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Morning Briefing Strap Line
Fri 22nd Apr 2016 - Friday Opinion
Subjects: The growing importance of the grey pound, a thirst for beer knowledge, and why Deliveroo is a real gamer changer 
Authors: David Martin, Glynn Davis, and Ann Elliott

The growing importance of the grey pound by David Martin

In a year that has already taken a heavy toll on the music world, we recently lost George Martin – no relation – a genius of musical invention who died aged 90, part of a booming cohort of the very old. The song hardly represents the peak of his magical musical tour with The Beatles, but When I’m 64 – a song written by Paul McCartney as early as 1958, long before its eventual release – is worth musing on.

In 1958, to be 64 was to be over the hill. Not surprising given the average life expectancy of people born at the start of the 20th century was about 50. For children born nowadays, the odds are they will live to be about 80, and in the more affluent parts of the country, 90 will become an unremarkable age. The scale of this change is profound, and it’s global – here’s a watershed moment revealed in a recent US Census Bureau report: “For the first time in human history, people aged 65 and over will outnumber children under five. This crossing is just around the corner, before 2020.”

In the 1950s, only about one in ten of the UK population was aged over 65. Since then, their numbers have almost doubled, an extra five million people, and they now form about 18% of the population. In ten years’ time, we already know the numbers of over-65s will have grown by a further 20% – that’s another two million people. But how much business empathy is there with this high-growth market? How much interest is there in marketing to it? I’d suggest there is little – for two key reasons.

Firstly, we tend to think about the old as they are now, or as they used to be. Secondly, the marketing department tends to be young, especially in these digital days. It’s not as if the economic importance of the older population is unknown. Here’s some recent US data from advertising guru Bob Hoffman, quoted in Business Insider: “According to Nielsen, people over 50 are the most valuable people in the history of marketing. In the US, they are responsible for 50% of all consumer spending [and] control about 70% of the wealth of the US... and yet people over 50 are the target of 10% of marketing activity in the US.” He also noted that over-50s only formed 6% of the population of the US ad industry.

Before we get too smug about the ad industry, we should consider recent Office of National Statistics (ONS) data on the employment characteristics of the UK hospitality industry. In what it quaintly calls “food and beverage serving activities” (I think they mean us), the proportion of workers aged over 60 was a mere 4%. Compare that with consumer data from CGA Peach’s Brand Track, where one in five people who eat out are aged 65-plus.

Meanwhile, 52% of the hospitality workforce is aged 16 to 29. That’s not exactly well matched, and responses to the National Living Wage may well amplify this imbalance. However, the story so far conceals a bigger trend – even higher population growth at the upper end of the age range. The number of people in the UK aged at least 85 will grow by 30% in the next ten years, by which time they will number two million. There were only about 300,000 of them when McCartney wrote that song. Extend the view further out and more than one in 12 people will be aged over 80 by 2039.

Hard as it is for some of us to accept, those reaching their mid-80s in ten years’ time are McCartney’s generation. They are likely to be healthier in later life than their forebears ever were, with much more adventurous tastes, and far more of them will be online – the data on internet access from the ONS amply demonstrates it. But another fairly safe prediction is that despite these life advantages, this burgeoning very-old population will not be hugely mobile. They will have been accustomed to routinely eating out throughout their adult life, much more so than their predecessors, but time will inevitably take its toll on their ability to maintain the habit. So who will still feed them?

The delivery market is very much in vogue, but the current focus is largely on the young metropolitan market. It makes sense – last year, CGA Peach’s Brand Track survey revealed more than 40% of delivery users were aged under-35, with three quarters of 18 to 24-year-olds saying they’d had a meal delivered in the past six months, compared with only one in four of those aged 65 and over. But the elderly had meal delivery long before the rest of us – the Meals on Wheels service dates to the 1940s. And in terms of ready-meal delivery, Wiltshire Farm Foods has been around for almost 25 years. The average age of its customers is 83, and while its menu is still solidly centred on traditional tastes, they can already live a little dangerously – with a lamb tagine.

To bring this argument’s long and winding road back to George Martin, his musical genius was in applying the new and innovative to an established genre – with a mould-breaking creative effect. Online food ordering – recently described as the “modern day milkman” – has transformed the traditional grocery retail sector. But in our industry, who’s going to deliver the modern day meals on wheels for the fast-growing, online-savvy elderly of the near future?

It will require a kind of business empathy for the old market that is all too rare now – and my market research world is just as guilty of ignoring the old. But few, if any, consumer markets will grow so fast in the coming years and, unlike the uncertainty of most business forecasts, the beauty of demography is we know these changes will happen. For the foodservice world, it’s worth viewing old people through some new lenses.
David Martin is managing director of Red Circle Insight, a market and customer insight resource

A thirst for beer knowledge by Glynn Davis

When asking a room full of people what IPA stands for it still comes as a surprise to me that virtually nobody will have the answer. It is undoubtedly the British beer with the most interesting history and is also the flag-bearing style for craft beer. Every half decent brewery will have an IPA in its toolbox. Most adults who have been into a pub will no doubt have seen the letters IPA on pump-clips numerous times, which makes it even more surprising that they’ve remained oblivious to the acronym’s meaning. If you don’t know what the three letters stand for then you are definitely not alone.

The reality is that the knowledge of beer among the public in the UK is pretty poor. Not only in terms of the different styles, but also the health aspects. Apparently “There’s a Beer For That” found 12% of people think a half pint of beer has more calories than a small glass of wine when in fact it is 91 calories versus 141 for wine. With the ongoing resurgence of interest in beer there also comes a desire to know more about our national tipple. The Society of Independent Brewers found 90% of drinkers demand to know more about what is in their glass. In the same way drinkers have become more inquisitive about grape varieties and wine regions, they have also sought to become more knowledgeable about beer. Two-thirds of people would like to know more about the ingredients in beer and its effects on taste.

So what is to be done? Ironically, one of the great pleasures of the growth of craft beer is also one of its downsides. There has been such an explosion of breweries – more than 1,500 at the last count – and each is fighting to present interesting styles that give them some standout in the market. This means there is a continuous flood of new beers into bars and pubs. For informed beer aficionados this is great but for most drinkers it undoubtedly adds to their confusion at the bar. 

When Charlie McVeigh set up the first Draft House in south London his simple objective was to tempt people into trying new and interesting beers that they had not sampled before. On his bar he had a wonderful mix of brews from around the world as well as one familiar global lager brand. He ended up selling vast quantities of this lager because customers would walk into the bar and face the array of unfamiliar brews. They were like rabbits in car headlights and in a state of panic they’d quickly order the one thing that looked familiar. 

This wasn’t the plan and McVeigh took the hard decision to remove his best-selling product and train his employees to engage with each uncertain customer and start them on their journey of discovering new beer styles. It clearly worked as he now has nine units and recently employed a policy of offering three third-pints of any beers for £5.

But the challenge has not ended at Draft House or anywhere else because as the craft beer market sucks in more people they are all in need of the same help and pointers from the employees in pubs and bars. There is still a lot of work to be done in the industry. My own worst story comes from The Lexington in London’s Pentonville Road. When I asked the bar person what was the difference between two particular stouts she said 50p. She spotted my disappointment at this lame response and added that how was she supposed to know the difference as she hates beer (and people I suspected). 

As the demand for craft beer has grown we have been able to enjoy the myriad beers from the 1,500 breweries in an increasing number of specialist beer pubs and bars. The only problem with some of them is they’ve almost engaged in an arms race to have the highest number of hand-pumps and keg fonts on the bar. For many customers this simply adds to their confusion and I can’t see it exactly been an easy task for the bar staff to keep on top of 60 or 70 different beers that constantly change (and this doesn’t include the often extensive bottle selection).

Rather like at the best restaurants with their modest sized – but frequently changing – menus, I believe pubs and bars should adopt tighter, more focused beer menus. Mother Kelly’s bar in east London is a great example of this. It takes that New York idea of using a simple A4 sheet of paper highlighting each day’s beers that runs to a manageable 20 brews. This covers pretty much every base in terms of styles, regions, countries and ABVs. This list comes with extremely knowledgeable staff who will tell you what IPA stands for if you’re still in the dark.
Glynn Davis is a leading commentator on retail trends

Why Deliveroo is a real game changer by Ann Elliott

I had lunch with the chief executive of a major casual dining chain and we discussed Deliveroo and its impact on the sector. He quoted lots of facts from conversations he had had with other chief executives in the sector and then said: “You can’t use any of those in your article you know!” So, back to the drawing board. From other conversations I have had though I think Deliveroo is a real game changer in many ways.

1. It is delivering real incremental volume

Many business leaders are saying Deliveroo is adding up to 20% incremental sales. This is business they would not otherwise have generated. That is significant. Whilst they may not appreciate the level of charges demanded by Deliveroo, 80% of a 20% sales growth is better than 100% of no sales growth. I haven’t heard one business say this growth in delivery has impacted either their restaurant sales or their takeaway volume. It would appear to be something of a no-brainer commercially. 

2. It is forcing some operators to reconsider the customer experience in their restaurants

If customers can eat the food they want from a brand they like whilst sitting watching the television, then how much better does the restaurant experience have to be to encourage them out of their homes, into their cars and into restaurants? How much better does the restaurant experience have to be to really differentiate it from a food only offering in someone’s home? A number of brands are taking this challenge very seriously and working up options for the future specifically in terms of design and service.

3. Packaging is vital 

Current takeaway packaging does not always work well with the Deliveroo proposition. Packaging has to be robust and fit for purpose of course but more than that, it really does have to present the brand brilliantly. This isn’t just about the branding, design or the copy – it’s about the packaging format itself and what it says about the brand. Many casual dining brands have been working on this for some time but others are just starting. My understanding is that Deliveroo is really helpful and work closely with brands to develop optimum takeaway packaging.

4. Restaurant design may have to change

New site development plans are now having to include space for Deliveroo bikes at the rear and holding areas for drivers (or consider how drivers can walk through restaurants without affecting the restaurant experience for diners). This isn’t always as easy as it sounds, particularly in shopping centres. The appearance of delivery drivers at the front of the restaurant waiting to pick up product has also to be considered when customers are using concierge services (mainly in London), such as Henchman. 

5. The Deliveroo hub is an exciting thought

I have heard about this from a number of sources but haven’t seen it in operation. Ostensibly it seems to be a collection of kitchens using own-branded chefs on one site enabling delivery drivers to collect product from a range of operators and deliver to one or multiple options. So an office could order one burger, one pizza, one Thai and one sushi as an option and have them delivered in one go. That really is about putting the customer first.

6. Is Deliveroo a better commercial proposition than company-owned delivery?

I think this is really interesting and I am fascinated to see what this means for Domino’s, Pizza Hut and PizzaExpress’ own planned delivery option. Will Deliveroo become the go-to delivery proposition allowing brands to focus on what they do best – operating great restaurants versus becoming a logistics expert?

7. The facts would support Deliveroo’s growth 

17% of the UK population normally orders takeaway food once a week. Students and under-25s are the most likely to order takeaway/home delivery more than once a week, whilst the retired and over-55s are the most likely lapsed users. When ordering a takeaway/delivery, 64% of the UK population is most influenced by somewhere they have used before with 15% most influenced by online payment being available. More than 16% of home delivery/takeaway users say they’d be willing to pay more for a service that delivers from restaurants/takeaways that don’t normally offer home delivery. 

8. It’s only the start of the story 

Deliveroo was only founded in 2013 and is backed by early Facebook investor Accel Partners and Index Ventures – it has raised about $200m (£144m) since its inception. Investors paid £133.85 for shares in the latest funding round in November, valuing the company at £376m. 

To me it’s a fascinating story and a great idea built on meeting the needs of today’s customer.
Ann Elliott is chief executive of key sector public relations and marketing company Elliotts – www.elliottsagency.com

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