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Thu 20th Jan 2022 - Update: Licensed premises numbers, coffee shop market growth, Revolution, City Pub Group and Deliveroo
Number of licensed premises grows quarter-on-quarter for first time in more than five years but still down in excess of 8,000 on pre-pandemic levels: Britain’s hospitality sector grew modestly in the last quarter of 2021, the new Market Recovery Monitor from CGA and AlixPartners reveals – but tough trading conditions now threaten to halt the sector’s upturn. The Monitor recorded a 1.6% increase in site numbers between September and December 2021 – the first quarter-on-quarter growth for more than five years. It highlights particularly encouraging growth of 1.8% in the number of independent venues, which have been vulnerable to closure during lockdowns and restrictions since early 2020. The report also indicates a 1.9% increase in venues in both city centres and on high streets, where footfall has suffered since the start of the pandemic. However, the Monitor emphasises COVID-19’s damage to hospitality and reveals the fragility of the sector’s recovery. Britain now has more than 8,000 fewer pubs, bars, restaurants and other licensed venues than in March 2020 – equivalent to a net loss of around 13 sites a day. Despite fourth-quarter growth, the future of more hospitality businesses is now under threat after a collapse in sales over Christmas and new year, as concerns about the Omicron variant spread and fresh restrictions were introduced in Scotland and Wales, affecting more than 16,000 sites – equivalent to 15% of the British licensed market. The sector also faces a host of operational pressures, including rapidly rising food and energy costs, staff shortages and supply problems. Karl Chessell, CGA’s business unit director for hospitality operators and food, EMEA, said: “The increase in sites over the last three months of 2021 shows the remarkable resilience and entrepreneurialism of hospitality, and the enduring appeal of Britain’s pubs, bars and restaurants. But after disappointing December trading and challenges mounting, both new and established businesses are vulnerable as we begin 2022. These positive numbers show how hospitality is ready to kickstart Britain’s post-COVID-19 economy, but without urgent and sustained government support there is a real danger that recovery will stall.” Graeme Smith, AlixPartners’ managing director, said: “With 8,000 fewer sites in the sector than March 2020, it is clear the UK’s hospitality landscape has dramatically changed. There are, however, signs of light on the horizon. Ultimately, when the sector has the oxygen of being allowed to trade without restrictions – as was the case in England between July and mid-December – demand is strong, providing hope for a sustainable recovery.”

Host of Italian concepts to join updated Premium Database of Multi-Site Companies: A host of Italian concepts are among the 87 new multi-site companies being added to the next edition of the Propel Premium Database of Multi-Site Companies, which will be released on Friday, 28 January, at midday. The updated Propel Multi-Site Database, which is produced in association with Virgate, features Scarpetta, which was founded by friends Uberto Jasson and Patrick Philion in 2012, and currently has three sites in London. Also added this month is L’ulivo, which is opening a second site this year at The Strand, London, and Chester-based restaurant operators Valentina Aviotti and Fabrizio Gobbato, who are opening their second site next month, which will be called Augusto Pizzeria. In addition, West Midlands-based bistro and Italian pizzeria concept Al Sorriso, which has opened a second site in the village of Tettenhall, Wolverhampton, will be featured. Premium subscribers will also receive a 6,430-word report on the new additions to the database. The comprehensive database is updated monthly and provides company names, the people in charge, how many sites each firm operates, its trading name and its registered name at Companies House if different. It features more than 2,000 companies. Premium subscribers will also receive the sixth edition of the New Openings Database, which is produced in association with StarStock, on Friday, 4 February, at midday. It focuses on newly announced openings and upcoming launches in the sector and is updated every month. The sixth edition also includes a 20,100-word report on the new additions to the database. Premium subscribers also receive access to another database – the Propel Turnover & Profits Blue Book, which is produced in association with Mapal Group. The Blue Book, which is also updated monthly, provides an insight into UK operator turnover and profitability over five years, profit conversion and directors’ earnings. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The single subscription rate is £445 plus VAT for operators and £545 plus VAT for suppliers. Email jo.charity@propelinfo.com to upgrade your subscription. Subscribers also receive access to Propel’s library of lockdown videos and Friday Wrap interviews and now also have access to a curated video library of the sector’s finest leaders and entrepreneurs, offering their insights on running outstanding businesses in the sector. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out, regular video content and regular exclusive columns from Propel group editor Mark Wingett.

UK branded coffee shop market achieves £1.3bn sales rebound as outlet numbers surpass pre-pandemic levels but VAT rise and staff crisis could derail recovery: The UK branded coffee shop market is now valued at £4,4bn having grown 43% over the last 12 months to regain 87% of pre-pandemic market value with outlet numbers exceeding 2019 levels, according to the Project Café UK 2022 report from World Coffee Portal. Sales in 2021 achieved a better-than-anticipated rebound of £1.3bn. Meanwhile, the number of outlets has surpassed 2019 levels, growing 3.5% to reach 9,540 stores. Market leaders Costa Coffee, Greggs and Starbucks all added locations to reach 2,791, 2,176 and 1,089 outlets respectively. However, the planned VAT rise, new covid-19 variants and ongoing staff shortages represent significant market headwinds in the year ahead and could damage the recovery for those operators unable to adapt to tough market realities, the report said. World Coffee Portal forecasts the UK branded coffee shop market will surpass pre- pandemic sales by the end of 2023 and reach £5.8bn over the next 5 years at a compound annual growth rate (CAGR) of 5.8%. The report forecasts the UK market will exceed 10,500 outlets by the end of 2026, displaying five-year outlet growth of 2.1% CAGR. The coffee-focused segment is predicted to grow at 2% CAGR over the next five years to exceed 6,200 outlets, while the food-focused segment is anticipated to grow at 2.3% CAGR to exceed 4,300 outlets. Most operators have achieved year-on-year growth, with 55% experiencing a sales uplift of more than 5%. Industry leaders are also more optimistic, with 56% indicating the current trading environment is positive, up from just 15% in the year previous. Three quarters (75%) surveyed expect trading conditions to improve over the next 12 months. However, after a summer of relative trading normality in 2021, the Omicron variant highlighted the unpredictable nature of the pandemic, with the possibility of new covid-19 waves looming over hospitality businesses in 2022. Nevertheless, just 16% of industry leaders surveyed believe covid-19 will have a long-term negative impact on out-of-home coffee demand, down from 33% in 2020. The planned reinstatement of VAT from 12.5% to 20% in April 2022, the rising cost of living, higher import costs, supply chain disruption and squeezed consumer income could further erode already thin sales margins for UK coffee shops in the year ahead. Meanwhile, a severe shortage of hospitality staff driven by the pandemic and exacerbated by the curtailment of European workers after Brexit presents another significant headwind for UK coffee shops. Just 6% of industry leaders surveyed feel more confident about Brexit and its impact on the hospitality industry than 12 months ago. In the longer-term, these factors could compel operators to raise prices, with further store closures and redundancies a very real possibility in 2022. UK branded coffee chains continue to diversify store portfolios and sales propositions in the wake of the pandemic, with drive-thru, smaller format coffee shops, neighbourhood locations and delivery all becoming more prevalent. The UK drive-thru market now comprises 578 stores, with Costa Coffee adding 75 locations since 2020 for a total of 275. Starbucks operates 270 sites and natural fast food brand Leon opened its first drive-thru store in 2021. Meanwhile,.70% of UK consumers surveyed have downloaded a coffee shop loyalty app, and 35% have used a click and collect service. While just 16% of consumers surveyed have ordered a drink for delivery over the last 12 months, almost a quarter (24%) would consider trying the service if it were more readily available.

Revolution boss – imperative going forward no further restrictions are imposed as ‘we learn to live with covid, festive like-for-likes down 23% on pre-pandemic levels: Rob Pitcher, chief executive of Revolution Bars Group, which operates 67 bars trading mainly under the Revolution and Revolución de Cuba brands, has said it is imperative that going forward no further restrictions are imposed as “we learn to live with covid”. It comes as the company saw like-for-like sales down 23% in the six-week period ending 1 January 2022 compared with the same period two years ago. In a trading update for the 26 weeks ending 1 January 2022, the company stated: “As previously reported, like-for-like sales for the majority of the half, from 19 July 2021, when restrictions were relaxed in England, to 13 November were very strong – up 14% versus the comparable period two years ago. Overall, two-year like-for-like sales for the period from 19 July 2021 to 1 January 2022 remained positive at 1.4%, with the business performing as well as could be anticipated given the additional restrictions imposed on our guests in the Christmas period. Sales over the Christmas period were impacted by the move to ‘Plan B’ including the return to the ‘work from home’ instruction, implementation of vaccine passports for late night bars and government messaging that unhelpfully encouraged the limiting of social interactions. Like-for-like sales for the six-week period ending 1 January were down 23% when compared with the same period two years ago, the last unaffected Christmas period. The impact of the government actions was most felt in the cancellation of office parties. Pre-booked revenue, an indicator of corporate Christmas parties, was down 39% for the six-week period to 1 January 2022 when compared to 2019-20. However, the total number of bookings during the six-week period was at 19% highlighting our young guest base were still keen to go out and enjoy themselves. Both of these metrics were significantly higher earlier in December before the Omicron variant and negative government messaging took hold. Pleasingly, many of the corporate parties have already been rebooked for early in 2022. Our refurbishment programme has continued as planned and we have completed six refurbishments and are pleased with their early performance, with a further 13 to complete in current financial year. We have a strong pipeline of new sites building and are currently in negotiations on five sites, expecting to sign the lease on our first new site imminently. Cash, net of bank loans, was £4.7m as at 19 January 2022 following the utilisation of a portion of the funds raised last year on our refurbishment programme. Despite the government’s response to Omicron, which in our view was overly cautious and caused a substantial loss of trade during the important festive season, the board remains confident of achieving its full-year expectations assuming the covid landscape does not significantly deteriorate. We are encouraged by the strong performance pre-Christmas and yesterday’s (Wednesday, 19 January) welcome announcement from the government about easing all restrictions but are nonetheless alert to and monitoring closely the inflationary pressures building across all elements of the supply chain and are taking action to mitigate these where possible. The group intends to publish its interim results for the first half on 1 March 2022.” Pitcher said: “I am so proud of our team’s resilience in the face of the confusing government messaging and the disappointment of the wave of corporate booking cancellations it caused during December. The only comfort is that many of these parties have already been rebooked and it was pleasing to see the number of general guest bookings significantly up versus 2019 demonstrating our young guest base remains as enthused and excited about our offering as we are. Yesterday’s news of the scrapping of the work from home guidance and the cancellation of all other restrictions is very welcome for our business and will actively help rebuild consumer confidence. It is imperative going forward there are no further restrictions as we all learn to live alongside covid-19. We continue to urge the government to support the recovery of the hospitality industry by leaving VAT at 12.5% and retaining business rates relief in line with the current levels of support. Our robust performance in the first half proves the resilience of our business, that our guests enjoy the fun and memorable experience we create which results in a highly cash generative business when operating free of restrictions.”

City Pub Group – in the last ten days there has been a significant increase in trade: City Pub Group, owner and operator of 46 premium pubs across southern England and Wales, has reported a “significant increase” in trade in the last ten days, which it believes is a result of increased consumer confidence. In a trading update, the Clive Watson-chaired business said it generated a 38% increase in revenue to £35.4m in 2021, compared with £25.8m in 2020, as a result of pubs being less affected by closure and restriction. Since the group last reported its trading in September, a restriction-free October and November saw trade returning to 2019 levels. It said that December began well with greater pre-booked business than 2019, however the emergence and onset of Omicron reduced sales to 85% of 2019 during this important period as most office party bookings were cancelled. The company said the strong trading in October and November helped to offset any reduction in December. Year end results are expected to be in line with management expectations. The business said: “Since our last update the group's financial position has continued to strengthen with net debt reduced and now under £14m. Our bank facilities have been further extended to 2024 and the group has £30m of undrawn facilities providing financial flexibility to execute the groups' strategy. Maintaining tight cost control and continuing to improve the efficiency of the group continues to be a focus. More than 70% of our drink products have now been signed up on a three-year fixed price term deal, assisting margin improvement and mitigating against inflation risk in this area. The group continues to rationalise its estate and has disposed of two underperforming sites during the year and one freehold investment was sold to the tenant. The hospitality industry is facing widely publicised challenges from which the group is not immune. Like many others the group's energy costs have and are expected to continue to rise significantly in the short term, with a material impact on operating margin. Additionally, over the Christmas period, the group has faced staff shortages due to Omicron isolating. Our staff are a key ingredient of our success therefore for those staff who could not work because of isolation, their sick pay was topped up and 80% of their salaries paid, despite no government support in this area. This situation is now abating with staff availability improving. For our business and the industry to recover and thrive again we urge continued government support through reduced business rates and VAT.” In terms of maintaining its estate, the business said that The Hoste Arms will undergo a further £300,000 refurbishment to ensure all rooms are up to the highest standards and the Cliftonville, its recent purchase in Cromer, will also undergo a £300,000 upgrade to increase the retailing areas and improve outside seating. This year the following development sites are due to open: Oyster Wharf, Mumbles, Swansea – March, Tivoli, Cambridge – April, Bury St Edmunds, Suffolk – April and The Nest, Bath – June. Additionally, the company said it continues to identify potential new acquisitions which fit within the group's investment criteria. It said it had made significant progress in this area, with discussions advanced on several new sites which it expects will be signed up during the course of the year. It said: “Once office workers return to work, we believe consumer confidence and consequently demand, will continue to further build, helping the group to grow its pub sales. The pub estate is well balanced, with many of pubs located in city centres, but also in residential areas and staycation locations. Once tourism starts to recover, the group will be well placed to maximise sales from its pub estate.” Watson said: "With our strong balance sheet and our new, more efficient operational and management structure, we are taking the opportunity to begin to grow and enhance our estate again. We have a strong freehold portfolio, located in great cities of southern England and Wales and four large new sites to open in the first half of this year. The market remains highly fragmented – providing a significant opportunity to continue to grow our estate. As Omicron abates, we will trade more normally and be more confident to carry out our successful strategy for which we are fully prepared."

Deliveroo reports strong end to 2021 with full-year UK and Ireland orders up 72%: Deliveroo has reported a strong end to 2021 with gross transaction value in the UK and Ireland up 36% year-on-year and 12% on the third quarter. The company stated: “The group had a strong fourth quarter completing an excellent year of growth in 2021, with full-year pro forma gross transaction value (GTV) up 70% year-on-year in constant currency – the top end of previously-upgraded guidance for 60% to 70% growth> Fourth quarter of 2021 GTV growth of 36% year-on-year and 11% sequentially (versus the third quarter of 2021), both in constant currency; sequentially, orders grew 10% and GTV per order stabilised, up by 1% in constant currency to £21.4m. We saw continued UK market share gains in the fourth quarter of 2021, with UK and Ireland GTV up 36% year-on-year and up 12% vs the third quarter of 2021, both in constant currency; full-year 2021 GTV was up 71% and orders up 72%, with further expansion of UK population coverage to 77% at the end of 2021 versus 53% at the end of 2020. International GTV was up 36% year-on-year in the fourth quarter of 2021, with sequential growth of 10% versus the third quarter of 2021; FY 2021 GTV growth of 69% in constant currency, with orders up 74%. Our full-year results will be reported on 17 March 2022; guidance for gross profit margin (as percentage of GTV) maintained at previous guidance range of 7.5% to 7.75%.” Will Shu, founder and chief executive of Deliveroo, said: "We finished 2021 with a strong fourth quarter performance, and our full year GTV growth of 70% in constant currency was at the top end of the previously-upgraded guidance we provided. I'd like to thank the Deliveroo team, our restaurant and grocery partners and our riders for their focus and commitment in what has been another extraordinary year. Since the business was founded in 2013, Deliveroo's focus has always been to deliver great experiences to our consumers, help our partners to grow, and provide further opportunities for riders. I am proud of what we achieved in 2021; despite a challenging backdrop, we continued to strengthen our customer proposition, widen our customer base and execute against our strategy. We are excited about the opportunity ahead and look forward to making further progress in 2022.”

Covid isolation rules for infected people set to end: Compulsory isolation for people with covid-19 will be scrapped by the spring, prime minister Boris Johnson said as he signalled that the end of the pandemic was in sight. Laws requiring people with covid-19 to isolate expire on 24 March and Johnson said that he would “very much expect not to renew them” or, if positive data continued, drop them earlier. As revealed by The Times, Johnson said ministers would focus on a post-pandemic plan for dealing with the virus in the years ahead, promising to publish it before the end of March. As well as scaling back testing, this will include using vaccination, preventive drugs and targeted testing to deal with upsurges and new variants. Susan Hopkins, of the UK Health Security Agency, suggested that she would not support removing isolation requirements “right now” but accepted the need to do so eventually. She indicated a long-term plan would involve recommending to people how long to isolate and using “treatments and prophylaxis” to prevent illness.

BrewDog ‘flouted US laws over beer imports’: Scottish beer and retailer BrewDog sent multiple shipments of beer to the US, in contravention of US federal laws, a BBC investigation has found. Staff at the brewery claimed to the BBC they were put under pressure in 2016 and 2017 to ship beer with ingredients that had not been legally approved. In a social media post on Wednesday (19 January), BrewDog chief executive James Watt admitted to “taking shortcuts” with the process. BBC Scotland's Disclosure programme was told that staff at the brewery in Aberdeenshire knew that two of its flagship products, Elvis Juice and Jet Black Heart, contained extracts which would not be approved in the US. The BBC said it has seen evidence that suggests US treasury officials from the Alcohol and Tobacco Tax and Trade Bureau (TTB) were given false information on at least five occasions during a six-month period, which meant that potentially hundreds of kegs of beer were sent with incorrect labelling – a violation of TTB laws. False information provided to the TTB can be prosecuted under US perjury laws. In a LinkedIn post on Wednesday – entitled My Biggest Mistakes As BrewDog CEO – Watt said: "We made some mistakes with the paperwork on the first few shipments [to the US] …all taxes were paid in full, but the paperwork was not always correct. In hindsight, there were oversights ... due to the fact we were trying to run a growing business on one side of the Atlantic and start a new business on the other.” Watt said the company self-reported the issue to the TTB, which told BrewDog there would be no further action taken. The TTB told the BBC a three-year statute of limitations prevented any enforcement action being taken, and in any case, it would have to have been initiated against the US-based importer, which is legally responsible for the shipments.

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