contains everything needed to recreate the popular vegan Love Burger. The burger kits will also be carbon neutral. The new Leon Love Burger at-home kit is available nationwide for £18 via, £19 for the gluten free box and an additional £5 delivery fee. Marketing director Rebecca di Mambro said: “These new launches are a celebration of the power of plants and bring to life our commitment to make it easier to eat well, live well and be kind to the planet.”

The Manor brand to double up: The Manor, the restaurant and cocktail bar brand operating in Aylesbury, is to open a second site in May, this time in Princes Risborough. It has agreed terms with the town council for a 20-year lease on the former NatWest bank site in the High Street on its commercial premises. The council-owned building has already undergone interior refurbishment works by the town council, and the installation of a new shop frontage. The plans were subject to a lengthy planning process and were given the green light. They include the addition of a roof top terrace area with panoramic views to the existing 1,369 sq ft building. The Manor’s owner, Peter Lee, said: “We are delighted to be expanding and coming to Princes Risborough, and contributing to the local economy. We expect to open by May 2021 and will serve both delicious brunches and tapas alongside an extensive range of alluring cocktails.”

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