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Morning Briefing for pub, restaurant and food wervice operators

Wed 8th Aug 2012 - Draft House, Strada and Absolute

Story of the day:

Jack – Olympics and weather producing big swings: Mixed weather and the Olympics are bringing big swings in pub and restaurant trading, Numis analyst Douglas Jack has reported. He said: “In particular, the Olympics should not have helped trading overall, but longer-term trends and track records are more relevant, in our view. On this basis, our preferred stock is now Spirit Pub Company. Many commuters and overseas tourists have stayed away from London. Our view is that London like-for-like trading was poor at start of the Olympics, improved last week as more events started (and the worst travel fears failed to materialise) and is now against easy comparatives (the London riots were on 6-10 August 2011). Overall, we expect the impact of the Olympics to be adverse. Pubs and restaurants outside central London (away from Olympic venues) cannot have benefited from the enormous home television viewing statistics. The quality of the TV coverage across 26 Olympic channels has encouraged channel-hopping, that can only be done at home. We would not sell shares based on 2-3 weeks trading, regardless of a likely trading recovery, boosted by pent-up demand. We would focus on longer-term trends, such as: The ongoing shift towards value that is helping pub restaurants at the expense of the casual dining restaurants. According to Horizons, average spend in restaurants and pub restaurants has dropped to £15.46 in June 2012 from £17.00 in January 2012 as diners trade down. As customers focus more on food prices, some operators have passed costs on via drinks prices. Scope to continue this is limited, in our view.”

Industry news:

Parts of the pub segment emerging from recession: Parts of the pub segment are emerging from recession, according to PriceWaterhouse Coopers (PwC). Robert Milburn, hospitality & leisure leader at PwC, said: "Eating out has become a key lifestyle activity for many consumers, thanks to increasing availability and choice, particularly in the casual dining segment. We see continued long-term development in the sector, with opportunities emerging from the development and roll out of new concepts. The pubs and clubs segment is in a phase of transition. Although hit hard by the combination of recession, smoking ban and competition from “drinking-in”, parts of the pub sector are coming out of recession, having been first in, and there are good stories as a consequence of closures taking out some over-capacity and pub groups restructuring and consolidating. We are seeing evidence of the effects of the slowdown in consumer spending and there must be a concern that those pubs which try to differentiate purely on price are going to end up in a price war, which will have losers.” In total, 332 H&L companies became insolvent in the second quarter of 2012. However, this represents a decrease of 22 per cent compared to the first quarter of 2012, when there were 428 H&L insolvencies. This drop is driven by a decline in insolvencies for pubs and restaurants. However, restaurants were still the worst hit in the second quarter of 2012, with 159 businesses becoming insolvent.
Wholesalers beer sales nosedive as illegal operators deliver direct: Legal beer sales have fallen by as much as 30 per cent in four months as black market van drivers have started delivering direct to off-trade retailers, according to the Grocer magazine. The Federation of Wholesale Distributors reported beer volumes down by 12 per cent on average between January and May this year. A spokesman for Bestway reported beer sales down by 30 per cent and added: “Things are pretty bad. 500ml cans in particular have been affected and in the past four months it’s got a lot worse, which we assume has been all about the build-up to the summer months and a key time for buying canned beer.”

Norfolk pub re-opens as a community enterprise: The White Horse in Upton, near Acle in Norfolk has been re-opened by a community enterprise company. An appeal was launched after a public meeting and 138 villagers have contributed more than £100,000. A further £80,000 has come in grants, including £50,000 from the Prince of Wales’ Prince’s Countryside Fund (PCF), to buy the pub from a private seller.
Pub sector sees steep decline in young drinkers: The number of young people regularly drinking in pubs has slumped over the past few years as thousands of locals have closed, according to research. A study of the drinking habits of 18 to 24-year-olds by real ale campaign group Camra shows that the number visiting pubs at least once a week has fallen from 38 per cent to 16 per cent in the past seven years. Mike Benner, Camra's chief executive, said: “Hard working publicans have been hammered by the Government in recent times and what we've seen in the past seven years is that young adults in particular have been priced out of an affordable night down their local pub.”

Siba member lifts best beer gong: The Champion Beer of Britain (CBOB) Award was once again handed to a brewer belonging to the Society of Independent Brewers (SIBA) at the Great British Beer Festival. Six of the seven class winners announced are also SIBA members. The victory for Coniston Brewing Company means that 12 of the last 13 CBOB winners have come from within the SIBA ranks, as well as the vast majority of class medals. Coniston’s No.9 Barley Wine lifted the top award after winning its category in CAMRA’s Winter Ales competition earlier this year and being judged today alongside the other category winners. 

Quintain on track to open London’s first designer outlet in a year’s time: Quintain has reported this morning that its London Designer Outlet (LDO), the first in the capital, remains on schedule to open in just over a year’s time. The company stated: “Our leasing team continues to experience strong levels of interest in the LDO which, on opening, will become London's only designer outlet centre. Once completed, it will provide an exciting new retail destination for local residents, tourists and employees.”

Company news:

Draft House opens fifth site tomorrow: Draft House, the London operator headed by Charlie McVeigh and backed by Luke Johnson, opens its fifth site tomorrow, The Draft House in Fitzrovia, with a stripped down menu offer. The venue, on the corner of Charlotte Street & Goodge Street, is the former Northumberland Arms and provides 30 covers in 700 square foot of trading space. McVeigh told Morning Briefing: ‘It’s our first prime site and we will be opening for breakfast between 8am and 11am. We’ve reduced the menu to focus on a quality burger and bap menu that will include the English pork belly bap.” Earlier this year, McVeigh said: “We have been working on this site since June of last year so there was some relief when we nailed it before the anniversary. At times the negotiations felt like the making of Apocalypse Now but we’re in now and very excited. There’s going to be a bigger emphasis on cask ale with beers from all our buddies at Camden, Kernel, Windsor & Eton and Sambrook’s – this tiny site will be a pocket-sized expression of London’s exploding beer and food culture.”
Titanic Inns bans dogs at site building food trade: Titanic Inns has banned dogs at foodservice times at its White Star pub in Stoke where it is building food trade. Titanic director Dave Bott said: “For some time now food sales in The White Star have been increasing. This has brought the problem of dogs being present in food service areas to the fore. We cannot identify an area to reserve for non-food customers and have therefore reluctantly taken the decision not to allow dogs in the pub during food service hours only. While we understand this may upset some customers we have also found other customers who are now much more comfortable eating without dogs in the vicinity. This is the classic 'can't please all the people all the time' problem and we are sorry for those customers that have found the rule not to their liking.”

Orchid steps up community engagement at free house division: Free House Dining, Orchid Group’s 88-strong family-friendly pub division, is using community engagement and charity support to not only help others, but also to boost business. Its adopted charity for 2012 is Honeypot, an organisation that works to enhance the lives of vulnerable children and young carers aged 5-12 years by providing respite breaks and on-going outreach support. “Thousands of pounds have already been raised thanks to the efforts of staff and customers, and our pubs have been given a real boost too,” said area manager Sharon Ward. “Being active in our communities increases footfall, draws attention to the pubs, encourages repeat visits and makes people see our pubs as an important part of local life. We are a family-orientated division so we chose Honeypot as it fits right in with our recognition of how important families are. Everyone is really keen to help to give youngsters and give them the best chance of being kids.”

McDonald’s reports Olympic volumes are double projections: McDonald's has revealed that its flagship restaurant in Olympic Park in London is serving record-breaking crowds. Also, the chain's four restaurants built especially for the Olympic Games – including two in the park for spectators, one in the Athletes' Village and one in the Main Media Centre – are more than doubling traffic volumes anticipated before the games.
London Underground Transport wins 28 per cent rent uplift on Angus Steak House: London Underground Transport has won a 28 per cent rent increase on an Angus Steak House site it owns in Argyll Street. “An Angus Steak House is part of growing up for many people and this one still remains remarkably popular,” says AG&G director Anthony Alder, who represented London Underground Transport. “It also shows that, despite the nay-sayers, the London market is still doing well and moving forward.”

A total of 13 buyers vied for Kingston pub: More evidence of strong market demand for pubs in London has emerged with news that The Alexandra pub in Kingston attracted 13 bids with all but three over its £1.6m asking price. The buy is a developer who is now considering his options. “Given that the Alexandra is in a great position, on a large plot of around a third of an acre and has clear potential for redevelopment or another building in the grounds, we weren’t surprised that it attracted a lot of interest,” said agent James Grimes of AG&G.

Café Coho to open second Brighton site: Cafe Coho is opening a second Espresso Bar & Cafe in Brighton. The new site is located on Queens Road, close to Brighton Station.  A spokesman said: “Similar to our Ship Street site, we will be focusing on providing freshly made, well-sourced food and drink in a space that is uncluttered, where the aromas are enticing and the service is friendly.”
Absolute Pubs opens fourth pub: Absolute Pubs has continued its expansion with the opening of the Flower Pot in Sunbury-on-Thames, following a £250,000 makeover. Award-wining licensees Simon and Sarah Bailey now operate four Absolute pubs around the Middlesex/Surrey border. Their latest venture has been funded jointly with landlord Brakspear. Along with the revamped bar and restaurant, the Flower Pot’s eight en-suite letting rooms have been refurbished to high standards to create a boutique hotel ambience. Stone-baked gourmet pizzas have been introduced as a USP for the Flower Pot, offered alongside dishes from other Absolute sites including pub classics, salads and sharing boards as well as steaks and burgers from prime Oxfordshire cattle. Absolute Pubs director Simon Bailey said: “With the opening of our fourth pub, we are firmly establishing the Absolute brand as a byword for quality pubs with high standards of customer service, while maintaining the quirkiness and unique character of each individual pub.”
Strada chain champions Mediterranean diet: Restaurant chain Strada has teamed up with the Italian Trade Commission to launch a celebration of the Mediterranean Diet. Visitors to will find an entire section dedicated to ‘Championing the Mediterranean Diet,’ featuring a downloadable booklet with helpful information, hints and tips, an illustrated eating guide and a video with insight from the British Dietetic Association and Institute of Food Research. There are also recipe cards, competitions and details of the new menu inspired by the simple ingredients of the Mediterranean diet. 
Enterprise offers to pay 50 per cent of Cask Marque accreditation: Tenanted operator Enterprise is offering to pay 50 per cent of the £160 cost of any licensee seeking Cask Marque accreditation.   Cask Marque has also created an exclusive offer for all Cask Marque members - a personalised Smartphone app showcasing your pub with a range of features for just £249.50 + VAT. This app enables licensees to capture more customers, communicate special offers, new menus, quiz nights and many other promotions straight to customers. As part of this offer, Cask Marque will include a full year's support to help licensees make the most of your app, with regular updates, newsletters and expertise. An Enterprise Cask Marque member will have the opportunity to trial the app for free.
Former Gordon Ramsay pub on the market for £1m: The Devonshire Arms in Chiswick is on the market for £1m through agent AG&G. “This is a two-storey, part-basement pub with a trade garden in a popular area of London, so there is plenty of investment potential,” says David Gooderham of AG&G. “Once part of Gordon Ramsay’s portfolio, the pub is just a short distance from the high-end retailers and restaurants of Devonshire Road – including the Michelin-starred La Trompette – so there is plenty of scope for it continuing as a pub-restaurant. But with a ground floor covering 237 square metres (2,554 square foot) and five rooms plus facilities on the first floor, it could equally appeal as a residential development (subject to required consents). We think the Devonshire Arms is going to make someone very happy.”

JD Wetherspon to open eleventh site in Bristol next week: Managed operator Wetherspoon will open its eleventh site in Bristol next Tuesday (14 August), less than a mile away from another of its sites.  The new venue on Whiteladies Road, called The WG Grace, replaces the Dragon Kiss restaurant and nightclub, which closed just over two years ago. The pub chain was granted planning permission for the refurbishment of the premises earlier this year and has spent £1.1 million on revamping the property. Meanwhile, a group of business owners and residents in Aldershot have lodged a 400-page petition against a plan to open a Wetherspoon pub in Aldershot.  Wetherspoon wants to open a two-storey venue in the Arcade, which would involve scrapping two units along the Wellington Street side of the centre and removing six of the ground floor premises.

Suffolk multi-site operator closes Bury pub: Suffolk multi-site operator Sean Driscoll has closed one of his four sites, Greene King’s The Elephant and Castle in Bury St Edmunds. Owner Greene King said it sometimes had to make the difficult decision to close those that had become unviable – it is now reviewing the future of the pub. Driscoll also runs the Bennet Arms in Rougham, the Victoria in Thurston and the Greyhound in Eastgate Street, Bury St Edmunds.

Domino’s Pizza in the US offers 50 per cent online discount: Domino’s Pizza, US is encouraging the move to online ordering by offering 50 per cent off on all pizzas ordered online.  The promotion, which last for a week, is part of a marketing drive that also highlights how the pizza options will seem endless when customers order from Domino’s. “One of the greatest things about a Domino’s pizza is that it is customisable. There are more than 34 million ways to make a single pizza delicious,” said chief marketing officer Russell Weiner.

Foodamentalists to open new bakery outlet: The health food manufacturer Foodamentalists, which produces gluten and wheat-free products for retail, is to open a new bakery outlet. The company’s new venture, to be called The Foodamentalist Gluten-Free Bakery, will open somewhere in the Cheshire region. According to British Baker, the group wanted to open an allergy-free restaurant but gave up plan when it couldn’t find the right premises.

Demerged Mitchells & Butlers former hotel division has returned $9bn to shareholders since 2003: Intercontinental Hotels Group is set to have returned $9bn to shareholders since it was split from the pubs arm now known as Mitchells & Butlers in 2003. The $9bn includes a further planned $1bn return that will come in part from the sale of the Intercontinental Barclay in New York. It is also selling the Intercontinental in Park Lane. Meanwhile, more than nine out of ten rooms in the 51 hotels that Intercontinental runs in London or near out-of-town Olympic venues is currently occupied. Chief executive Richard Solomons said: “We would expect 80 per cent occupancy during August so the Olympics has clearly had a beneficial effect.”

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