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Morning Briefing for pub, restaurant and food wervice operators

Fri 23rd Feb 2018 - Friday Opinion
Subjects: Survive or thrive, uniting the brewing generations, Big Temperance versus Big Alcohol, and adjust your offer for the delivery age 

Authors: James Hacon, Glynn Davis, Paul Chase and James Sandrini

Survive or thrive by James Hacon

For years the sector has ridden the high times, rolling concepts out in cookie-cutter fashion, reaping the rewards of launching in new markets with limited competition, chasing landlords who make you jump through hoops, and batting-off meeting requests from financiers who want a slice of the action. 

It’s a stark contrast to today. The investors have closed their chequebooks for the most part, landlords continue building schemes that sit with empty sites and offer bigger sweeteners to secure a deal, and brands are closing sites. We all know this story, we’ve read it in what seems a daily flow of articles in the business pages of national newspapers.

I hear a lot of negativity about certain brands that are closing sites and taking drastic action to right themselves. Almost every senior executive I speak to tells me they are struggling right now, with ownership and debt structure the key differentiator on whether they need to take drastic action or not. 

But what went wrong and what can we do about it? I’ve been asked this a lot recently. I’m sure we all have our own ideas and, let’s get this straight, I’m not a financier so I’m no expert on debt or structuring businesses. I know a thing or two about customers and brands, so that’s where I come from when starting to answer this question. 

If you flip your thinking to that of a customer for a second, I think we can find most of the answers. 

You live in an area where there were one or two great restaurants you visited for celebrations amid a plethora of middle of the road independent pubs and restaurants, many with poor retail standards and inconsistency. Suddenly the national groups start arriving with a design that sparkles and better retail standards. It’s new and different. You try it. You like it. You go back. It’s consistent. It may not be as good in terms of food as the local, but it’s consistent. That consistency means you won’t be disappointed and feel you’ve wasted your money. It’s an important factor if you don’t go out often. 

On top of this, you may not even realise this is a national chain. I’ve sat in focus groups for a 60-site operator where the whole group of ten thought it was a local concept. 

Another new brand comes, the cycle continues. You try out something new. Tens of these new concepts come and you need to start choosing between them. The brands don’t change much, for the most part they don’t do specials and provide offers to keep you coming back. You spot the concept elsewhere on your travels, figure out it’s a big group and it loses a bit of the magic. As that restaurant group grows, the retail standards are bound to slip with a fight for the best managers and an inability to put existing managers into those sites, recruiting new staff and not training them as effectively as possible.

In the meantime, those independents that have survived have realised they need to get better – and have. The pub groups have seen the huge competition posed by casual dining and now work with their operators to drive retail standards. Finding better lessees and supporting multi-site operators to grow and take better units.

Suddenly there is more competition and more choice for those customers. The only difference is these venues have individuality and, in some cases, feel more casual. Let’s face it, for a long time pubs were our casual dining. I think what we are seeing is customers choosing individuality over consistency again.

What does that mean for us as a sector? It means we have to act. We have to revolutionise. It means we have to do more to make less.

In QSR and fast casual, the cookie-cutter approach may work better as what you’re paying is lower and the time involved in your experience less. In full service, many of the occasions people are coming to your restaurants for warrant an experience – whether a date night, a birthday or even a catch-up with friends.

I ask many leaders in our sector what their favourite places are to dine and I don’t think I’ve ever heard a group restaurant mentioned. Ironic, hey? Where is the pride? 

It’s at this point brands have a choice – they thrive or survive. I know full well financiers will want to cut costs and concentrate on margin. Many tactical marketers will up the discounting as we have seen. 

I was with a well-known founder of a large group this week who agreed that at times like these we should focus on providing better value and taking a hit on margins across the board, not pumping offers. 

We need to go back to basics and create experiences. We need to invest heavily in training, in our sites and in developing interesting initiatives to get people coming back for a reason other than a discount.

I’ve presented to more than 200 business leaders in the past week. I asked all of them if they were making cuts, nearly all of them were. I asked the same group if they have a clear document outlining their brand. Fewer than 10% raised their hands. If you haven’t clearly defined your brand, how can you go about refining it or even starting to decide what you will do next? How can you get your people behind your vision and on the path to growth? The first step on the journey of revitalising your brand and putting your company back into growth is getting everyone aligned and working to the same vision. It needs to be a vision of thriving – even if you feel like you are barely surviving. 

Speak to your people and customers, know your competition, develop a strategy, and work together to achieve it. There will be places to make cuts in your business – but make sure they are in the right places. 
James Hacon is managing director of Think Hospitality and advises multi-site brands on growth, and brand and development strategy, as well as investing in early-stage concepts with a bright future

Uniting the brewing generations by Glynn Davis

Fuller’s move to purchase Dark Star brewery highlights the radically changing state of brewing. Traditional brewers have found it particularly tough in recent years to hold their ground against a massive number of small craft breweries setting up shop. It feels like there’s a new one opening every day.

This scenario is also being played out in the fashion sector, where the rise of new, often online-only brands, especially in the fickle fashion category, has brought serious pressure on established operators in the market. These are technically known as digitally native vertical brands (DNVBs).

Whatever you want to call them, they are the newer, cooler kids on the block. What the incumbents have faced is the challenge of making themselves equally cool and relevant to the younger customers who, not surprisingly, want to be associated with the newer brands.

One answer to this major issue is to acquire the new competition as evidenced by the Fuller’s deal or, more frequently, collaborate with them. Louis Vuitton recently collaborated with ultra-cool New York-based skatewear brand Supreme to develop a limited range of clothing and luggage items that were made available in a small number of pop-up stores in some of the world’s most fashion-conscious cities. Louis Vuitton enjoyed enormous demand and publicity that helped give it the glow of coolness by association.

Fashion chain H&M cottoned on to this some years ago and has teamed up with the likes of Stella McCartney and Erdem. Likewise, Reebok teamed up with Victoria Beckham and Off-white collaborated with Jimmy Choo. Levi’s has also been collaborating with myriad third parties, from vintage jeans-tailoring specialists to rappers and sports stars such as Michael Jordan for a denim sneaker range, and even technology companies such as Google to develop connected biker jackets.

It’s not surprising these arrangements work because while the larger player is looking for some edginess to rub off on it, the smaller brand can take advantage of superior supply chain capabilities of the bigger partner and access a potential new customer base that hasn’t been exposed to the brand before – through its high price points or its seriously limited output. It’s definitely a win-win, as the consultants would say.

In the brewing world there has been an explosion in collaborations, which have included many international examples of brewers working together to create a co-produced beer that is made available in both markets. However, this has typically involved the cool breweries working with equally hip and happening contemporaries and, even though it has often produced some great beers, it has also been a little self-congratulatory in many cases.

A particularly exciting phenomenon, though, is the broadening of collaborations. We are seeing some of the newer craft brewers working with more-established traditional operators. A recent example is Brew By Numbers, from craft beer’s ground zero Bermondsey, which has worked with Hobsons Brewery from the Midlands to create a cask ale (new territory for Brew By Numbers) called Mosaic And Citra.

This follows Fuller’s brewing a collaborative beer with Bristol’s Moor Brewery a couple of years ago that re-interpreted the former’s iconic ESB. This beer has returned as part of a successful box set that included collaborative beers Fuller’s brewed with some of the leading UK craft brewers including Cloudwater, Marble, Fourpure and Thornbridge. The box was made available exclusively in Waitrose stores and was snapped up by beer fans with an appetite to try unique products that mixed the heritage of Fuller’s with the newer thinking of the young craft brewers.

Mixing heritage with contemporary offers a world of new possibilities and, as with the fashion collaborations, was a way for Fuller’s to be associated with the youngsters and also learn some new tricks along the way, while the newer players accessed a different – much broader – customer base and got to play on some seriously big brewing kit at Fuller’s Chiswick base.

With such clear upsides for all parties involved in collaborative initiatives, it is hoped we will see more of these tie-ups that extend across generations of brewers – and we might see some more acquisition en route too.
Glynn Davis is a leading commentator on retail trends

Big Temperance versus Big Alcohol by Paul Chase

The recent announcement of a partnership between Dutch brewing giant Heineken and the Global Fund To Fight Aids, Tuberculosis And Malaria, has drawn a scream of protest from the alcophobe fanatics of “Big Temperance”. Heineken has agreed to aid the Global Fund by providing its experts on supply chain logistics to better deliver medicines and healthcare products to people in African countries to help the fight against these three killer diseases.

This has prompted an open letter to the Global Fund from IOGT International and more than 70 other alcohol health charities and non-governmental organisations calling for the Global Fund to immediately end its partnership with “Big Alcohol”. 

IOGT International is the International Order of Good Templars by another name – an anti-alcohol group with its roots in the 19th century temperance movement. IOGT is also a dominant presence in the UK’s Alcohol Health Alliance and had members on the Public Health England committee that fiddled the revised low-risk alcohol drinking guidelines. These are the people leading the fight against Big Alcohol in Africa.

The crux of their argument is that alcohol (not just alcohol abuse) is a major cause of ill health and drinking it makes people disinhibited and therefore more likely to have unprotected sex, leading to more HIV/Aids infections and so a big conflict of interest, they claim, between the Global Fund and Heineken. But this argument is a mere smokescreen for people who think it more important to stop the spread of alcohol use than the spread of Aids, TB and malaria.

The Global Fund gets 95% of its revenue from governments – taxpayers – around the world. Only 5% comes from private donations, including companies. They administer a $4bn annual budget. Any sensible person would welcome the help of a wealthy global brewer. To be sure, this is not entirely an act of selfless philanthropy, Heineken wants to sell its products in Africa and present itself to African governments as good corporate citizens. But there is a powerful reason, from a health perspective, why Heineken and other global drinks producers should be encouraged to make their products more widely available in African countries, and at a price local people can afford. That reason can be summed up in one word – moonshine.

Anyone who knows anything about alcohol abuse in Africa will tell you the problem isn’t the legal market for well-known brands, which many Africans can’t afford anyway, but the illegal market for moonshine. Every year, countless numbers of Africans risk their health and lives drinking illegal alcohol. The illicit brewing market in Africa is worth an estimated $3.5bn a year. With names like “Kill Me Quick”, “The Dog That Bites” and “Goodbye Mum”, African moonshine has a frightening reputation.

Over the years, thousands of Africans have been killed, blinded or rendered sterile by drinking these lethal concoctions. In one of the worst-recorded cases, 128 Kenyans died and 400 were harmed after drinking a particularly poisonous batch of illicit booze.

In Libya, where alcohol has been banned since early in Gaddafi’s rule, a bottle of Chivas Regal can cost more than $100 so Libyans drink a local concoction called bokha. There was recently a major health crisis related to poisoned bokha. Someone had added methanol to a batch and 1,500 patients flooded into Tripoli’s hospitals within a few days.

The World Health Organisation says about half of all alcohol drunk in sub-Saharan Africa is produced illegally, with 85% of consumption in Kenya and 90% in Tanzania coming from the illicit market.

Barley, the essential ingredient in beer, still isn’t grown in many parts of Africa. High taxes and poor supply chains have also pushed up the price of legitimate goods. Toxic homebrew plugs the gap in the market. Africa’s booming cottage industry is made up of clandestine breweries, where maize and sorghum are fermented using water that itself is often filthy. The alcohol content is bolstered using anything from embalming fluid to stolen jet fuel. The resulting grog may sell for as little as 20 US cents a glass but, for the poorest Africans living on a couple of dollars a day, it is often the only way of blotting out their troubles.

This is the folly of trying to ban legal means of accessing properly produced, quality-controlled beverage alcohol products. All that happens is the demand is met by an illicit supply of poisonous concoctions that can kill or blind on the spot.

And yet IOGT and its virtue-signalling fellow travellers are worried about Africans knocking back a pint of Heineken!
Paul Chase is a director of CPL Training and a leading commentator on alcohol and health policy

Adjust your offer for the delivery age by James Sandrini

Restaurants, please stop putting your entire menu on Deliveroo – it’s lazy and costing you money.

It’s 6.30pm, the sun stretches over the distance. The wine-maker – glass in hand – laughs hardily; her exuberance echoes through the vineyard. There’s a good reason why wine buyers avoid ordering shipments while visiting the grower. What works in the heady climbs of southern France or northern Italy doesn’t translate quite so well to the offy in Northampton.

We are creatures of context. Restaurants already know this. Guests treat weekday and weekend meals differently, just as they do different days of the year and operators wisely follow suit. So why do restaurants insist on offering the same choices to restaurant diners and those who order to their own homes?

For one, expending energy on delivery can, for bricks and mortar operators, feel like “tipping the taxman”. A necessary evil it may be, but celebrating it verges on the macabre. Mastering delivery from a standing start also means varying the operating model. New dishes and extended opening times means more labour. Bespoke packaging costs more money. Why focus on delivery when this effort could be aiding the core business?

However, there is one thing you can do today that exchanges a little effort into a large reward – offer less. A lot less. We’re generally an anxious bunch and struggle to make decisions when confronted with a wide array of options. Waiters hurdle this obstacle in the restaurant by guiding guests towards their dining destiny but at home, without such provision, consumers can easily drift and your competitor is a click away from profiting from that inertia.

Your concept needs to be clear and memorable. You need to be famous for something. Convenience is king. Unlike a restaurant diner, an online customer doesn’t need to plan their movements around their upcoming meal, nor are they captive to a particular location. Lucky them. They’ll order when they’re hungry from anywhere within a reasonable radius.

This means more competition and less patience and with more customers than ever, especially younger markets, willing to trial a restaurant for the first time by ordering online, those that attract and retain attention will prosper.

Almost one-quarter (23%) of us eat delivered food once a week. While a restricted delivery menu would suit explorative first-time and irregular diners, it may not enthral your biggest fans. So steal something from the restaurant, offer specials and change them every week. Promote them on your social channels and via email. Continue to promote your delivery offer with fresh food and fresh content.

Just because a third party is delivering your food and drink, it doesn’t mean there is a lack of opportunity to stand out. It’s true the “noise” of ambience, service and location are dissolved by delivery platforms. The online experience is also largely undifferentiated. Standing out in this context should mean offering something your audience wants and your competitors don’t or won’t.

If most of your delivery customers order to their office, there’s a good chance they’re eating at the same time as their colleagues and have a small window to order and eat in. Take advantage by offering large-format lunch dishes such as sushi for six to appeal to the herd.

Get creative – and don’t stop with the food
Delivery includes a facet regular dining experiences don’t – unboxing. You can print personalised messages on packaging or store collateral in the bag aimed at converting online customers into future restaurant diners.

Concentrating the offer should also improve food quality. Fewer dishes for chefs to prepare also equates to less complication for the driver – who doesn’t know your menu. In turn, this should get drivers out of your restaurant and into the customer’s doorway quicker.

Of course, not all the dishes you serve in the restaurant will travel well – fish and chips need to breathe, room-temperature sushi loses its lustre, a cold burger, you get the idea. If the dish doesn’t taste up to scratch after half an hour in a box, cull it or order better packaging. You already do menu tastings? Test the dishes for takeaway in the same sitting.

Delivery is a channel akin to a new service. Stick to your concept but adjust your offer to match the needs of the audience and remember, you’re being gauged on the overall experience far more than Deliveroo or UberEats.
James Sandrini is a director at 48.1 – a creative agency for food and drinks brands. For more, read the blog at www.fortyeight.one/food-and-drink-blog or follow @fortyeight_one on Twitter

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