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Morning Briefing for pub, restaurant and food wervice operators

Fri 11th Feb 2022 - Friday Opinion
Subjects: From Accra to Arc via Finland and Miami, economic long covid, embracing food transparency, the cask revolution is coming 
Authors: Anni Opong, Paul Chase, Stefan Catoiu, Charlene Lyons

From Accra to Arc via Finland and Miami by Anni Opong

I love talking about our business, our brilliant people and all our shared successes. But talking about myself, or worse, writing about myself? That is about as far from my idea of fun as you can get. That said, I am persuaded to pen something for Race Equality Week. Again, the subject is not something I would normally rush to, but I am conscious that it’s a timely and important opportunity to speak up about. Because I know I am a good example of what can happen when you work hard and are given the right opportunities, and you grab those opportunities with both hands.

In reality, this article is not really about me, it’s about our team. I want to be a role model in so far as I want everyone to understand that no matter your gender, race, background or status, you can reach the very top. If just one person in our business, or in the wider hospitality industry, sees me and what I’ve done and it helps them realise this truth, fantastic. If reading this gives them the little added encouragement they might need to truly go for it in their careers or in this company, then this article will have been worth every word.

My long story short is that I started life in Ghana, born to a Ghanaian father and a Finnish mother. I was raised in the capital city, Accra, and had a fairly typical African upbringing until aged 14, when we moved to Finland following the death of my father. In Finland, I went to catering college, and that experience set me up to launch a career in hospitality. I worked kitchen and front-of-house roles at the Fashion Café in London for a few years before working at an Italian restaurant in Miami as a manager, looking after both the kitchen and front-of-house teams. I joined Arc Inspirations nearly 20 years ago as a food liaison manager, working my way up through operations to become operations director, and then managing director six years ago.

Clearly, as a person of mixed race and African heritage, I have probably, at times, had a different lived experience to some of my colleagues. It’s not something I dwell on. What I do think about is the reason I’ve made it to where I am – the support of my teams (you can’t do anything on your own in our business), some pretty long hours, a bucketload of passion, dedication and a little bit of sacrifice. That is how I’ve managed to get to where I am, and I have loved every moment at Arc. It has helped me grow and develop not just in my career, but made me a stronger and more confident person. It has given me an identity, something to belong to, and where I feel at home.

In terms of the issue of race and equality, it’s important we take the opportunity of this week to talk. We (at Arc) are a little snapshot of society. What we can see, and certainly what I feel, is that society is moving forward on this issue. There is progress – change is happening – and we at Arc need to play our part in driving the equality agenda, in all its forms. Like the wider world, we’re certainly not perfect. We want and need to do more, and it’s important that this focus on equality and inclusion is an ongoing conversation all the time rather than a week in the diary each year.

For me, the motivation for writing this is to convey a really important message – that there are opportunities for everyone here. At Arc, we want to champion equality, and we want to see people of all backgrounds rising up through the company. We want to lead the industry on being the best operator, with the best group of people from all walks of life and all races. The message we want to reinforce, especially this week, is anything is possible here – wherever you are from and whoever you are. Just look at me.
Anni Opong is managing director of Arc Inspirations. This article was first published internally at Arc

Economic long covid by Paul Chase

While I am more than a little sceptical about the existence of long covid as a medical condition, as opposed to it being a social malaise experienced by people who don’t want to return to the office, long covid as an economic malaise is undoubtedly real – and beginning to bite. Economic long-covid manifests itself in two main ways – both sector-specific and in terms of more generalised economic consequences that will affect consumers’ spending power and confidence, which will in turn impact upon the prospects of licensed retail and hospitality businesses, as well as many other sectors. 

So, what is economic long covid and what are the solutions? It is not just a consequence of the covid pandemic, but of government policy decisions about how to manage it. The immediate consequences of lockdown policies and the restricted trading conditions that came later are well known and obvious. Pubs, bars and restaurants were prohibited from trading and reliant on government grants, loans and the furlough scheme. They have limped through the period of crisis and emerged from it with a huge millstone of debt around their necks. 

But the whole nation has been plunged into debt because the government’s support measures have been financed by the Bank of England creating a huge expansion in the stock of money. And this is the root cause of the cost-of-living crisis. How have we got to this position? Once the decision was made to try and control the pandemic by instructing people to stay at home and closing hospitality and non-essential retailing, it was inevitable that the government would have to fire a big-state financial bazooka and pay people for staying at home while giving grants and loans to businesses affected by these policies. People can’t live on thin air. The problem is that the money used to pay them was conjured out of thin air – some £400bn of it.

This vast expansion of what economists call “broad money aggregates” solved the immediate problem the chancellor had in front of him, but the downside was the inflation created by this policy some 18 months down the line. The government and the Bank of England’s hapless governor, Andrew Bailey, likes to pretend that the current inflation is nothing to do with them – it’s all caused by cost-push pressures from abroad. In a recent interview, it was put to Bailey that “you had one job – keeping inflation on target at 2% – and you blew it!” Predictably, Bailey cited external cost pressures like gas price rises from abroad as being the factors outside his control that were driving inflation. This is a classic Keynesian cop-out used by central banks and the governments they serve when they seek to obscure the fact that central bank mismanagement of monetary demand is the cause of inflation, and nothing else.

Let me digress for a moment. There are two schools of thought in economics. One is the Keynesian school, named after the famous English economist John Maynard Keynes, and the other is the monetarist school whose most well-known advocate is the late Milton Friedman. These schools have diametrically opposed explanations of inflation. For Keynesians, inflation is caused by rising costs, whether it is the cost of commodities or labour (wages). These costs are then passed onto consumers in the form of increased prices. This is called “cost-push inflation”. Monetarists (including yours truly) believe that cost-push inflation is a myth, and in the words of Milton Friedman, “inflation is always and everywhere a monetary phenomenon”.

So, let me be clear, inflation is not caused by increases in energy prices from abroad, or by supply chain problems caused by covid or Brexit. It isn’t caused by excessive wage demands either. Why is this? If the stock of money in the economy grows only as fast as its productive capacity, then sectoral price increases can’t translate into an increase in the average level of prices – which is what the inflation rate measures. If the stock of money is stable, then price increases in one sector will be compensated for by price decreases in other sectors. If central banks manage monetary demand properly then sectoral price increases merely redistribute spending between one sector and another, and the different sectors affected will have to adjust their prices accordingly to ensure their products or services are priced at a level that clears the market.

Sectoral price increases can only translate into a rise in the average level of prices if the quantity of money sloshing around in the economy is expanded faster than the economy’s productive capacity – if there is more money chasing fewer goods. Inflation arises when more units of money are required to complete the same number of transactions. The stock of money can only be expanded by the central bank – not by gas producers or wage earners.

I have little confidence that the Bank of England will solve the current cost-of-living crisis if it doesn’t understand its root cause. There is no pain-free option here. Interest rate hikes may take some air out of asset bubbles but won’t cure inflation on their own. The Bank of England needs to phase out quantative easing by paying off government debt as it becomes due out of current tax income rather than taking out new loans to repay old ones. This needs to be accompanied by quarter percentile rises in interest rates every couple of months until they rise to around 5%. This will inevitably reduce public spending and require a major adjustment to the size of the British state. This is long overdue. Long-term, I favour a negative income tax as the best way to reduce burgeoning welfare costs and return the country to a balanced budget.

What our sector needs to prepare for is a long period of stagflation – a combination of above-average inflation and low growth. Eventually, the Bank of England will have to reduce the stock of money in the economy, however they seek to disguise it. But meanwhile, household disposable income is going to be squeezed, and visits to licensed premises are going to be value-driven at the lower end and quality-driven at the higher end. It is mid-market premises that will struggle to survive, and they will need to revise their offering as the market polarises between premium and value. This is the nature of economic long covid.
Paul Chase is director of Chase Consultancy and a leading industry commentator on alcohol and health

Embracing food transparency by Stefan Catoiu

In April, new government legislation will see calorie labelling on menus become mandatory for businesses in England with more than 250 employees. The most significant changes include adding calories for individual menu items and displaying the statement that “adults need around 2,000 kcal a day”.

Aside from understanding this new legislation, it’s interesting to look at what’s driving these new laws and requirements. While the government is focused on the public health impact of nutrition, consumers are demanding increased transparency from the brands they buy from – whether it’s about nutrition, origin and welfare or sustainability. It’s important that hospitality operators both large and small acknowledge that this issue goes beyond compliance. Honesty and transparency helps attract and retain more conscientious and label-savvy consumers.

Large operators have already recognised the consumer demand for greater transparency and display calorie information on their menus. But now, all mid-to-large-sized operators must follow suit and display calories for the first time. Operators who fail to comply will face fines, but more importantly, consumers will start to take notice if they don’t fall in line. Operators who are currently preparing for the April deadline will need to think carefully not just about being compliant, but also about representing their brand at its best. Unless implemented intelligently, there is a risk it could downgrade the overall customer experience and impact your bottom line. 

After the challenges posed by covid, it’s understandable that both the timing and the depth of the new measures have had their fair share of criticism within the industry. But while the shift towards greater transparency arguably brings challenges, I believe that it brings a unique opportunity for operators to set themselves apart. From Natasha’s Law to the rise of plant-based diets, it’s impossible to ignore that customers are coming to expect more information about how their food is made and where it comes from. Whether it’s data on calories or specific ingredients like gluten and dairy, there is a growing number of people who want that information readily available at the point of sale. We already have it on the food we buy in supermarkets, so why not in our restaurants or our takeaways?

Arguably, the trend towards transparency is only going to accelerate with the introduction of calorie labelling. While the legislation only applies to larger businesses at the moment, operators across the industry should be proactive in thinking about how the changes might affect consumer expectations. If bigger companies are offering this information, it’s likely that customers might come to expect this from smaller restaurants, cafes and takeaways. Operators who are not agile enough to respond might run the risk of losing out. 

Back in 2015, when I co-founded the first totally digital and cashless QSRs in the UK with Nick Popovici, our aim was to put nutrition information at the heart of our concept, so it’s really interesting to see the demand for that has come full circle. In our restaurants, customers could fully customise their meals based on their preferences, goals or health because they could see exactly what they were getting through the technology and user interface. They could measure the total nutritional value of their meal with a dedicated calorie counter, while a nutritional sidebar told users the percentage of fat, protein and carbohydrates going into their order.

While the demand for more nutritional information started many years ago, I’d encourage operators who want to get a head start on the next major trend think about how sustainable their menu is. Experts say changing the way we eat is necessary for the future of the planet, but that government policy is needed alongside this. Could legislation on environmental labelling come next? Research by Innova Market Insights found that two thirds of consumers are willing to pay more for sustainable products, and that figure is even higher for millennials (73%) and Gen Z (72%). Three in five global consumers said they are interested in “learning more about where their food comes from and how it is made”. 

The term “clean label” has gone from providing transparency around calories and nutrition to also showing how eco-friendly and humane food is. With many of us keen to get a better understanding of the social impact of our food choices, I wouldn’t be surprised if eco-labels such as a product’s greenhouse gas emissions, water use or origin started to appear on menus in the near future. Regardless of what change comes next for the industry, now is a great time for operators to think about their food labelling strategy and what they can do to meet ever-changing consumer demands faster.
Stefan Catoiu is co-founder and chief operating officer of Vita Mojo

The cask revolution is coming by Charlene Lyons

To mark 30 years since the founding of Black Sheep Brewery, we’ve been reflecting on what the last three decades have brought us, and what the future may hold. When the brewery was founded, our focus was on championing cask beer at a time when choice in cask was bleak, and we succeeded. However, the continued decline of cask – along with increases in beer duty, the explosion of craft beer, pub closures, and changes in consumer behaviour – has meant we have constantly had to find ways to innovate and adapt, a challenge we have relished. 

The emergence of craft beer in recent years has drastically changed the landscape of the UK beer scene, with the American craft beer movement largely influencing consumers here in the UK. Classic British styles like IPAs have been modernised with American hop varieties, leading to a broad shift in the flavours that UK drinkers are looking for from their beers. The result of this movement has led to growth in creative, flavoursome and diverse beer styles, from pastry stouts to cheek-sucking kettle sours.

Even the perception of lager has changed across the country, where we now have a really amazing range available here in the UK rather than the so-called cooking lagers of yesteryear. This has helped to drive premiumisation across the entire industry. People are willing to pay more for a higher quality product that they feel is worth it. This has provided us at Black Sheep with the opportunity to express ourselves through beer styles in a way we would have not previously been able to do, and that is great for consumers, but also fun for us as brewers. 

That said, there is an increasing appetite for classic English styles, which, of course, is our speciality. Styles like best bitters are receiving more interest from drinkers, which is amazing to see. And although we’ve had to change in some areas to respond to the evolving market, we’ve also responded by doubling down on our core principles – quality, consistency, cask and supporting our local pub trade. These have been important to us since the beginning, but they remain just as important, if not more so, today. The pandemic has, of course, created issues for us, like everyone in the on-trade, but we were quick to respond and focused our efforts on supplying our off-trade customers with all they needed. We also increased our direct-to-consumer offering through e-commerce, and our “brew to ewe” service that delivered beer to people’s doors throughout the lockdowns.

What does the future hold for the industry, and Black Sheep Brewery? We expect premiumisation will continue across the board in the alcohol industry, not just in the tasting, but also in the experience that drinks can offer. There’s also no doubt that craft beer is here to stay and will continue to grow as it becomes more accessible. At Black Sheep, we have a growing portfolio of craft beers through our 5 Barrel Project – which is a small group of brewers in our team who focus on brewing specialist craft beers for specialist bars and pubs – and this is something we have big plans for, especially in the coming year.

The low and no-alcohol segment will also become more prevalent as consumers become more health-conscious, while sustainability will play a key role in this market too, with businesses needing a clear stance on their environmental standards and production methods. It’s something we’re focused on for the future here at Black Sheep, and we’ve made some great progress in the last year following a new partnership with Warren’s Group. We have a close relationship with the local biogas firm, meaning that 100% of the biproducts we produce go into the production of renewable energy via this partnership. We can then obtain full data on how many kilowatts of energy is generated per tonne of waste we send, and in time, we hope to be able to buy back the energy created by our waste to fuel the brewery.

One really exciting trend that we expect to see in the coming years is the cask beer revolution. It’s such an amazing form of beer, and something we have been passionate about since our founding. There’s definitely a huge opportunity for this form of beer to extend its appeal beyond the stereotypical cask drinker. As part of our 30th birthday celebrations, we’re on a mission to get more people engaging with the cask category, with loads of exciting plans afoot. Watch this space!

The cask revolution is coming, and we’re going to be part of that journey. We want all drinkers out there to join us and in drinking the freshest pint in any pub. 30 years since the first pint of Black Sheep was pulled, we’re more enthusiastic than ever to keep driving quality, consistency and enjoyment into what we do. Our customers have got much more incredible beer and exciting innovation to look forward to.
Charlene Lyons is chief executive officer at Black Sheep Brewery

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