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Morning Briefing Strap Line
Fri 15th Feb 2019 - Friday Opinion
Subjects: Recipe boxes are a flash in the pan, the slow death approach and turning teams into your USP
Authors: Glynn Davis, Paul Chase and Sally Whelan 

Recipe boxes are a flash in the pan by Glynn Davis

Travelling home on London Underground recently I spotted yet another advertisement for a subscription service – this time for recipe box company HelloFresh with an offer of 50% off the first box for new subscribers

Some might view these home-delivered food solutions (awful industry term) as the next big thing in food convenience and a possible threat to foodservice operators. I fail to find the model’s appeal, however.

The HelloFresh advertisement encapsulates the major problem – churn rates. The level is such, the cost of acquiring customers is awfully high. The need for promotions such as 50% discounts is prevalent. Just consider the situation of well-established player Blue Apron in the US. In its recent fourth quarter, it reported a 25% year-on-year decline in customer numbers from 746,000 to 557,000 and, as a result, orders fell 24% to about 2.4 million.

The reality of recipe box companies is they have to keep feeding the beast to keep growing their customer base as many people fall away – partly because they’ve had their fill and got bored but also due to a plethora of rivals looking to lure them away with a discounted first box. No doubt some people will be on a merry-go-round of promotional boxes. 

I recall a conversation with the boss of a bottled beer subscription service, who suggested the model was unsustainable because some people use different email addresses for sign-ups, take the initial heavily discounted boxes and then cancel their subscription before moving on to the next supplier.

To get these discounted offers in front of people is a costly exercise in itself. I found it particularly interesting, therefore, to see the money recently raised by two recipe box companies in the UK will be used for nothing more interesting than marketing.

SimplyCook raised £4.5m from Octopus Investments and said it would be used to increase brand awareness in the UK through increased sales and marketing expenditure. Likewise, Mindful Chef received £6m from Piper and will use part of it for “growth marketing”.

Those aren’t the only recent investments in this hot part of the market – Gousto raised £18m from investors including Unilever Ventures and BGF Ventures, which takes its total fund-raising to £75m. Part of the appeal for the likes of Unilever is the segment provides exposure to the direct-to-consumer (DTC) market that is arguably a threat to its existing business model. Its keenness to be involved in the DTC market place is evidenced by its purchase last month of healthy snack subscription company Graze.

For other investors, I’m not sure recipe boxes represent a particularly good opportunity. I’m sure they would point to the fact Piper forecasts the UK market to grow from £215m to £430m in the next five years – and Gousto grew 178% in 2018 – but at what cost I wonder?

One way for recipe box companies to boost sales and improve their viability is to cut costs. For the beer box companies this involved securing excess/distressed stock from brewers at discounted prices, which started a race to the bottom. Needless to say, this didn’t play out well with discerning drinkers.

For the likes of Blue Apron, one solution has been to strip out the protein part of the meal through its introduction of the Knick Knacks range, which is initially available through online site Jet.com. This is owned by US supermarket giant Walmart and highlights the obvious interest large grocers have in the recipe box market.

The possibility of supermarkets creating their own service is clearly another threat. Morrisons has its own brand, Eat Fresh, while Waitrose has the Cook Well service – although the latter is suspended after the company that packs the boxes went into administration!

Despite the big grocery chains parking their proverbial tanks on the lawns of the recipe box companies, Mindful Chef co-founder Giles Humphries is relaxed about the situation. He points to the fact the company is differentiated by its boxes being priced at the higher end of the market and his recipes’ health benefits.

I question the long-term health of the recipe box category and would suggest the foodservice sector has little to worry about, despite it being a rather hot market segment at the moment. A flash in the pan, the recipe box instructions might well say.
Glynn Davis is a leading commentator on retail trends

The slow death approach by Paul Chase

The “whole population” approach, sometimes referred to as the “single distribution model”, is the mainstay of the “public health” approach to tackling alcohol harm. It stems from research carried out in post-war Paris by mathematician Sully Lederman, which linked a significant fall in alcohol-related deaths from liver cirrhosis to a fall in population-level alcohol consumption in the city.

The idea was further developed by epidemiologist Geoffrey Rose in 1985, who claimed the number of heavy drinkers was a direct function of the average alcohol consumption of a population. In other words, if we visualise the distribution of alcohol consumption as a sort of bell curve, with light drinkers at one end and heavy drinkers at the other, the level of consumption of the majority of drinkers in the middle will determine the level of heavy consumption by the minority at the extreme end. The theory is the way to reduce the level of heavy drinking is not to focus on the problems of heavy drinkers as such, but to shift the whole bell curve to the left. Reduce average consumption and heavy consumption will fall as sure as night follows day and, as a consequence, deaths directly caused by alcohol misuse will fall (for a fuller explanation see Chase, Culture Wars, page 146).

Except that, with few exceptions, the empirical evidence doesn’t support the theory, as the latest figures on alcohol-related deaths bear out. In Britain, the numbers contradict the whole-population theory. Currently the rate of alcohol-related mortality in England has never been higher, despite the population level of consumption falling 18% between 2004 and 2016. And, while it has risen slightly since, today’s level of consumption is still 16% lower than it was in 2004. Consumption falling but alcohol-related deaths rising is not how it’s supposed to work!

The benefit of the whole-population approach from the point of view of the neo-temperance puritans is it gives them an excuse to campaign for measures that reduce drinking across the whole population. If you can demonstrate turning moderate drinkers into light drinkers, and light drinkers into teetotallers will reduce the amount drunk by the heavy drinking minority who are dying because of their abuse of the product, then you’re on to a winner. Unfortunately, they can’t demonstrate that.

Not only has there been a decline in population levels of drinking but the number of people drinking above 14 units a week – the official “low-risk” drinking guideline – has fallen too (from 26% in 2011 to 21% in 2016) and the number of teetotallers (21% of the population) is at an all-time high. Yet there has been no decline in the number of heavy drinkers and the alcohol mortality rate has actually risen.

However, the ideologues of so-called “public health” will cling to their theory no matter what because it has been used to justify a range of anti-alcohol policies, not least minimum unit pricing, which is currently failing in Scotland. If you point out the obvious – that the way to reduce alcohol mortality among heavy drinkers is to improve the interventions and services we provide for them and leave the rest of the population alone – they will howl in protest. You will be accused of being an industry shill. “Who funds you?” they’ll cry! It never occurs to them it is their intellectual and political investment in a failed theory that prevents us from tackling the problems of alcohol harm in the most obvious ways.

If you criticise the “public health” orthodoxy on alcohol its defenders always fall back on the claim alcohol misuse will “bankrupt the NHS”. The latest stats from the Office for National Statistics show in 2017/18 there were 338,000 admissions to hospital where the main reason was attributable to alcohol – only 2.1% of total hospital admission episodes – compared with 2.3% in 2007/08. If the facts contradict the theory, engaging in personal attacks on your critics is all that’s left to you. Perish the thought they should just acknowledge they got it wrong.
Paul Chase is director of CPL Training and a leading commentator on alcohol and health policy

Turning teams into your USP by Sally Whelan

Experience was the hospitality word of the year in 2018. Not officially, but I have no doubt on equivalent measure it would have given “single-use” a run for its money. 

We must all hear it at least once a day – a lot more in our office – as operators look for new and inventive ways to stand out in a fiercely competitive market. From interactive cocktails to surprise menus and naked dining, we are seeing more and more experiential offerings favoured by consumers, with Barclaycard revealing more than half would prefer to pay for a good experience than splash out on material possessions such as clothes and shoes.

While I don’t see the experiential lifestyle trend slowing any time soon, an “experience” can be defined in many ways and thousands of operators still need to ensure their offering is one consumers will remember without the tools and gadgets many are turning to. This is where your in-house team can play the biggest role.

An operator’s team is its biggest ambassador to help a brand stand out from the competition. Forget about social media influencers, the service provided by front and back of house can make or break a loyal customer relationship. Why should a customer stick around when the restaurant next door offers prompt service with a smile? It plays a bigger part than you think in getting customers back through the door.

The real trick is ensuring staff are in a position to provide this. Making your team your USP is not only key to running a successful business but also fosters a culture for top calibre staff to stick around. While our industry may not be the easiest to recruit for – an Institute of Hospitality report found nine out of ten UK restaurateurs agree recruiting staff is a struggle in the wake of Brexit – doing what we can to keep staff happy is the first and most important step in improving a business as a whole.

If we want our teams to stand out, we must give them the tools to do so.

Involve your team in company decisions
Team members on the ground know more about the day-to-day workings than most. They hear customer complaints, analyse busy periods and see customers first-hand. Their knowledge is priceless and should be harnessed. Right from the induction stage, creating an inclusive atmosphere helps employees feel part of the family. Including staff in decisions such as new dishes, site rebrands and other operational changes not only provides valuable insights but gives them a sense of responsibility for the success of their brand, leading to higher employee engagement. They want to see their company do well because they had a part to play in the decision process.

Offer employees more than just a job
The management analytics gurus at Gallup found 87% of millennial workers find professional development or career growth opportunities extremely important – and the hospitality industry should take note. While I wasn’t fortunate enough to attend the Restaurant, Marketer & Innovator conference, members of the HGEM team were there. They reported brilliant things including Be At One brand manager Giles Denning telling delegates the key to recruiting in the hospitality industry is promising employees a career rather than a job. Not only does this encourage team members to stay within the business, it also ensures a company understands its values and positioning – inside out.

Promote a winning culture
No-one wants to work somewhere where the atmosphere is flat and they feel devalued. Promoting a winning culture helps motivate staff and get the best from them. Another piece of feedback I heard from the conference was how Casual Dining Group promotes the use of Facebook Workplace for its staff to share news, praise and ideas. This particular leadership style allows team members to flourish and encourages them to do well. If you offer a winning internal culture, this will shine through in the service your customers receive.

Making your team your USP is about “hero-ing” them as individuals. As an industry the more of this we carry out, the better chance we stand of retaining our staff and providing our customers with the best possible experience. Customer service may be traditional but even in an ever-changing industry, tradition still has an important role to play.
Sally Whelan is founding director of guest experience management expert HGEM

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