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Morning Briefing for pub, restaurant and food wervice operators

Tue 24th Jul 2012 - Slug & Lettuce, Corney & Barrow and Whitbread

Story of the day:

Slug & Lettuce on track for fourth consecutive year of double-digit sales growth: Slug & Lettuce, the premium high street brand owned by Stonegate Pub Company, is on track to chalk up its fourth consecutive year of striking out-performance. Stonegate chairman Ian Payne described it as the “best -performing and most successful High Street brand” in the sector. He told Morning Briefing: “Slug and Lettuce is 27 years old and with ten weeks left in Stonegate's financial year, it is on track to deliver double digit sales growth for the fourth consecutive year. Slug has 75 sites in England and Scotland - Canary Wharf probably has the highest take per square foot of any High Street bar in the UK.” The brand was subject to an in-depth study by consultants in 2005 when it was acquired by Robbie Tchenguiz – the study claimed the brand had no future. The very strong performance by Slug & Lettuce is consistent with strong performance by other parts of the premium bar market. Marston’s Pitcher & Piano chain has been reporting like-for-like sales growth in the high single digits. Last week, Mitchells & Butlers also reported that its Castle and Nicholson’s pubs, largely located in affluent urban locations, are achieving the best like-for-like sales performance across its brand portfolio. 

Five things worth knowing from the Domino’s Pizza results:

1. The rise and rise of on-line sales: On-line sales rose 43.4 per cent to account for 52.4 per cent of all delivered orders. The company took £1.5m of on-line orders in a single day for the first time. Domino’s now spends 42 per cent of its marketing budget on digital activity, up from roughly 30 per cent last year. 

2. New menu products: The company saw new menu additions achieve 19.1 per cent of all sales. New products included a Saucy BBQ Stuffed Crust, a Mexicano Stuffed Crust and Triple Chocolate Cookies.

3. New marketing uses for Twitter: Domino’s held its first Twitter Reverse Auction whereby the more people that twittered on two hashtags, the more the price of pizza dropped. Tweets had to be made between 9am and 11am in the morning and the pizza was on sale from 12 noon for a very limited time. The first auction was for a Pepperoni Passion and produced a twelvefold increase in tweets on the day.

4. New apps: Domino’s launched a Domigoals app that provided football fans with the latest football results and the chance to win pizzas and prizes. The app had over 54,000 downloads and an engagement rate of 88 per cent in just over three weeks.

5. Franchisee earnings: Douglas Jack, analyst at house broker Numis Securities, estimates average weekly takings per Domino’s store is now £11,500 per week, up from a £10,000 historic average. He also estimate that franchisee earnings per site are now up circa 15 per cent to £115,000 per annum.

Industry news:

Beer sales dip 5.3 per cent in 2012 second quarter despite strong sales at Jubilee: UK beer sales dipped sharply in the second quarter of 2012, as poor weather, and the impact of another substantial tax hike in the March Budget failed to compensate for strong trading around the Jubilee weekend and the Euro 2012 football. The new sales figures come from the British Beer & Pub Association (BBPA) quarterly Beer Barometer, issued today. The BBPA also says that the decline in sales means the tax hike has brought the Chancellor no extra revenues. Its chief executive Brigid Simmonds has called recent claims from Minister Chloe Smith, that the policy was helping to tackle the deficit, “misguided”. UK beer sales have fallen by 15 per cent since the controversial policy was introduced in March 2008, with beer duty up by an eye-watering 42 per cent over the same period. On and off trade sales both struggled from April to June. Overall beer sales fell by 5.3 per cent in the quarter compared to last year, with on trade sales down 4.6 and the off trade down 5.9 per cent. Simmonds said: “The Chancellor can’t change the weather, but he can stop the misguided beer tax hikes that are damaging the sector and doing virtually nothing to help tackle the deficit. The very marginal rise in beer duty revenues the government is achieving is being all but wiped out by a fall in income from employment and other taxes. There is growing public concern over its effect on brewing, pubs and jobs, and we do need urgent action.”

Manchester sees upswing in the number of licensed premises: Manchester has cemented its reputation as one of the UK’s key cities for nightlife with a 30 plus per cent increase in the number of licensed premises in the past five years. The Manchester Evening News stated: “The figures suggest the economic downturn has not stopped Manchester's clubbers and drinkers from visiting the city in ever-increasing numbers. The total number of licensed premises in the central wards now stands at 310 – compared to 282 in 2007. Nine out of ten are licensed to sell alcohol after 11pm.”

Diageo’s Barclay becomes new Distilling body president: Alan Barclay has been elected as the sixty second President of the Institute of Brewing and Distilling. Alan is Europe supply governance director for Diageo and is based at their Technical Centre at Menstrie in Scotland. On his election, the new President Barclay said: “Talent is that vital resource that all businesses need if they are going to succeed in an increasingly competitive international environment.” 

PriceWaterhouseCoopers – big supply spike in London hotel bedrooms: The luxury hotel market in London has grown 33 per cent since the Games were announced and the budget sector has also increased its presence with a 60 per cent increase in room supply. Liz Hall, head of hospitality and leisure research at PwC, said: “Such a large supply spike against an uncertain economic and travel environment is likely to mean a tougher competitive outlook. Many operators are positive about London’s prospects after the Games, encouraged by the global awareness of the Capital as a destination and the ongoing improvements in infrastructure. Others, however, have voiced concerns about the supply spike and how it will be absorbed. If there is a post-Games travel dip, trading could get very difficult – especially in east London. The challenge for London's hoteliers after the Games will be how to differentiate themselves in such a competitive market off the back of the Games feel good factor.”

Gourmet Society offers Olympics dining discounts: Dining club the Gourmet Society has joined forces with Travelex, the leading foreign exchange currency provider, to offer visitors to London during the Olympics a Gourmet Society card with 25 per cent off deals and two-for-one offers at hundreds of top London restaurants. In addition to their Gourmet Society card, visitors will also receive a Travelex London City pack which includes a mini guide, maps of central London and the tube, a wallet for their Oyster card and a £12 National Theatre offer. Simon Leonard, managing director, Gourmet Society, said: “Our partnership with Travelex will open the culinary door to visitors for them to sample the incredible cuisine the city has to offer, and at great prices.”

Smashburger debuts radio spots and introduces brand tagline: Smashburger, the US better burger concept that is looking for UK franchisees, has debuted its first marketing drive with radio advertising in several markets. The company has also created a brand tagline for the first time: “Smashed fresh. Served delicious.”

Chipotle Mexican Grill suffers 20 per cent stock price fall after posting eight per cent like-for-like growth: Mexican food chain saw its stock fall by 20 per cent in early trading last Friday after reporting an eight per cent rise in like-for-like sales. The company reported a 61 per cent increase in profit during its second quarter despite a relative slowing in sales that the company blamed on a weak economy and reduced consumer spending. However, the company had reported seven consecutive quarters of double-digit same-store sales increases.

McDonald’s launches “favourites under 400 calories” menu: McDonald’s has launched a “Favorites Under 400 Calories” menu platform that highlight lower calorie items, featuring existing popular food and beverage choices at counters and drive-thrus in the US. Neil Golden, chief marketing officer for McDonald’s in the US, said: “We've found that customers are surprised to learn about the calorie content of some of their favourite menu options at McDonald’s. In fact, customers may be surprised to know that about 80 per cent of national menu choices are under 400 calories for the standard recipe.”

Stein – food should cost more: Celebrity chef Rick Stein has argued that consumers should expect to pay more for food. Speaking on Radio 4’s Today programme, he said: “The cheaper you make things the more cruelty is inherent in it. Simply, we should prepare to pay more because I don’t think people really understand the implications of something like milk costing less. I am afraid we are all complicit in it. I don’t think people stop to realise what it means to get cheap pork, cheap chicken and cheap milk.”

Company news:

Corney & Barrow to launch Cabin concept next week: London-based wine bar chain Corny and Barrow, led by Lucy Knowles, will launch its new concept aimed at transport hubs next Tuesday (31 July), C&B Cabin. The venue, serving a British tapas menu, opens in Waterloo and Corney & Barrow plans to open more, in venues offering between 1,000 and 2,500 square foot, at the rate of two a year. Corney & Barrow is re-branding its entire estate as C&B Bars. 

Fleurets values the Sarumdale estate at £5.94m: The estate of Sarumdale, the company placed in administration by Barclays last month that owns 12 freehold pubs and one leasehold site, has been valued at £5.94m by Fleurets, an administrator’s report states. The company, whose estate was valued at £7.66m by Christie & Co in June 2011, owes £6.63m to Barclays, £500,000 to unsecured creditors and £823,000 to HRMC (although there is a £200,000 counter-claim pending). Barclays called in administrator Begbies Traynor after HRMC issued a petition to wind the company up and deciding it did not wish to grant the company a capital repayment holiday that was needed to make a Company Voluntary Agreement possible. Sarumdale directors Rodney Hall and Mike Lloyd have claimed the collapse of the company came after a “compulsory” interest rate swap cost the company around £2m over a number of years. The administrator’s report suggests Hall and Lloyd are unhappy with the Fleurets valuation. It states: “The directors have advised the joint administrators that the Christie’s 2011 valuation should be achieved as a minimum.”

Wells and Young’s appoints new director brands: Brewer Wells and Young’s has recruited Phil Toms to the new post of director of brands, reporting to commercial director David Revell. Toms joins from Nestlè Cereals where he has held a number of posts, most recently as Nestlè brands marketing controller focusing on adult brands including Shredded Wheat brand as well as portfolio responsibility for health and nutrition initiatives, shopper marketing and new product development. He will take up the director of brands role at Wells and Young’s Bedford brewery in November 2012. 

Punch re-opens Burton pub after £200,000 co-investment with Mitchell’s of Lancaster: A pub in Branston, near Burton on Trent, is reopening on Thursday (26 July) after a £200,000 refurbishment by owner Punch Taverns. Improvements have been designed to appeal to a new market by creating a dining area and rustic drinking bar. The menu will feature locally sourced produce, a variety of burgers, traditional pub mains and grills, quirky sandwiches and deli boards. Special weeknight food offers will include Ruby Tuesday, Burger Night Wednesday and Fishy Fridays. A new sports bar, with “Sports Bar Menu” has been added towards the back of the pub. Mitchell’s has 60 managed pubs in its portfolio.

Thomas to open £1.7m Wonderworld tomorrow: No Saints, the ten-strong nightclub company run by former Luminar boss Steve Thomas, will re-open the former Oceania nightclub in Milton Keynes as its first Wonderworld mega-site tomorrow (25 July). The new venue will feature two separate nightclubs – Yesterday and Tomorrow – and make use of the latest in new technology. An app for the nightclub will allow customers to download vouchers that can be read off mobile devices at till points, automatically re-calculating drinks prices.

New Brighton nightclub featuring bearded ladies and contortionists delayed: The opening of Funfair, a new nightclub in Brighton aiming to recreate the atmosphere of Victorian carnivals with bearded ladies, contortionists and belly dancers, has been delayed by three weeks. The club in Kings Road, Brighton was due to open on Friday July 13. The landlord of the property is Imperial Property Company, which has delayed opening while work is carried out on flats above the nightclub. The group also runs Max Hotels, including the Lansdowne Place hotel in Hove. It recently placed the Royal York hotel in Brighton into administration. Funfair is the brainchild of the team behind London venues The Bathhouse and The Baby Bathhouse, Tava O’Halloran and Daniel Wright. A spokesman for the chain said: “Influenced by the move to Brighton, FunFair seeks to recreate the spectacular opulence and vintage mystique of the Brighton Pier and rambling fun fairs of old.”

Whitbread’s Table Table brand creates Kid’s Breakfast Taster Panel: The Table Table brand owned by Whitbread has sought to forge closer links with the family dining market by creating The Kid’s Breakfast Taster Panel. Children aged eight to 15 are working with chefs at tasting sessions within individual pubs where they will be given a range of breakfast dishes to cast their opinion on. A spokesman said: “From bacon and beans to scrambled eggs and sausages, those selected will get their say on the perfect breakfast combination, to avoid any tantrums at the dining table when eating out with parents.” Youngsters need to demonstrate some culinary creativity and send in their favourite breakfast combination to be selected. 

York Roast Company to open fourth site: The York Roast Company is planning to open a fourth restaurant on the corner of Low Petergate and Goodramgate. The business, which currently has branches in Goodramgate and Stonegate in York, launched its first sit-down restaurant in Chester in April as part of plans to expand across the country. The new restaurant is planned for the 17th century Grade II-listed building, formerly trading as the Yorkshire Bookshop, which has closed down.

Peel Hunt – Wetherspoon showing resilience: Paul Hickman, leisure analyst at Peel Hunt, has trimmed an upgrade forecast on Wetherspoon result but re-iterated a “Buy” recommendation with a Target Price of 490p. He said: “What Wetherspoon is demonstrating is that the all-round value represented by its unique brand has resilient appeal. In a similar way, its resourceful management has once again been able to balance volume and price to maintain positive sales momentum while covering the cost threat. We expect both challenges to become slightly easier tasks in the 2013 financial year. Meanwhile management also continues to utilise cash in a balanced way, so that the prospective cut in openings to 20-30 (we assume 25) is countered by the enhancement from share buybacks. That should protect the downside.” Meanwhile, JD Wetherspoon has started work on a pub in Blairgowrie, which is in Perthshire and has a population of 8,090. It is converting the former Woolworths premises in the town, which most recently trading as Poundsworth. Wetherspoon spokesman Eddie Gershon said: “I can confirm that Wetherspoon has completed on the site for its new pub in Allen Street. However, at present there are no on-site or opening dates.” The new venue will be called The Muckle Mill. 

Hickman – quality pub companies re-rated: Paul Hickman, leisure analyst at Peel Hunt, has increased his Target Price for Marston’s shares to 123p from 114p. He said: “A month ago, Marston’s broke through the 100p level that it last saw a year ago. This marks a re-rating of quality pub companies that we have long predicted. In the last quarter the average of December 2012 EV:EBITDA for freehold-based non-London pubcos has risen from 8.2x to 8.5x, and in line with that we raise our Target Price from 114p to 123p.”

Marco Marco opens third site: Italian restaurant chain Marco Marco has opened its third site. It has begun trading on the site of the refurbished Spring Gardens pub in Marple Bridge, Stockport. Marco Marco opened its first restaurant in Northwich, Cheshire, in 2009 and launched a venue in Lymm earlier this year. The Marple Bridge restaurant has 90 indoor covers as well as a roof terrace.

McDonald’s reports resilient Europe performance: McDonald’s has reported sales in Europe rose 3.8 per cent in its second quarter. However, the weakness of the Euro led to a three per cent slide in operating profit – the division would have reported an eight per cent increase in profit but for the currency slide. US restaurants reported 3.6 per cent sales growth on the back of the popularity of a new coffee menu.

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