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Morning Briefing Strap Line
Fri 25th Jul 2014 - Friday Opinion
Subjects: The spectre of New Zealand clampdown, can Tesco learn from Carrefour, posh fish and chips and red tap and the change retail and social environment
Authors: Martyn Cornell, Chris Edger, Paul Chase and Nielsen Harrap

Beware those who want to return to the six o’clock swill by Martyn Cornell

If you are worried about the impact of late-night levies and early-morning restriction orders on the hospitality business in the UK, be grateful you don’t live in Auckland, New Zealand. There, police are calling for a six-year ban on any new bars and off-licences, and a “sinking lid” policy, which would mean no new licences are given even if other bars or off-licences close down.
You might wonder why the city declared this year by the American consultancy firm Mercer to have the third highest quality of living in the world, after Vienna and Zurich, would need such drastic action against its drinking establishments. (London, for what it’s worth, came 38th in Mercer’s survey, Birmingham 51st, Glasgow 54th, Aberdeen 56th, and Belfast 63rd.) New Zealanders are 31st in the World Health Organisation’s list of countries ranked by alcohol consumption per head (the UK is 25th). Can Auckland’s alcohol problem be that bad? Well, Auckland police claim to get around 70,000 “alcohol-related” call-outs every year: that’s more than 1,300 a week, for a population of 1.4 million. Comparative figures for the UK are hard to find, but that does seem on the face of it to be a massively high figure: 5,000 “call-outs” per 100,000 people per year. In the UK, actual alcohol crime is calculated at only 15 incidents per 100,000 population per year. Even if you said police recorded just one crime for every 100 call-outs, that would still mean Auckland’s boys and girls in blue were dealing with more than three times the number of alcohol-related incidents that British bobbies had to cope with.
Once upon a time, of course, New Zealand had some of the most restrictive opening hours of any country not actually practising prohibition. In 1917, in the middle of First World War hysteria about drinking causing “lost production”, a law was introduced shutting all bars at 6pm. The result was the quickly notorious “six o’clock swill”, when men left work and hurried to the bars to get as much beer into their stomachs as they could before the shutters came down. A national referendum finally ended the six o’clock swill in 1967, after 50 years, with closing time extended to 10pm and, later, 11pm. From 1989 to December last year, New Zealand had 24-hour licensing. After December 18 2013, bars had to close at 4am, and not reopen until 8am. 
However, local councils are now able to come up with their own ways of controlling alcohol under the same Sale and Supply of Alcohol Act, passed in 2012, that ended 24-hour licensing. The local authority in New Zealand’s biggest city is one of the first to decide it wants to tweak the current arrangement: bars in the central city should close at 3am, it says, with operators with “high standards of management” able to apply to close at 5am, while bars in outer suburb, it says, should close at 1am, with those with high standards of management able to apply to close at 3am.
The city’s police want to go further than this, however: bars in the central city should close at 3am with no extensions given, bars in other areas should close at 1am with no extensions given, and there should be a “one-way door policy” in the central city from 1am, they say. In addition, they want a six-year freeze for new on-licences and off-licences in all of Auckland’s central business district, and the so-called “priority overlay areas”, neighbouring suburbs. In a submission to Auckland Council, the police say the central city should be the area with the most alcohol restrictions, not where alcohol-fuelled harm is “deemed acceptable”, and they attack the idea of “rewarding best practice operators” by giving them longer hours, saying that even the best operators contribute to harm, increase levels of intoxication and attract crime.
Naturally enough, Hospitality New Zealand, the local equivalent of the ALMR, is under-impressed by the arguments of Auckland Police, with its spokesman, Russell Gray, describing the police proposals as “disappointing and draconian”. Gray said police should be “focusing their efforts on the very few trouble-makers” rather than trying to restrict everybody.
Does this have any relevance to the UK? Our own First World War licensing restrictions lasted more than 20 years longer than New Zealand’s did, with no real reform until the 1980s, though they were nothing like as ferocious as those the Kiwis suffered. But I have sometimes wondered if Britain might have taken the same route, and brought in 6pm closing in the First World War as well: suppose the United States never entered the war until after Prohibition had been passed in Washington, could Woodrow Wilson, to appease Prohibitionists at home, have made it a condition of coming in on the side of the Allies that even tighter limits had to be placed on drinking hours in the UK than were already in place? It might have happened. Still, fortunately it didn’t, and eventually we were able to enjoy the same freedom to drink in a bar all the clock round that New Zealanders had from 1987. Now, however, there seems to be an increasing impetus to restrict that freedom in the land of the All Blacks, with gains once celebrated being pushed back: 24-hour drinking cut, even under Auckland Council’s proposals, to 17-hour drinking in the suburbs.
The lesson, perhaps, is that once complete freedom has been won, it’s an extremely bad idea to concede a little of that freedom back to your opponents. Once you have said “OK, no more 24-hour licences, but 20-hour ones instead”, it’s much easier for those who would love to drive opening hours back down to the era of the six o’clock swill and worse, to push for another hour to be removed from opening times, and then another, and then another …
Give them a minute, and they’ll take the whole day.
Martyn Cornell is managing editor of Propel Info

Could Tesco learn turnaround lessons from Carrefour? by Chris Edger

As observers of the retail industry and Tesco – one of the great retail success stories of UK plc in recent times – what are we to make of this week’s change of chief executive? First, one must recognise the herculean efforts of Philip Clarke to refocus the business. He has ended unprofitable foreign adventures, put more staff onto the floor in UK stores, driven the “clicks and brick” agenda and “humanised” stores through better amenities and services. The fact remains, though, that profound changes in consumer behaviour – preferences for convenience and immediacy – threaten the viability of Tesco’s erstwhile sweet spot, its huge hypermarket portfolio. Non-food merchandise sales in these hypermarkets have been in decline for some time, because of internet commoditisation. Food-based transactions in these stores have declined as a result of convenience shopping and the onslaught of marauding pound-stores and hard discounters. Consumers are now extremely promiscuous. Wages have not kept track with inflation and people are on a permanent hunt for value – combined with special treating when the need for indulgence arises.
What are the solutions? The recent revival of Carrefour provides some clues. Like Tesco, it struggled with a number of the same issues and experienced extreme turmoil at a senior level. Last week it declared second quarter organic growth of 4.8%. What has it done and what can Tesco learn? Essentially it has continued pursuing a multichannel approach but has stopped the rot in its hypermarkets by simultaneously refocusing on value and reviewing its property portfolio. Carrefour, which is a couple of years ahead of Tesco in turnaround terms, proves that organic decline in the hypermarket segment can be halted. The appointment of Dave Lewis as Philip Clarke’s successor might eventually lead to the generation of greater footfall at these sites by imaginatively pulling the price lever. For sure, Lewis, an FMCG pricing expert, will understand the art and science of “big brand” price elasticities (price and item-sales dependencies), having been on the “other side”. He will also have great consumer channel insight and, crucially, coming from a lean production background will have a sense of what constitutes effective central overhead costs. To this extent, he can choose to pursue a strategy that has greater clarity for all stakeholders, one that returns it to its core purpose, that of providing “surprice”, the combination of surprise and price, to customers.
Whatever path Tesco now chooses, it obviously owes a great debt to its previous leaders, who built it into the third largest supermarket chain in the world. Whither Tesco? Prosper or wither? You cannot write off a great company after four years of , by its standards, dismal performance. By deciding what it stands for, perhaps turning back to its original big idea of value, and re-basing the central cost structure of the UK business, attrition at its hypermarkets might at least be stemmed. Over time Tesco will need to ruthlessly review its portfolio. The race for space is over, and now the culling of redundant hypermarket space will inevitably begin. Don’t write Tesco off. Its mojo will return – undoubtedly after more pain – and, like Carrefour, it will begin to rise again.
Chris Edger is professor of multi-unit leadership at Birmingham City Business School and a former human resources director at Mitchells & Butlers

Posh fish and chip and red tape by Paul Chase

A couple of weeks ago I had a fish and chips lunch with the chancellor, George Osborne. It’s not that George and I hang out at the same chippy, you understand, it’s that George attended a Chamber of Commerce working lunch in Esther McVey’s Wirral West constituency, which includes West Kirby, and I turned up too. After his speech, and during the Q&A, I thanked George for the beer duty cuts two years running and for the abolition of the duty escalator, but asked, ‘Could we please have some VAT equality so we can show you what we can really do for job creation?’ Predictably he didn’t rewrite the budget or make any promises, but he did list what he had done for the pub industry, mentioning those duty cuts, rate relief for small businesses, and cutting red tape.
Cutting red tape? Hmmm, interesting one, that. What government gives with one hand it takes back with another, often unintentionally because things are not thought through and no one joins up the dots. Here are a couple of examples: first, the late-night levy (LNL). Like cumulative impact zones, late-night levies seem to be growing like Topsy. While the sector seems to have seen off EMROs, largely because there is a proper process of consideration which the sector’s lawyers have insisted be followed, and which, as a result of them being well-informed, has resulted in councillors rejecting every EMRO application (so far). But with LNLs there is no proper process for objection, and so we have the imposition of an iniquitous business tax justified on the basis that the “polluter pays”. But the money raised largely benefits the police, who aren’t even obliged to spend it in the area from which it was raised. Maybe I need to have a chippy meal with Theresa May. Scary thought!
But at least the government has saved the sector some money by abolishing the need to renew the personal licence. Well, it seems that the Deregulation Bill, which contains this measure, is still wending its way through parliament and will probably become law in October. But then, the abolition of the need to renew the personal licence will have to be enacted by a statutory instrument, and there may not be time to do this before the first renewals become due in February 2015; so even this modest cut in red tape may be in jeopardy.
I don’t want to alarm anyone, because the Home Office is looking at a contingency plan. I have a practical suggestion: rather than the renewal date kicking in ten years after the grant of the licence, that is, February 2015, how about the Home Office gives dispensation for that to mean ten years after the 2003 Act “went live” – which would be November 2015. After all, the personal licence was a meaningless piece of paper in the holder’s back-pocket until the new licensing system actually came into force. This is the procedure they have adopted in Scotland, and it would allow the government here the time to get the statutory instrument in place so that this cut in red tape could actually happen. I live in hope.
But there are plenty of other cuts in red tape that the government could introduce. Take the process of application for a personal licence: at the moment you cannot do it electronically because counter-signed photos of the applicant and original, signed documentation must all be submitted – and you can only pay for the application by cheque! You cannot scan everything in, submit electronically and pay online with a card. As a result my company, CPL Training, which makes more than 3,000 personal licence applications a year, has to write out 3,000 cheques every year. It is a simple red tape challenge that would save time and money.
There is also a desperate need for a central database of personal licence holders. An example of a recent case we were involved in featured an applicant who left the trade in 2010, and went through the proper procedure for surrendering his personal licence (as set out in S116 of the Licensing Act 2003). Four years later he decided to re-join the trade and duly applied for a new personal licence in a different licensing authority’s area. He made the council aware that he had previously held a personal licence. The local licensing cop smelt a rat! He enquired of the original licensing authority whether this man’s personal licence had, in fact, been surrendered, and was told there was no record of this. The new application was then rejected on the basis that the applicant had misrepresented in his new application – an offence under S158 of the Act that carries a Level 5 fine. But, upon further investigation, and much delving into council paper files, it turned out he had surrendered his original licence after all. Red faces all round; licence granted. All this nonsense could have been avoided if there had been a proper, central database of personal licence holders.
If anyone in the Home Office can make these changes happen I hereby promise to treat them to some posh fish and chips!
Paul Chase is a director of CPL Training and a leading commentator on on-trade alcohol and health policy

Social scene confidence and the space race by Nielsen Harrap

As the country heads into recovery, operators are taking stock of the past few years, plans for new retail schemes are being dusted off and consumers are starting to see positives in their financial outlook.
The retail downturn has been well reported throughout the recession, and while positive results are now becoming more common, this does not mask the fundamental changes happening now and in the future of the retail market. True omni-channel (that is, all touch-points of transaction and interaction) is changing the way consumers engage, from local community hubs to the out-of-town retail palaces, meaning the interaction and role of the physical location is changing. This in turn is resulting in a repositioning of our High Streets and shopping schemes. Destination “experiential trips”, along with “grab and go” convenience, are becoming more and more pronounced.
Through the recession, the market for dining and drinking away from home remained flat, but it has not declined in the same way as the retail sector, and it has shown a greater resistance to economic factors. The dining and drinking away from home market has benefited from a combination of spending priorities and developing sophistication. Whether a habit or a treat, it would seem dining out, at all levels of the market, has remained healthy, if very competitive.
CACI’s Shopper Dimensions survey of more than 170,000 interviews across more than 100 retail centres shows the importance of catering to retail. Shoppers who use catering spend 48% more on retail goods than those who do not. In 2013, overall average catering spend increased by 9%, from £10.32 to £11.26.

This change in the retail market and the positive relationship with catering explains why there has been an increase in the A3 space allocation for new and existing schemes from developers over the last few years. This has moved to a target of around 25% of shopping centre space in new, efficient centres, from the level of around 10% of previous years. It ticks the box of providing experience, increasing dwell times and increasing retail expenditure and conversion.

This is particularly true of casual and destination dining rather than QSR, “grab and go” and cafes. Clearly there is a logical relationship between the more affluent using higher spend-per-head offers and therefore greater retail spends, but the offer needs to match the shopper in the catchment.
As financial confidence grows in our consumers, notwithstanding the spectre for many of potential interest rate rises, recently alluded to by the Bank of England, it is clear this can have a positive impact on the dining and drinking away from home market. Using our SocialScene Acorn system, we can segment the UK population in relation to their leisure, eating and drinking activities. This consumer confidence reached a new high in March, having grown each month in 2014, according to the CACI/BPS Shopper Confidence Monitor. This rise is being fuelled by a rapid step-up in the confidence of the “City Socialisers” SocialScene category, dominated by younger, well-educated, prosperous people living in major towns and cities.
Whilst the City Socialisers category only make up 9% of Britain’s population, they are heavily over-represented in London, where they make up 30% of residents. This in part explains why the recovery is being disproportionately fuelled by growth in the capital. Our City Socialisers are key consumers for many brands including the likes of Pret A Manger, Jamie’s Italian, PizzaExpress, Wahaca, Carluccio’s and YO! Sushi, and are also an important market for the pub and bar sector. They are vital to the higher-end offers found in the capital and other major cities and towns, such as All Bar One, Loungers and Be At One, as well as higher-end drink brands including Peroni, Bombay Sapphire, and also the current market’s love affair with experiential cocktails, microbreweries and distilleries. They show the key attributes of both high frequency and high expenditure.
Returning to the “space race”, with the economic recovery gathering pace, CACI has calculated that there will be more than three million square metres of new shopping centre scheme space opening in the next five years with potentially up to 25% of this being allocated to A3 usage. Is this really sustainable?
Food and beverage operators have higher capital investment and require longer leases for payback than standard retailers, but they also need the retailers in place to attract consumers to schemes. It is this combination, and the experience, that drives footfall. If some of the retailers are no longer there in ten years’ time, when their leases are up, where does that leave you as an operator? The need to understand the long-term viability of schemes is becoming ever more important.
With consumers’ confidence growing and the interaction and role of the physical location fundamentally changing, developers need to recognise these changes and review their leasing models to reflect the growing importance that food and beverage operators offer the market, just as operators need to understand the future developments and changes to their customers and the markets in which they operate. Understanding who consumers are and how they interact with the market, whether they work, shop or play, is fundamental for operators and developers in order for them to make the right investment decisions.
Nielsen Harrap is principal consultant at the market insights firm CACI

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