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Wed 21st Sep 2016 - ALMR Christie & Co Benchmarking Report – additional costs could undermine sector growth
ALMR Christie & Co Benchmarking Report – additional costs could undermine sector growth: Rising operating costs, particularly payroll costs, are threatening to undermine the growth of an evolving and innovative sector, according to the Association of Licensed Multiple Retailers (ALMR) Christie & Co Benchmarking Report 2016. The report benchmarks operating costs, market trends and sector performance. The tenth edition of the report showed the average costs associated with running a pub at a seven-year high, with payroll costs accounting for almost 30% of turnover. The report also underlined the continued evolution of the licensed hospitality sector, with food sales now accounting for 32% of revenue. Gross profit margins on food sales were down from last year’s record levels to 61.5%, as operators were unable to fully pass on cost inflation to customers. The report said this casts doubt over their ability to pass on increasing labour and legislative costs, which could threaten future profitability. ALMR chief executive Kate Nicholls said: “In terms of revenue, we are seeing results that back up the ALMR’s recent Future Shock Report showing customers are increasingly moving towards food options and away from drinks. Food sales now account for 32% of turnover, with wet sales making up 61%, the lowest in the history of the report. These are encouraging results for the sector but evidence of rising costs, coupled with uncertainty following the EU referendum, threaten to undermine the good work businesses are carrying out and could potentially derail investment in venues and staff. Operating costs now stand, on average, at 49.3% of turnover, up from 47.7% in last year’s survey. Payroll costs now stand at 27.8% of turnover, a substantial amount with payroll costs set to rise over the short and medium term. Our recent employment survey showed tight profit margins of about 8% to 12% – a 1.5% increase in costs could reduce them by 11%. With the government looking to introduce an apprenticeship levy and increases to the rates of national living and minimum wages, clearly some pubs and bars are going to absorb these additional payroll costs. Businesses need confidence and certainty in order to plan and invest, but uncertainty over the UK’s exit of the European Union could undermine confidence in the sector and threaten investment. Sector recession in 2008 had a two-year drag on growth and investment and turbulence following the triggering of Article 50 could have a similarly negative effect. The government will need to take this on board as it considers placing additional financial burdens on businesses that could undermine investment in venues and staff members.” Neil Morgan, managing director – pubs and restaurants – at Christie & Co, added: “In all sectors, operators which can adapt will be the winners going forward. High-street venues are evolving, and their unique presence in the centre of the UK’s towns and cities allows savvy operators to promote daytime trade, while simultaneously positioning themselves to benefit from the vibrant evening economies on the circuits in which they are located. However, as these segments become increasingly competitive, we may see operators having to fight harder to maintain their market share which, in turn, could reduce margins and profitability. In the short-term, costs are expected to rise due to currency fluctuations and more expensive imports, and changes in consumer confidence could also impact on levels of discretionary spend.”

Trends in London’s best bars revealed: The American Bar at the Savoy is the most influential bar in London, a new report on trends in the capital’s dynamic drinking-out sector has revealed. The “London Influencers” report from CGA Strategy and BarChick investigated the most influential outlets in the capital, profiling their stand-out appeal, their drinks ranges and how suppliers can gain listings there. It highlighted the current outstanding quality of London bars and reveals how they set standards for others to follow – not only in London but worldwide. The report also revealed the drink trends likely to proliferate across the market, including the rising importance of “thought leaders”, be that online via social media or “in-the-know” friends. The research also uncovered the growing prominence of star-name mixologists, in-house distillation and South American spirits, along with the continued rise of premium, small-batch and unusual drinks and theatrical service. It has a host of valuable market insights for bar operators and suppliers alike. The five London bars named by the report as most influential are The American Bar at the Savoy; The Connaught Bar; Dandelyan; Hawksmoor Spitalfields; and Hawker House, which is run by London Union. Next on the list – and the first standalone venue in the top ten – is Callooh Callay in Shoreditch. Seventh is The Draft House in Old Street, and eighth is Nightjar in Shoreditch. The top ten is completed by tap room Mother Kelly’s in Bethnal Green and the Blind Pig, a “secret” bar at Social Eating House, Jason Atherton’s restaurant in Soho.

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