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Morning Briefing for pub, restaurant and food wervice operators

Wed 13th Feb 2013 - M&B, Spirit and Tasty

Story of the day:

Snowy weather causes pub and restaurant like-for-likes to decline by 2.4% in January: Bad weather took its toll on the eating and drinking out market in January, with leading pub and restaurant groups collectively seeing a 2.4% drop in like-for-like sales against last year, according to latest Coffer Peach Business Tracker figures. Total sales for the 25 companies in the Tracker sample, which include the effect of new openings, were flat compared with January 2012. “It would have been worse if not for the impact of a good New Year at the start of the month and a bumper last week, which appeared to have been boosted by pay-day,” said Peter Martin of Peach Factory, the business intelligence specialist that produces the sector Tracker, the sector’s biggest and most comprehensive performance barometer, in partnership with Coffer Group, Baker Tilly and UBS. “The middle weeks of the month, which felt the brunt of the snow, were all significantly down on the same weeks last year,” added Martin. Both pub and restaurant chains were generally equally affected by the downturn, as was trading inside and outside the M25. The January trading figures come on the back of a flat December and a modestly successful Christmas holiday period, which saw the six weeks to 6 January producing a 2.1% like-for-like sales increase on the corresponding period 12 months earlier. “The underlying trend, however, is of a tightening eating and drinking-out market,” said Martin. Year-on-year like-for-like sales up to the end of January were ahead just 0.5% on the previous 12 months, with total sales up 3.9%. “These figures represent a downward trend in the rate of market growth since the summer. In August, year-on-year like-for-likes were running at +2.0%, but have shown a steady decline every month since then,” said Martin. “This points to 2013 being another tough and essentially flat year, with little give in spending. Innovative groups can do well but it is increasingly becoming a fight for market-share.” David Coffer, chairman at The Coffer Group, said: “We do not believe that bad weather was wholly responsible for the drop in January trade. There was undoubtedly a trend of customers preserving their money, leading through the difficult festive period and beyond. If one ignores the impact of bad weather, only a neutral position would have been likely.”

Industry news:

CGA - beer must innovate or get left behind: Market insights firm CGA has argued that brewers must innovate to grab the attention of trend-setting ‘Early Adopters’ - typically younger in age and have high social status and spending power. CGA research has found that this type of consumer visits the on-trade 1.6 times a week (higher than the 0.9 times a week majority). CGA’s Phil Tate, who was speaking at The Publican Morning Advertiser’s Beer Innovation Summit, said: “Our research shows that beer needs to innovate as the market shakeout means there is a danger of beer being left behind. Increased choice in the on trade combined with competition outside the category has declined beer’s share of total shares beer, wine and spirits sale by 1.5%. Beer has a 70% share of outlets exiting the market, but only a 52% share in new openings. Two key innovative trends currently being seen in the beer category are 2.8% low ABV beers and American Craft beer. Whilst consumer awareness of 2.8% beers is very high, conversion to trial is low. On the flipside of this lies American Craft Beer which has very limited awareness yet a high conversion to trial showing that the category is one of huge potential.”
Squeeze on family incomes to last 15 years: Families will endure 15 years of squeezed incomes until living standards return to pre-crash levels, the Resolution Foundation has reported. Ten million adults in the low to middle income group have seen spending power decrease by an average of £280 a year, according to the think tank. The income squeeze means that someone who earned £22,000 a year in 2008 will have to wait until 2023 to return to a similar standard of living. If the downturn had not occurred, a £22,000 income would have reached around £27,500 by 2023.
Food prices rises three times faster than wages: The Office of National Statistics has reported that food prices are rising more than three times faster than wages. Average private sector worker’s pay climbed by 1.4% in the last year while food prices rose 4.5%.

Technomic – lines blurring between limited service and full-service fast casual: The lines continue to blur in the US between limited-service fast-casual restaurants and full-service casual-dining chains, according to a new report by insights firm Technomic. Consumer expectations are shifting as customers continue to trade-up and trade-down across the casual-dining spectrum. “Consumers in search of a casual-dining occasion have plenty of choices, and their expectations are changing,” said Darren Tristano, executive vice president of Technomic. “Whether their needs are driven by price, food quality, overall value or simply the dining experience itself, operators need to know how to stay competitive.” Consumers’ fast-casual and traditional casual-dining visits appear to be cutting into fast-food and upscale casual-dining visits, as consumers trade up from quick service and trade down from upscale casual-dining restaurants to these locations. In an effort to compete with quick-service restaurants, leading fast-casual brands have expanded breakfast offerings by 31% since 2011. However, there’s still plenty of opportunity as just 31% of leading fast-casual restaurants offer breakfast.

McDonald’s launches McCamembert in France: McDonald’s has launched a new menu item tailored for the French market – the McCamembert. “We feel used,” said Patrick Mercier, chairman of an association of Camembert producers in Normandy. “They did this without consulting us, without even warning us.” A review in the French newspaper L’Express said cambembert fans “will be disappointed”, because it lacked taste and, horror, “could even be confused for brie”.

Company news:

Spirit to begin trial of new premium pub brand: Managed operator Spirit is to start a trial of a new premium pub brand shortly, chief executive Mike Tye has told a Barclays Capital seminar. The company has five brands in its managed portfolio after taking the decision a fortnight ago to combine its 69 Original Pub Company sites with its John Barras brand. The development of a premium pub brand comes after similar developments at other managed operators such as Marston’s and Greene King – Mitchells & Butlers already operates 81 Premium Country Dining Group sites. Spirit began a small trial with a handful of gastro-pubs about four years ago but did not continue the trial. Tye told the Barclays Capital seminar that there is “continued brand evolution” taking place at Spirit – and the new brand will be more premium than its Taylor Walker and Chef & Brewer brands. Meanwhile, the seminar heard that Spirit now has four concepts for franchising within its leased division – Premium Pint Local, Great British Sports Local, Premium Food Local and Country Pub and Dining. Eight pubs are now in trial – five branded and three unbranded – under its John Barras brand, with “encouraging” early signs with positive feedback from franchisees. Tye said: “Turnover based rent allows shared upside from growth and better cashflow for franchisees.” The company has also invested £2.4m in Vianet’s iDraught system to improve yield and beer quality in the leased estate, with a 25% return on cash targeted. 

Alistair Darby – three quarters of Mitchells & Butlers brands developed in-house: Mitchells & Butlers chief executive Alistair Darby has emphasised the strength of the “fundamentals” at Mitchells & Butlers during a presentation at a Barclays Capital pubs conference. Darby told the seminar that 45% of the 1,600-strong estate is located in prosperous London or the south east. He also pointed out that three-quarters of the company’s brands and formats had been developed through in-house innovation. But Darby told the seminar that the company had “more to do” with like-for-like sale below its major peers and inconsistent returns on capital. He listed the priorities of the year ahead as: successful execution of established strategy, brand development, guest service, a proactive response to food inflation, especially food, and a focus on returns on expansionary capital.
Chef Rimmer creates beer that matches food: Chef and restaurateur Simon Rimmer has teamed up with family brewers Robinsons to create three very unique bottled beers, specially handcrafted, to go with steak, chicken and curry. Rimmer runs the vegetarian restaurant – Greens – in Manchester and Earle, a modern brassiere in Cheshire, has sold 100,000 copies of cookbooks, and co-presents Channel 4’s Sunday Brunch with Tim Lovejoy. He said: “Every bloke wants to create his own perfect pint. I’m the luckiest bloke in the world because I get to create three. Not only can beer be used as a key ingredient in a wide range of recipes, but it is also a great accompaniment to enjoy alongside our favourite dishes; complementing and bringing out the very best flavours in our food as the world’s best wines do. The subtleties of beer are perfect for complex food matching.” 
Antic London to open Walthamstow site next month: Antic London, which operate 24 pubs in the capital, is to open its next venue, The Chequers Pub, Walthamstow, on 7 March. The company stated: “The pub has been re-modelled and will feature two snugs and larger bar and dining area in phase one of its opening, with an event space and a new courtyard area to follow in phase two. The hope is to provide an external bakery and other units once the courtyard is finished. The pub has been in operation from the mid 18th Century with the courtyard being used as a soup kitchen in the very early 1900s and is deeply embedded in the history of Walthamstow.” The company has previously announced its opening The Effra Social on Effra Road, Brixton later this month on 28 February.

Simon French – buy laggard Wetherspoon shares: Panmure Gordon analyst Simon French has issued a buy recommendation on JD Wetherspoon shares with a target price of 615p on the shares. He said: “The stock (-4% year-to-date) has underperformed its peers (flat to +13% year-to-date) despite the group reporting industry leading like-for-like sales growth of 8.0% for the 11 weeks to 13 January. We think trading conditions are getting worse but with disposable incomes tightening we think the group’s value offering will become even more favoured by consumers. Margins remain the market’s key concern but investors should be aware that management always takes a long term view of this business and will sacrifice margin accordingly if it can lead to sustainable market share gains. Although we do not forecast it, we can see margin recovery potential of 120-130bps over the medium term. The stock trades on a CY 2013E adjusted EV/EBITDAR of 7.4x, an unjustified discount to Mitchells & Butlers on 7.6x, even more so when considering that Wetherspoons pays a dividend. We reiterate our Buy recommendation and 615p Target Price, implying circa 20% potential upside.”

Homeslice Pizza to open next month: Homeslice Pizza, the latest pop-up to find a permanent site, will open in Seven Dials, Covent Garden next month. The concept, overseen by Kiwi chef Ry Jessup and Mark Wogan, son of Sir Terry, will operate a 50-seat restaurant in the historical Neal’s Yard. Most recently, Homeslice has been a pop-up at cutting edge food destination The Filling Station in Kings Cross. Each pizza is individually hand-rolled on a marble work surface and cooked in a bespoke wood fired oven in an open kitchen. Five selections will be offered daily with combinations such as artichoke and courgette with fresh lemon and parsley or bone marrow, fire roasted spring onion and watercress. The drinks offer will be British beer and Prosecco on tap, double magnums of house wine with a measuring stick on the tables for customers to help themselves and only pay for what they drink. Homeslice will offer a slice of pizza, a pint or a “from the magnum” glass of wine, all priced at £4.00 each. Whole pizzas will be available for £20.00 (20 inches, six slices). Both slices and whole pizzas will be available to eat in or takeaway. Agent Davis Coffer Lyons advised landlord Shaftesbury.

Beefeater offers free kids breakfasts during half term: Whitbread’s Beefeater brand is offering free breakfasts for kids during half term. The offer applies to two children under 15 when an adult buys an all-you-can-eat breakfast costing £8.25 throughout the week of half term.
Tasty buys Nuovo site in South Woodford: Restaurant group Tasty One has bough the Nuovo site in South Woodford. Nuovo owner Laura Unthank has run the restaurant on the South Woodford site for 20 years, converting the building which used to house Lloyds Bank into ‘Jailhouse Rock’ in 1993 before expanding and reopening as Nuovo in 2006 – she will continue to operate Nuovo’s other site in Buckhurst Hill. Unthank said: “Tasty has been trying to buy the site for a number of years and in the end we just received an offer which was too good to refuse. We are planning to expand the Buckhurst Hill restaurant but it will still have a genuinely family run feel and we can’t wait to welcome people to it.”
Hillbrooke lines up eighth site: Hillbroke Hotels, the operator of top-end coaching inns often located close to or owned by country estates, is to open its eighth site at the end of next month after buying The Pembroke Arms at Wilton near Salisbury, located on the Wilton estate. The company states on its website: “We are pleased to announce that in Spring 2013 Hillbrooke Hotels will re-open The Pembroke Arms at Wilton near Salisbury after an extensive refurbishment. This is an exciting new development for us and we look forward to adding the Pembroke Arms to our growing stable of hotels and inns”. Other sites include the Bath Arms on Lord Bath’s Longleat Estate on the Wiltshire/Somerset borders, The Elephant in Pangbourne, Berkshire; New Inn in Coln St Aldwyns, Gloucestershire; the Master Builders on Lord Montagu’s Beaulieu Estate at Buckler’s Hard, Hampshire; and The Stag & Hunstman in Buckinghamshire. Explaining the company’s market position, Brooke said: “ Under our banner of ‘Quirky Luxury’ (not boutique, please note) we are extremely proud of what has been achieved over a relatively short period of time. We are not a normal centralised hotel group, and we do have a slightly eccentric style, which not everyone always understands when they first come to stay or work with us. It soon becomes abundantly clear though - service beyond customer expectation and an innate willingness to help.”
Marston’s suffers fire at Redhill pub: Midlands based brewer and retailer Marston’s has suffered a large fire at its Dog & Duck site in Redhill town centre. It is not yet clear what caused the blaze or whether there were any suspicious circumstances surrounding the incident.
Pizza Hut to offer digital fans Valentine’s Day scent: Pizza Hut is to release a limited range of “Eau de Pizza Hut” scent for Valentine’s Day. The new, scent is available for the first time globally, but will only be awarded to the “biggest Pizza Hut fans” on a limited country-by-country basis. “The Eau de Pizza Hut is perhaps the most unique scent we’ve ever developed,” said Ashlee Firsten of Aromachology, a New York-based custom perfumery. “The cologne has a slightly sweet base scent of freshly rising dough, but finishes decidedly savory with hints of Italian spice like oregano, vine-ripened tomato sauce, the crispness of fresh-sliced vegetables and all wrapped by wafts of cheesy goodness. It’s really a quite complex combination of aromas that results in the hunger-inducing smell of a fresh Pizza Hut pizza.” Eau de Pizza Hut will be awarded to social media fans around the world.
Starbucks large coffee ‘contains three quarters of daily caffeine dose’: A large cup of Starbucks coffee contains more than three quarters of a person’s ‘safe’ daily dose of caffeine, according to a report. The 16oz ‘Grande’ coffee is reported to contain 330mg of caffeine, nearly double the recommended limit for a pregnant woman. A study by the government regulatory agency Health Canada concluded that the average person can have up to 400mg of caffeine a day without experiencing negative affect, such as anxiety or heart problems. The average allowance for a pregnant woman is 200mg, according to the Food Standards Agency, and 75mg for a 10-year-old. A 16oz Starbucks coffee has 330mg of caffeine, according to a table compiled by Chemical and Engineering News. However, Starbucks deny the findings, saying their Grande contains just 140mg - still more than a third of the daily recommended limit. This is compared to an 8oz cup of brewed coffee, which contains 133mg, and an 8oz cup of instant coffee, which has 93mg.An 8oz can of Monster Energy has 92mg, while an 8oz Red Bull can has 83mg. A bottle of Coca-Cola contains 58mg of caffeine, while an 8oz cup of decaf coffee has 5mg and hot chocolate has 9mg.
Restaurant Group withdraws Rangeland burgers: Frankie & Benny’s operator The Restaurant Group has withdrawn all of its burgers from Irish manufacturer Rangeland Foods. The company, said that following the announcement that Rangeland Foods had discovered that a batch of meat - contained traces of horse meat, TRG destroyed all of its burgers. TRG added that it is now sourcing all of its burgers from UK suppliers and that all of its beef burger products have been tested to confirm that they are horsemeat-free. A spokesman for TRG said: “TRG were supplied by Rangeland, but following the announcement on 26 January by the Irish Food Standards Agency that they were investigating all beef supplies into Ireland sourced from Poland that may contain a contaminant, TRG decided to cease using Irish suppliers of burgers. At this stage, there was no indication that Rangeland Foods were being investigated by the Irish FSA.” He added: “Subsequently, on 4 February, the Irish FSA announced that Rangeland Foods had identified that a batch of meat contained equine DNA. Whilst Rangeland has confirmed in their statement that the contaminated batch of meat did not enter their production processes, TRG has destroyed, as a precaution, all products sourced from Rangeland and now only source burgers from UK suppliers - all beef burger products have been tested to confirm that they are clear of equine DNA.”
Footballer opens restaurant: Fleetwood Town striker Richie Allen, who is nursing a broken leg currently, has opened his own restaurant Sticky Chops, on the corner of Miller Arcade and Jackson Street in Preston. A spokesman said: “The restaurant will specialise in chicken, ribs and skewers and there is a burger that we say is the best burger in Preston. It’s the type of stuff footballers eat. We do all the meat on the grill - it’s not fried. We also do a platter of chips with rustic chips, sweet potato chips and fries. It’s good food.”
Amended proposals submitted for Wetherspoon pub in Aldershot: Amended plans have been submitted by Dunedin Property for The Arcade in Aldershot, after strong public opposition and a refused scheme last year. A new planning application for a similar scheme to the one rejected last July has been received by Rushmoor Borough Council and consultation will run until 27 February ahead of a decision by the council’s development control committee. The refused scheme, for a two-storey Wetherspoons pub and large Poundland store, was recommended for approval by officers, but councillors chose to go against their advice. It is the subject of an appeal, due to be considered by the planning inspectorate next month.

Nextep Inns opens second Punch Taverns site and fourth in total: Nextep Inns, the pub company set up by brothers John and Peter Knowles, has re-opened its second Punch Taverns site, The Bayley Arms in Hurst Green, Clitheroe after a £200,000 joint investment between itself and owner Punch Taverns – the latter’s investment was around £140,000. “It’s a food destination pub deep in the Ribble Valley,” said Peter Knowles. The addition of the pub comes after the company was launched at a Punch pub – The Feilden’s Arms in Mellor Brook, Blackburn, which saw a £286,000 joint investment. The company, which wants to grow to six venues, has also re-opened The Red Lion in Wybunbury, near Nantwich, a Daniel Thwaites pub, after a £250,000 investment and taken on a second Thwaites pub, The Bay Horse, which is a quarter of a mile from its original site. The brothers, who also run an accountancy business with a number of pub sector customers, want to hit the six pubs target within three years.
Coca-Cola plans focus on “collaboration, innovation and listening” after sales drop: Coca-Cola’s chief executive Muhtar Kent has pledged that the company will become better at “collaborating, innovating and listening” to consumers and partners next year as it reported sales weakness in its European business in the fourth quarter. European revenue fell 6% in the three months to 31 December, which Coca-Cola blamed on ongoing macroeconomic uncertainty, weak consumer confidence, adverse weather and an unfavourable price mix in the quarter. Kent said Coca-Cola must continue investing in its business to “get even better” in terms of collaborating, innovating and listening to consumers, customers and partners - and to execute “with precision”.

Burger King takes another step in McDonald’s catch-up with ten new coffee beverages: Burger King in the US has taken another key step in matching the offer at rival McDonald’s McCafe concept by launching an unprecedented ten new coffee variants. They include a smooth roast coffee, fresh-flavored iced coffees and lattés blended by Seattle’s Best Coffee. “We know how important coffee is to Burger king guests, and we’re focused on giving them a great cup – whether it’s iced or hot, morning or night,” said Jennifer Dimaris, vice president, brand management for Seattle’s Best Coffee. “That’s why we put more than 40 years of experience to work and used extensive testing to create a new coffee menu that is just right for (their) guests.”

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