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Morning Briefing for pub, restaurant and food wervice operators

Fri 11th Mar 2016 - Friday Opinion
Subjects: The sector comes of age, the evolving curry market, and questions I’ve been asked lately
Authors: Paul Charity, Glynn Davis, and Ann Elliott

The sector comes of age by Paul Charity

The provision of food and drink on an out-of-home basis is as old as time itself. The UK’s network of coaching inns is testament to the systemised provision of refreshments at key geographical locations as travellers made their slow and weary way around the country. For centuries, every town and city in the UK was well-populated with inns and taverns serving their local populations with a hearty if basic offering of recognisable staples.
It is in the last quarter century, though, the UK foodservice scene has changed beyond recognition, making a quantum leap in terms of the quantity and quality of branded offers. Now the UK foodservice scene lays claim to world-class credentials, second only to the US in combining the key constituent components of individuation, quality, value and consistency.
Let’s rewind to 1990 to get a flavour of the level of progression within branded foodservice in the UK in the past 25 or so years. Branded operators were few and far between. Luke Johnson and Hugh Osmond were still three years away from investing in PizzaExpress and creating a UK-wide network of restaurants. JD Wetherspoon had a turnover of £7m. Pubs were still required to close at 3pm on a Sunday before being allowed to reopen at 7pm. The branded coffee shop hardly existed and branded quick-service restaurants tended to be US imports – McDonald’s arrived in the UK in 1973. Food in pubs existed at a basic level of tired staples – and the term gastro-pub was yet to be invented.
Fast-forward and progress has been dizzying. The UK now offers world-class branded formats run by world-class individuals. The UK’s leading companies have fast-tracked themselves, assimilating the lessons around systemisation offered by our American cousins, who still lead the world in replicable branded offers driven, invariably, by the power of franchisable retail content. But talent has flooded the UK scene. Our aforementioned leading companies have moved their skillsets on an upward curve, producing talented individuals who have, in many cases, formed their own companies. US companies opening in the UK have also spawned a generation of executives equipped to start their own foodservice brands. High quality branded concepts are disruptive within their market places. This opportunity has attracted individuals from the banking, law and accountancy professions, who have relished the challenge to make their mark – and their fortunes – in the entirely democratic world of foodservice; if you offer tasty, good-value food, consumers will seek you out and fill your tills.
The success of the UK’s branded foodservice entrepreneurs can be measured in entirely objective ways. UK consumers make the second highest number of eating and drinking out of the home visits in Europe. UK consumers make 142 visits each per annum, second only to Italy, whose figures are skewed by much bigger breakfast usage (30% of all visits) and average 176 visits each year per capita. The UK foodservice market has the biggest domination by brands of anywhere in Europe. In the UK, visits to brands by consumers rose to 58% of all visits in the year to June 2014, up from 52% in 2008. (The next highest country is France with 45% of all visits to branded chains).
The UK dominates the European list of large companies by turnover with circa 40 companies achieving turnover of £100m or more. No other country other than the US is producing so many foodservice brands with the universality to appeal to overseas markets. A non-exhaustive list would include Costa Coffee, Jamie’s Italian, Wagamama, Caffe Nero, Pret A Manger and PizzaExpress, with the latter attracting investment from a Chinese private equity buyer, Hony Capital, intent on expanding the brand across China. Lastly, it’s worth noting last year saw 16 new branded concepts opening in the UK each week – an incredible 800 new branded concepts in a single year. My own estimate is the UK now has more than 2,000 operators of branded foodservice concepts. Some of these smaller, emerging brands will undoubtedly grow into world-class operations with a worldwide operating footprint.
A particular feature of US foodservice has been its versatility in taking global cuisines and creating its own formulations – before re-exporting them. So aside from the US staples of burger, fried chicken and ribs colonising the globe, we have US reinventions of Italian food and drink, in particular, conquering foreign markets – pizza (Domino’s, Pizza Hut) and coffee (Starbucks) are the obvious examples. It was with some pleasure I dined at Soho House in Chicago last year and noted the company had exported its Dirty Burger, Chicken Shop and Pizza East brands to the US in a classic coals-to-Newcastle exercise. Could UK foodservice firms now go one step further and export our systemised and branded takes on Indian, Chinese, Thai, Japanese, Italian, and indeed, US food around the world? Who would bet against?
Paul Charity is managing director of Propel Info. This article is an abridged version of his foreword to the new book, Effective Brand Leadership – Be Different. Stay Different. Or Perish, by Professor Chris Edger and Tony Hughes

The evolving curry market by Glynn Davis

Upmarket Indian restaurant Trishna has just announced it is to run a series of “Not Your Average Curry Nights” priced at £120 per head that will introduce modern innovative dishes from different regions of the subcontinent to diners. This struck me as interesting. Not only from the point of view of Indian food now moving into the land of the £100-plus per head meal but it also reminded me of the days when I frequently enjoyed what could be described as an average curry night.
That Indian food can now command these sorts of premium prices, and operators like JKS Restaurants (that also runs Gymkhana), are now showing the British public the real richness of Indian food, is to be welcomed. My concern lies with the reference to the average curry night because I fear they are becoming a much rarer thing than they were in my youth. After a few beers the next stop was always for a curry to finish things off. I did this for many years because I was fortunate my hometown of Doncaster had one of the country’s first Indian restaurants, called Indus, which I’d been visiting initially as a birthday treat each year from the age of eight. It sadly closed a couple of years ago.
Even sadder is the fact its demise is not particularly unusual. Recent statistics show 600 Indian restaurants have closed over the past 18 months, representing 11% of the UK’s curry houses, and there are fears as many as a third of the 12,000 such restaurants are heading for closure. There was a time when a village or small town would absolutely have had at least one pub and an Indian restaurant but this is now far from being a certainty. Both these established parts of the British leisure scene face their issues as the market around them has been changing dramatically.
Not only do Indian restaurants face a critical shortage of chefs, from next month a chef employed from outside the EU will legally have to be paid a minimum salary of £35,000. This will not exactly help margins in the trade that have halved from 20% to 10% over the past 20 years as operating costs have risen but menu prices have largely stayed the same. This has been necessary because curry houses have faced a torrent of competition from the likes of pubs hosting curry nights, the supermarkets running constant curry meal deals, and pretty much any bog standard cafe seems to have a curry as an option.
The Indian restaurant industry has also suffered from a lack of economies of scale, which have benefited other cuisines where chains have being built up and central kitchens employed. The bigger curry house chains like Aagrah have only been able to grow into double figures (current roster is 14 restaurants in Yorkshire) because they have enjoyed the advantage of being run by a big family. Renowned chef Cyrus Todiwala, who runs Cafe Spice Namaste, told me some time back no Indian restaurateur would ever take the risk of having a non-family member running one of their outlets.

The curry house has also faced an issue with younger consumers developing an appetite for other cuisines. Whereas my de facto meal out was the curry, for today’s younger audience it is just as likely to be a premium burger, Nando’s, Vietnamese or Mexican that sates their desires after a night out. There are still plenty of the older clientele who religiously stick to their Indian meals out but the future health of the curry house will inevitably be reliant on attracting more younger customers.
Thankfully it’s not like the industry does not adapt. I’ve seen various changes over the years. It must have been a decade ago when I walked the length of Brick Lane in east London to try to find an old school Indian. I wanted sitar music, flock wallpaper, carpeted floors, and maybe a Taj Mahal-shaped bit of coving for added ambience. I failed in my mission because they had en masse moved on and switched to playing British music, stripped off the wallpaper and painted the walls white, ripped up the carpets to instead lay down wooden flooring, and the coving was no more.
What I haven’t mentioned is the food. In contrast to the decor, it was exactly the same. And to a large degree it still remains exactly the same today in most curry houses, which all have the familiar dishes of old. We know what the roll call comprises: rogan josh, tikka masala, jalfrezi, and bhuna to name but a few.
But as high profile restaurants like Trishna increasingly put the focus on regional Indian cuisine as well as introducing healthier dishes – which all goes to provide something new and fresh as well as differentiation in the market – it is hoped this thinking will spread to the menus of other more price-conscious restaurants around the country. It’s more than just a cuisine and jobs at stake. It is part of modern British culture and one many people in this country will be very sad to see having such a tough time. Let’s all partake in more average curry nights.
Glynn Davis a leading commentator on retail trends

Questions I have been asked lately by Ann Elliott

I often get asked: “What are the latest trends I need to know about and what’s really going on out there?” These are some of the questions from the last week or so.

1. Are millennials really drinking less? 
There was some interesting research published this week by the Office of National Statistics on UK alcohol consumption, which said an increasing number of young people are either turning teetotal or drinking considerably less than before. According to the survey, over 50% of 16 to 24-year-olds had not had a drink in the previous week. The trend isn’t limited to the younger generation with 42% of all Britons (regardless of age) having not had a drink in the previous week, an 8% increase compared with a decade ago. So the answer is yes. This is not a new trend. It looks set to continue.

2. Do I need to take any notice of the Morrisons/Amazon deal you wrote about last week?
With the latest delivery companies, such as Deliveroo and GrubHub seeming old news (but still incredibly relevant for our sector), the Amazon’s latest partnership with Morrisons is still causing some surprise. According to a survey by Trustev, 64% of millennials are more likely to make a purchase from a retailer that offers same-day delivery. This is Amazon’s sweet spot. The big question for us is: “Will Amazon link with food distributors take part of the out-of-home food and beverage share?” The success of the partnership with Morrisons could be an indicator. I would certainly be taking notice.

3. What are others in the sector wanting from the upcoming budget?
The industry will be hoping for increased support from the government with the continuations of last year’s policies. In particular, continued cuts to beer duty and reform on business rates. A further 1p cut in beer duty would help ensure the pint remains affordable, support pubs and secure jobs. The industry would benefit from government support to help alleviate the costs of the National Living Wage, taking effect on April 1. Workers aged over 25 will earn £7.20 per hour, a 50p rise on the current rate. PwC estimates this will cost the hospitality industry £13.2m by 2020. I think the government is unlikely to do anything in this area but the impact of this on our sector is enormous and not yet being discussed openly.

4. Is there still growth in the bar side of business? 
A survey of more than 1,300 diners and restaurateurs conducted this week by OpenTable found over half (55%) of diners had visited a restaurant specifically for their bar menu. 81% of consumers said they enjoyed eating at the bar, while 61% said a welcoming bar area was more likely to make them visit a restaurant. This has triggered a reaction from operators looking to attract additional trade. Of those operators surveyed, 65% either have invested or are planning to invest in their bar area in the next 12 months. This is a wise move – the link between bars and casual dining is a driver for growth.

5. My food is as good as ever but my like-for-like sales are pretty stagnant – thoughts?
Recent research from Mintel revealed 71% of consumers agree the atmosphere of a restaurant is just as important as the food. We also have lots of evidence to show the overall experience in a restaurant is key – not just one particular part of the offer. Every element of the customer journey has to be examined with the same sort of forensic intensity as the food and delivered consistently and brilliantly – and then communicated exceptionally well to guests. Always been important, always will be.

6. Where’s worth trying at the moment?
I would go back to Babaji in Shaftesbury Avenue, Palomar in Rupert Street, The Walgrave in Brendon Street, Yumi Izakaya in Shaftesbury Avenue, The Grazing Goat in New Quebec Street, and Grangers in St Pancras Square. I also went on an awesome food tour in Cambridge – Aromi was superb.

A great few weeks for learning and insight.
Ann Elliott is chief executive of leading sector PR and marketing agency Elliotts –

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