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Morning Briefing for pub, restaurant and food wervice operators

Tue 9th Apr 2019 - CDG results, record foodservice inflation, online bookings overtake calls
Casual Dining Group reports first quarter like-for-likes up 4.2%: Casual Dining Group (CDG), the circa 280-strong operator of the Las Iguanas, Bella Italia and Café Rouge brands, has reported an encouraging start to the year with like-for-like sales up 4.2% for the 13 weeks since the new year, aided by diversification of its business. The company, which said it is continuing its search for a successor to outgoing chief executive Steve Richards, recorded a 2.6% rise in like-for-like sales for the past 11 months aided by “proactive steps”, which included refinancing with its existing shareholder and lender group, reaching positive agreements with property partners, and investing and diversifying across its brands. The group also announced seven UK openings and a further seven franchise openings in Ireland and the Middle East for 2019. It said it was also set to embark on the “major refurbishment” of its core estate, which would cover 30 sites. The company said its increased focus on diversification had led to double-digit delivery growth from virtual brands including Blazing Bird and partnerships with the likes of Deliveroo. It said it had also seen double-digit growth from its new partnerships with Tesco, Three Mobile and Cineworld. Richards said: “Over the past 18 months we have taken proactive steps to underpin the company’s future growth potential at a time when the sector has faced unprecedented challenges.” For the prior FY2017/18, revenue declined 0.5% to £327.4m while the group’s uninvested estate saw like-for-like sales drop 0.6%. Adjusted Ebitda for the period was down £4m to £25.9m. During the year to the end of May 2018, the company restructured its balance sheet in light of KKR taking control of the business from former majority shareholder Apollo, the consequence of which led to a £30m cash injection to fund future projects but also a non-cash, goodwill write-down of £209.6m. The group said it now had a “restructured balance sheet to position the business for growth with low gearing and access to funding from existing shareholders, as required”. Richards said: “The historic performance in the prior year reflects the difficulties the wider sector faced but we are confident our proactive measures, the support of our shareholders, and our diversification by brand, channel and geography mean CDG is strongly positioned.”

Foodservice inflation hits record high of 9.8% in March but may have peaked: Foodservice inflation hit a record high of 9.8% in March as fish and fruit prices rose – but the figure may have peaked, the latest Foodservice Price Index from CGA and Prestige Purchasing has revealed. The fish category saw another jump in inflation month-on-month, with much of the increase down to difficulties in the North Sea where poor weather has kept ships off key fishing grounds for long periods. Fishing vessels have already been limited to lower quotas for cod and haddock in the past year. Inflation in the fruit category also remained high in the month but is expected to ease as the UK’s reliance on imports reduces moving through spring and into summer. Similarly dairy commodities, while still up compared with 12 months ago, have also started to fall and are expected to continue doing so heading into the peak production season. The oils and fats category has continued to trend downwards and now sits below levels seen in March 2018. The meat category has fallen again this month as it recovers from the peak of Christmas demand. Pork and lamb prices remain down from this time last year but demand for certain products such as bacon has seen recent uplifts. Prestige Purchasing chief executive Shaun Allen said: “Food prices in the sector have been consistently tracking at higher levels for nearly a year and the latest inflation level of almost 10% this month reflects the extent of how much the supply markets have been impacted compared with the same period last year. However, the outlook on inflation is looking more positive for operators as inflation in the sector looks to have peaked and is forecast to drop over the coming months subject still, of course, that the outcome of Brexit doesn’t lead to major disruption to availability of products from the EU and introduction of World Trade Organisation tariffs.” Fiona Speakman, CGA client director – food, added: “The challenge of inflation in the foodservice sector intensified yet again this month, with prices of important items such as fish and fruit running at high levels. Combined with Brexit-related economic uncertainty, patchy consumer confidence and various supply issues, it is making forecasting extremely difficult for operators across the industry.” The Foodservice Price Index is jointly produced by CGA and Prestige Purchasing using foodservice data drawn from 7.8 million transactions per month. More information on specific categories is available on a subscription basis.

Booking a table online overtakes phone reservations for first time: Booking a table online has overtaken telephone reservations for the first time, according to the latest Go Technology report from hospitality management solutions company Zonal and insights firm CGA. The report, which tracks the technology habits of 5,000 UK adult consumers, showed more than two-fifths (45%) now prefer to make their booking online compared with 20% who use the telephone. This is a radical change from four years ago when almost three-fifths (58%) of consumers preferred to make table bookings by telephone. Payback for brands that offer a good online booking service is proven as the average monthly spend on eating and drinking increased to £87.83, compared with £74.68 for those who don’t pre-book. The biggest complaint for pre-bookers is a table not being available at the time they book (37%), followed by having to queue to get in (35%) and spaces or tables being occupied when they arrive (34%). Being asked to pay a deposit for a booking is a source of irritation for more than one-fifth (21%) of customers, rising to 25% for 18 to 34-year-olds. Consumers in a group of less than eight said they were willing to pay an average of £4.55 per head for a midweek restaurant table but those in larger groups will pay £6.04. When it comes to targeted marketing campaigns, women are more likely to pre-book (53%). Parents make more than one-third (35%) of the booking cohort but only a quarter (27%) of those who never pre-book. Zonal commercial director David Charlton said: “Offering an online booking service is no longer a luxury for brands, it’s a given. We recognise an industry-wide issue of no-shows so requesting a deposit is one way to tackle the problem. However ask for too much and consumers may go elsewhere, ask for too little and the risk of no-shows increases.” Karl Chessell, CGA business unit director, retail and food, added: “Pub, bar and restaurant customers increasingly see booking as a necessary part of their eating and drinking experience. Large groups, celebrations and the fear of missing out on popular places are all fuelling the trend.”

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