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Morning Briefing for pub, restaurant and food wervice operators

Fri 17th Sep 2021 - Friday Opinion
Subjects: Supply chain problems could have positive impact on F&B industry, in defence of alcohol, hospitality showing just how agile and resilient a sector it is
Authors: Glynn Davis, Luke Johnson, Ann Elliott

Supply chain problems could have positive impact on F&B industry by Glynn Davis

The chickens appear to be coming home to roost. Sadly, they don’t seem to have been roosting at Nando’s, McDonald’s and other foodservice companies, where shortages of the birds have at times prompted the temporary closure of certain units and resulted in menu changes.

It’s not only the chickens that have been problematic though, because the pandemic and post-Brexit disruption that has caused lorry driver shortages has led to shortages of foods right across the board. Such is the parlous situation, with global supply chains in disarray, that the head of the Food and Drink Federation reckons this scenario could be long-lasting. So bad are things that he is calling time on the days when we’ve always had every food imaginable available in our supermarkets and on the menus of our restaurants.

The “just-in time” supply chain systems involving frequent deliveries had effectively done away with the need for stock rooms holding goods ahead of the next delivery, but Brexit and covid-19 have rendered this fragile infrastructure unfit for purpose. No longer can we be reliant on the constant replenishment cycle whereby goods go straight from the lorry onto the shelves of supermarkets, and into the hands of wholesalers for supply into restaurants.

The ramifications for restaurants are clearly enormous, and running out of chicken is clearly not great if you are Nando’s. But I’m predicting the present situation might just have some positive broader impacts on the food service industry. It will absolutely prompt a closer look at supply chains, and from this it could hopefully lead to a reduction in the levels of waste that blight the industry. As much as 30-60kg of food per day is thought to be wasted in the average restaurant, according to Dutch-based firm Orbisk, which has developed a food waste monitor for kitchens.

The ludicrously broad-sweeping menus available in some establishments might have their wings clipped because they simply become unmanageable in their complexity, as shortages of ingredients become part of the food landscape in the future. Since such establishments must be more susceptible to waste then this can’t be a bad thing, even if it comes with some short-term pain. The incredible array of options that have typically been available on the global buffets must also be an area of great focus for their operators, who must look to minimise food waste from the supplies they are successfully able to source.

We are already seeing evidence of changes with menu construction, according to Lumina, which found dish counts across both chain and fast-food restaurants, as well as managed pubs and bars, are currently, on average, 20% smaller than pre-pandemic.

As well as cutting menu options there are also, thankfully, a variety of solutions out there to help businesses cut the level of food destined for the bin. A growing number of retailers and food service operators are working with the likes of Olio, which has just raised $43 million to fund its global expansion. More than 30,000 “food waste heroes”, who are trained members of the community, collect and redistribute unsold or unserved food from the likes of Pret A Manger, Compass, Costa and Elio. They have been joined by Tesco, whose 2,700 UK stores now redistribute surplus food nearing its sell-by date via the Olio network.

Another expanding player in this app-based space is Too Good To Go, which connects restaurants and stores that have unsold food with customers, who can then buy the surplus, without being able to choose, at a much lower price than normal. I’ve enjoyed some incredible deals with Too Good To Go “magic bags” that have contained a great mix of products at around a 40% discount, which would otherwise have been heading for the bin.

The adoption of such solutions has absolutely been both financially and ethically advantageous to those foodservice companies who have already chosen to get onboard. I’d suggest the ongoing issue with supply and availability of food stuffs into the UK should foster an environment for many more businesses to join them, as they really must get a better handle on the overall management of their supply chains.
Glynn Davis is a leading commentator on retail trends

In defence of alcohol by Luke Johnson

Like many people, I have a complicated relationship with alcohol. When growing up I was fearful of the terrible power that drink holds over someone who is addicted to it because a member of my close family suffered from the disease for decades. It put me off the stuff until I was well into my twenties. I then gradually grew to appreciate the pleasures of booze.

Despite this background, I entered the licensed trade when I was 18 – more than four decades ago – running student nights at local clubs while at university. Since then I had steadily increased my involvement with the business of alcohol in many aspects of my working life. I’ve owned and helped manage nightclubs, restaurants, pubs, hotels, resorts and other facilities that sell it. More recently I’ve even invested in a brewery.

Essentially alcohol is the only serious intoxicant that is generally legal – at least for adults. It is available in hundreds of thousands of shops and venues in this country – to be consumed on the premises or at home. It is a huge industry, worth many tens of billions across diverse manufacturing, wholesale and retail arms, and employs hundreds of thousands. 

Many struggle to control their drinking. According to research by Public Health England, following the impact of lockdowns, 2.5 million adults were consuming more than 50 units of alcohol a week – 7.7% of men and 3.2% of women. That’s the equivalent of almost three pints of beer or three glasses of wine a day. Supposedly a million additional people went overboard on the sauce thanks to the dystopian pandemic restrictions. This apparent deterioration has largely been about buying booze at supermarkets and drinking at home – because much of the on-trade was shut for the past 18 months.

By contrast, the recommended weekly intake of alcohol used to be 14 units. But a notorious paper in The Lancet in 2018 indicated that any amount of alcohol was unhealthy. Meanwhile, I take a certain amount of comfort from the fact an Oxford regius professor of medicine told me he felt about 20 units a week was safe enough. 

Yet despite having seen the harms of alcohol up very close, I strongly believe that in moderation alcohol is beneficial to mankind. Too often we are made to be almost ashamed of enjoying drink and mild inebriation. The puritanical tendencies of the public health zealots mean they are constantly demonising drinkers and those who make and sell alcoholic drinks, and trying to restrict their availability and make us all feel guilty if we enjoy a tipple. 

A wonderful new book called “Drunk” provides serious intellectual ammunition for anyone who wants to defend alcohol from those who would prohibit or curtail its sale and consumption. It was written by Edward Slingerland, an American professor of philosophy who teaches in Canada. Across 350 pages, it mixes history, science, psychology, literature and sociology to explain why humans love alcohol and its effects. It is a well-written and persuasive read, which argues that alcohol has played many positive roles in human societies. It can enhance creativity, alleviate stress, build trust, and help groups to collaborate and cooperate. The author believes it has been a core driver in the rise of civilisation, turning selfish primates into communal creatures. 

Alcohol disarms the prefrontal cortex. This part of the brain is in charge of cognitive control – enabling us to focus our attention, resist distractions and temptations, and regulate emotions. By disabling this part of the brain, alcohol encourages lateral thinking, play and the embrace of new ideas and experiences. It briefly turns sober adults into children – warmer, more open, more trusting, more emotional, more optimistic, more fun. As William James put it: “Sobriety diminishes, discriminates, and says no: drunkenness expands, unites and says yes.”

Alcohol is a wildly successful and popular intoxicant – at least 2.4 billion people worldwide consume it, and humans have been doing so since 7000 BC. It is believed brewing and beer existed before baking and bread. Since ancient times, almost all over the world, societies have been fermenting fruits and grains to produce alcoholic beverages. Alcohol suits so many because it is easy to make, tasty to consume, storable and quickly eliminated from the body. 

Of course some of alcohol’s ancient purposes have fallen away in the modern world. Yet as a social catalyst it has no equal. In fostering humour, friendships, intimacy and bonding it helps people work and fall in love together. The book quotes research that shows social drinkers enjoy better psychological, social and physical well-being than those who abstain or drink to excess. It is right and proper that well-run pubs should be celebrated as vital communal centres of happiness and good cheer.

The author discusses the damage that alcohol can do at reasonable length, but argues that generally only about 5% of people abuse alcohol. He emphasises the importance of drinking socially – not in isolation – and the heightened risks of distilled spirits over fermented drinks such as wine, beer and cider. And of course alcohol doesn’t only cause disease like cirrhosis – it can lead to drunk driving, bar fights and violence against women. He even recommends some of the more sensible ways to moderate intake: smaller glasses; alternating rounds with water; drink limits at work functions; and the adoption of the southern European drinking culture – avoiding the all or nothing bingeing that northern Europeans tend to adopt. 

This book should be required reading for anyone who works in the booze business or enjoys a drink. It offers a thoughtful and more coherent explanation for the dominance of alcohol in most societies – save perhaps the Muslims and the Mormons – than I have read anywhere else. And believe me, I’ve read a lot of books on the subject. This volume is clearly pro-alcohol but it still presents both sides of the debate in a rational and entertaining way. 

The conclusion is alcohol is certainly not an unmitigated vice – it can deliver enormous pleasure and various functional benefits. Of course there are trade-offs that society makes with intoxicants to provide a degree of balance. In order to understand this fascinating and important subject better, I recommend you sit down with a nice glass of wine or beer and get stuck into Edward Slingerland’s Drunk.
Luke Johnson is a serial sector investor, and the current chairman and backer of Gail’s Bakery, All Star Lanes and Lussmanns Sustainable Fish & Grill. He is also the former chairman and backer of PizzaExpress, Giraffe and Draft House. This piece first appeared in Premium Opinion 

Hospitality showing just how agile and resilient a sector it is by Ann Elliott

There definitely seems to be a real air of positivity and optimism among operators in the sector right now – a feeling garnered not only from private conversations but also from the pervading mood at the excellent Propel Multi-Club Conference last week, and the highly successful “Only A Pavement Away” lunch on Wednesday this week.

To generalise hugely, their summer was “okay to good” and largely level with 2019 figures, and September has started really well. Of course, some are not out of the woods yet, and others are absolutely flying. But those in the mid-ground seem quite buoyant.

Inevitably there is concern about recruitment, team availability, wage increases, the additional cost of training many new starters, moving teams from one site to keep another open, limiting trading areas and potentially closing their business for some daypart sessions.

In addition, there are issues around supply chain continuity, food inflation and the increased cost of non-food goods – and the impact of all of these (and other factors) on their profit and loss performance for the foreseeable future. Having to react to all these issues quickly but thoroughly is causing real stress with existing teams too.

Some, but by no means all, don't feel they have a handle on potential customer behaviour moving up to and beyond Christmas, and this really concerns them. Government behaviour is equally mercurial and tricky to anticipate and plan for. Oh, and some are considering contingency arrangements for another potential lockdown in October.

Many in our sector don't know what is going to happen to their delivery businesses, their click and collect operation or their online market sales, all of which may have become important sources of revenue (if not profit) to them over the last 12 months. There is enormous uncertainty about the future, and more than one business I know has given up formulating annual budgets because they're out of date and virtually useless almost from the moment they're written.

Quite a number I know felt that there would be a glut of sites coming onto the market as less well-capitalised operators went under, and some independent operators decided they just could not, or did not want, to weather the storm, surrendering their leases as they went. Not only was it felt that sites would be available, but that landlords would be almost forced to agree very advantageous deals to operators, giving rent-free periods or substantial capital allowances to refit properties.

This isn't quite the case either. While some landlords have their hands tied, others have paid old tenants to leave and devised creative ways of investing in new tenants. It isn't quite the free-for-all imagined by some. There is now a battle for great sites just as there is for great people, so not a happy picture.

Many business leaders face relentless pressure, stress and uncertainty across most aspects of their operation at the moment. How can they expand if sites and teams are not available? Yet there isn't an air of doom or gloom around the sector. Rather, there is a sense of optimism, hope and quiet excitement.

New operators are emerging, building on the foundations of those that have disappeared. Interest rates are low, and while banks may not be supporting the sector now, there is substantial interest in it from other lenders. I have spoken to many operators who have more cash now than they had at the start of the pandemic thanks to government support among other things. Property can be found, and new neighbourhoods are likely to emerge to support the creation of new pubs, bars and restaurants.

Our sector, thanks to Kate Nicholls and UKHospitality, now has a place alongside other sectors at the government’s table, and our voice is being heard. Customers are coming back – in large towns and cities, workers are returning to offices, even if only three days a week, while spending their disposable income nearer home on other days. Internal tourism is happening, even if international tourism isn't quite yet.

We can, and do, go on about how agile, resilient and proactive this sector is – but it’s true, and operators know this. They have come through the worst commercial circumstances ever, but now have their houses in order and feel ready to face the challenges ahead, and make the most of every single opportunity they can find.
Ann Elliott is a hospitality strategist, connector and adviser

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