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Morning Briefing Strap Line
Fri 1st Apr 2022 - Friday Opinion
Subjects: Tough times ahead for restaurants, give government credit where credit’s due, the City is still the place to be, introducing alcohol-free innovation
Authors: Ann Elliott,  Philip Smith, Glynn Davis, Jez Manterfield

Tough times ahead for restaurants by Ann Elliott

Last Wednesday, my husband paid £925 for ten weeks’ supply of oil – so roughly £370 per month. We also use electricity and gas for heating and lighting. The last time he bought oil he paid £210 for the same amount. That’s an additional cost of just under £300 per month for oil. We do not live in a mansion.
In the last two weeks I have eaten in Gusto (three times), Café Nero in Manchester, Grainger’s in Kings Cross, Brasserie Blanc, The Brown Cow in Bingley, Tossed, The Guildhall, The Renaissance Hotel (dreadful and expensive), South Place Hotel, Smiths Garden Centre in Bingley, Dishoom in Birmingham, Albert Schloss in Birmingham, The Duke of Sussex in Waterloo, Brewhouse & Kitchen in Milton Keynes and The Signal Box in Euston. Tomorrow, I am visiting five pubs with Matt Kearsey from Hall & Woodhouse.
Of course, going to pubs, bars and restaurants is part of what I do for a living. I am not registered as a limited company, but some of these visits can legitimately be reclaimed – but far from all (and I was treated to some of them too, which was lovely). I can’t ignore the fact though that I spend a lot of money on eating out. That’s just the truth. And I absolutely love it. It’s part of the joy of life for me.
There may be a moment though, in the not-too-distant future, when I have to consciously think about how much I spend on eating out and how much we spend on oil and utilities. Something will probably have to give, and its unlikely to be our heating. I am absolutely not pleading poverty, rather I am reflecting on the changes that many households may have to make to their discretionary expenditure to accommodate the increases in utility pricing. Just like us, and probably just like you.
Most meals we have in restaurants probably hover around the £25-a-head (at least) mark, so £50 for a couple. Coffees are £3-plus (or £5.63 for an Americano at the Renaissance, including 12.5% service charge). Hello Fresh is £70-plus a week for 16 meals. Thank goodness we don’t have Deliveroo in range, or I am sure I would go mad here too.
Most businesses I know have seen a falloff in covers and an increase in spend per head. If customers are having to decide now whether to eat out or eat in, it’s very likely that covers will continue to decline over the next 12 months or more.
Personally, I think higher end restaurants may well be okay. As will quick service restaurants. From the customer research I have conducted, it’s also likely that delivery (and click-and-collect) will continue to retain their percentage of overall sales, if not increase slightly. It’s not really feasible that consumers are going to want to go back to the days when they had to cook for the family after a busy day at work. If you don’t love cooking and/or find it relaxing, then it’s a time-wasting boring task quite often (speaking from personal experience here, of course).
It's dine-in and mid-market/casual dining which I think may feel the brunt of customer cut backs. In response, these businesses will potentially either look to upscale their whole customer experience and charge accordingly, or alternatively, try to reduce their spend per head in order not to lose customers. Either way, it’s a risk.
These are very uncomfortable times, for customers and operators. Discretionary spend per head is going to be scrutinised by many households like mine when utility bills start to bite. I know this has been said already in the sector, but when it hits you personally, it really does come home to you.
PS I missed the five-pub visit to Hall & Woodhouse as I caught covid. Just like everyone else too, I think.
Ann Elliott is a hospitality strategist, connector and adviser

Give government credit where credit’s due by Philip Smith

As we emerge from the covid pandemic, I think we can all agree that this has been the most extraordinary time in most of our lives, and in the life of the nation. There will be many lessons to be learned. 
In addition to being a Tory Peer – my day job as chief executive of the Association of Conservative Clubs, the second largest members’ clubs organisation in the UK, with around 800 clubs trading as Conservative or Constitutional Clubs across the country – I speak not just as a Tory politician, but as someone who is deeply involved in the members’ social club sector, one of the sectors that make up the hospitality industry. Like other businesses that offer food, drinks and entertainment, we have suffered because of lockdown measures and the difficult trading conditions that resulted from local restrictions as we tried to manage the spread of covid.  
I understand that in a crisis, people and businesses look to the government to wrap the arms of the state around them and protect them, as far as is possible, from the worst impacts of a national, and indeed, global health crisis. And this government has done so – to the tune of some £400bn. I can think of no industry that has benefitted more from the largesse of the taxpayer over the past two years than the UK’s hospitality industry. So, it is with more than a little disappointment that I read the sadly predictable laments of industry commentators and leaders that the chancellor’s spring statement didn’t leave the 12.5% VAT rate in place. 
I understand that everyone fights their corner and wants what is best for their business, sector or industry, but I urge a little perspective here. I do not, of course, expect everyone to thank the government for what they have done, but they could, and should, at least thank the taxpayer. Because the funds that have been devolved upon the hospitality industry are not government money – the government doesn’t have any money – it is taxpayers’ money. Much of the funding that has been made available is borrowed money and will have to be repaid by future taxpayers.
So, a brief summary of what our industry has received: 100% business rate relief from April 2020; closed business lockdown payments of between £4,000 to £9,000 from April 2021; local restrictions support grants for closed premises of between £1,334 to £3,000 per month depending on rateable value; for premises that remained open, between £934 and £2,100 per month, again depending on rateable value; the ‘Eat Out to Help Out’ scheme; the furlough scheme which enabled hospitality premises to retain staff in return for paying just 10% of their wages, tapering up to 20% in September 2021; the ability to reclaim statutory sick pay; VAT reduced first to 5%, then 12.5%; commercial tenants protected from eviction if they couldn’t pay their rent during lockdown or restricted trading.
The support for the hospitality industry has continued throughout the pandemic – including support for businesses impacted by Omicron. On 21 December, the chancellor announced a £1bn support package for businesses across the UK. For hospitality businesses in England, this meant one-off grants of up to £6,000 per premises, plus more than £100m discretionary funding made available to local authorities to support other businesses. And let us not forget the ongoing 50% reduction in business rates for the next 12 months, and the rise in employer National Insurance rates announced in the spring statement.
Many businesses have more cash in the bank than they did at the start of the pandemic, and net cash deposits for all hospitality businesses have risen by £7bn (40%), while small and medium sized businesses in hospitality have seen their cash deposits rise by £2bn (79%). Fewer businesses have become insolvent, with insolvencies running 25% lower than pre-pandemic levels, and staff vacancies are 50% above pre-pandemic levels.
I urge our industry to accept that government cannot provide all the help that is needed to everyone, all the time. An acknowledgement, however, of what hospitality has received because of government decision-making would go a long way, in my opinion, to ensuring the continuity of that support. Spending decisions are political decisions, and there is little incentive for government to splash taxpayers’ largesse upon an industry if all it gets back is criticism that it isn’t enough and is never enough. 
Lord Smith of Hindhead is chief executive of the Association of Conservative Clubs

The City is still the place to be by Glynn Davis

When working in the City of London some years back, my lunchtimes typically involved a short stroll down Fenchurch Street to the East India Arms for a few pints of Young’s Ordinary Bitter. I was certainly not the only person with this near-daily routine, because the small one-bar pub would be packed from before noon until well into the afternoon each working day. 
It was a similar story across the whole of the Square Mile, and this gave its watering holes a unique buzz in what was then a largely male-dominated environment, with maybe a bit too much of a hard-drinking culture. Things have certainly been toned down over the years as the City has embraced a bit more of a balanced employee mix, and the drinking is now tempered by plenty of much more female-friendly and food-focused venues, including some smart restaurants.
With my affinity to the City, it made it particularly painful to see it ravaged by the pandemic. It immediately became one of the most exposed places to covid-19 as the work-from-home restrictions completely emptied its narrow streets of people. Those hospitality businesses with a presence in the City felt it extremely badly. The likes of Pret A Manger, Young’s, Fuller’s and Shepherd Neame were among those companies that kept some of their City outlets closed, even when the rest of the country was trading between lockdowns.
Thankfully, things are now on the uptrend. Bloomberg’s most recent Pret Index reported trade in the financial districts had hit a healthy 79% of pre-covid-19 levels, and Pret A Manger chief executive Pano Christou has been expressing new found confidence in the area, along with London in general. Even more gung-ho for the City is Jon Dalton, founder of Bloomsbury Leisure Group, who runs 14 hospitality businesses, including pubs in London, Bristol and Manchester. 
His Pelt Trader bar near Cannon Street station has been operating at near pre-pandemic levels since mid-February, and it is the same story at his Farringdon Tap venue that sits opposite the expansive offices of Goldman Sachs that will house 6,000 employees – of which most are now back in the office full-time. Many are also back to frequenting his bar again – apart from the Russia desk, who were regulars, but Dalton says they have been noticeably absent recently.
Although Friday is not back to its old self as the big night of the week – it has been replaced by Thursday – he regards this as a short-term phenomenon and suggests the five-day working week in the City office will be back soon. Adding to the positivity about the City is the continued desire by older workers to work from home, which represents a great opportunity for younger members of the workforce, back in the office full-time, to potentially leapfrog their older brethren to promotions. Their presence – and greater willingness to socialise after work – is clearly a boon for all pub and bar operators in the Square Mile. 
Against this backdrop, Dalton is expanding his presence in the City, with new units planned for London Bridge (that will open as the London Tap), a unit in a new-build in Aldgate and a third bar, The Bolter, near the Bloomberg Building. The fact that all his units compete with much bigger players does not worry him as he believes independent operators like Bloomsbury Leisure have a great opportunity in the City against the chains like JD Wetherspoon, Fuller’s and Young’s by offering a combination of value, a superior range and their employees’  great product knowledge.
For any operators considering the City of London, there is another upside to the area, which is coming into its own during these times of difficulty recruiting. With the trading week typically running Monday through Friday in most of the area, it is possible to have a single manager who can be on-site pretty much at all times – almost playing the role of the old landlord. These limited hours also ensure there is no burn-out from any members of the team. 
The City might not be returning to quite the drink-fuelled bonanza times of my years working there, but this old centre of commerce is far from being washed up and looks to potentially offer plenty of opportunity for those operators up for the challenge.
Glynn Davis is a leading commentator on retail trends

Introducing alcohol-free innovation by Jez Manterfield

As we all know, trends data tells us that consumers are looking to lead more balanced, healthier lifestyles, with 70% of British adults saying they are proactively trying to do so. Within the alcohol drinks industry, the key is providing a great range of choice to consumers that supports different occasions, including moderation. Reflecting this trend in the market, we are seeing an increase in consumer penetration of the no-and-low category, and notably “no alcohol beer/low alcohol beer” (NABLAB). This is true for the on and off-trade, where the NABLAB category is growing year-on-year at a much faster rate than the total beer category.
One of the reasons for this is consumer attitudes towards the category. The stigma that some might say existed in the past around drinking NABLAB in the on-trade is very much on the decline. In fact, moderating alcohol consumption – or opting for non-alcohol brand extensions at the bar – is seen as a positive choice, and this is manifesting in various ways. For instance, a consumer may have taken the decision to go alcohol-free, but they very much enjoy the refreshingly crisp taste of lager, and so opt for NABLAB as their drink preference. Or we see consumers engaging with alcohol as you see with a flexitarian diet, perhaps consuming no-and-low during the week and saving their alcoholic beer choice for times when they really want to unwind. And we know that some people choose to alternate between no-and-low options and an alcohol variant during the same drinking occasion, to moderate their intake and manage the moment in a way that’s best for them.
Within the on-trade, the opportunity is huge, and producers and venues alike will be left behind if they don’t have a compelling and relevant no-and-low range across all categories. The top two categories are non-alcoholic cocktails and no-and-low beer, followed a little way behind by wine and spirits. Research has shown that 50% of UK consumers find no-and-low alcohol ranges appealing, which equates to a massive pool of potential customers. When you consider that in the context of beer, there is strong value in no-and-low, with a high average price per litre relative to the alcohol variety, there’s also a significant commercial opportunity for retailers out there.
If you start to look at consumers who drink NABLAB by age group, the evidence for this category becomes even more compelling. As you segment on-trade consumers by age from youngest first, you see that it’s the younger tranches who consume NABLAB the most, and it reduces with each segment thereafter. Broadly speaking, younger consumers visit the trade more often, for longer and visit higher tempo outlets, where rate of sale is at its highest. So, this tells us that if we want to keep younger consumers engaged with visiting the trade and keep the industry relevant to the future core drinker, then no-and-low options must play a part in this. This is not about tokenism in simply having a couple of options available, but about embracing the exciting range of brands available across different styles within all categories, and making this part of your core offering, to really give consumers another reason to come out and stay out. 
We have found that many consumers are looking to make a functional choice, secondary to an initial choice of what type of drink they want to consume. What I mean by that is, on a particular occasion, a consumer may have decided that the drink for them right now is a lager, but that they would like it without alcohol at this moment – in much the same way as they may opt to have it without gluten or a lower calorie version. This then tells us that brand is key here, as consumers are still wanting to have their beer of choice on these occasions. This opens the potential for the NABLAB range to grow, as consumers lead their decision making by brand rather than the generic segment, reflecting the journey of the growing power brand/proposition in alcoholic beer over recent decades.
It wasn’t so long ago that requests at the bar would’ve simply been for a pint of lager, mild or bitter. Until more recently, brands began to lead what consumers looked and asked for at the bar. It’s been the same with NABLAB to date, as punters generally have one option of low alcoholic lager, and maybe a low alcoholic ale if they’re lucky. That is simply not acceptable any longer, but I believe NABLAB is now on the cusp of catching up with alcohol options in this regard. There is space for more brands to enter, with an exciting pipeline of innovation coming through, and that will only help the health of the overall category.
Looking ahead at aspirational growth of the no-and-low beer category, Asahi Europe & International’s goal is to have non-alcoholic products make up 20% of our total portfolio by 2030. We really see this as an opportunity to engage with a wider group of consumers across more occasions, and to meet the needs of the future core consumer of the category, as we see no-and-low penetration increasing year-on-year with younger consumers. I sometimes wonder what a pub will be like if I was to visit in 30 years’ time. Would the roles have been reversed, and I’d see most of the taps on the front bar be a delicious and varied range of no-and-low draught beer, and the fridges the preserve of the alcoholic beers? One to ponder. Cheers!
Jez Manterfield is category controller at Asahi UK

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