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Morning Briefing Strap Line
Fri 13th May 2022 - Friday Opinion
Subjects: Solving mass disposability, the investor appetite, over here and planning to go everywhere, alcohol and obesity
Authors: Louise Palmer-Masterton, Rob Johnson, Sarah Travell, Paul Chase

Solving mass disposability by Louise Palmer-Masterton

I do believe that food tastes better off a plate. There is, in fact, countless research to back that up, and if you think about the gastronomic experience of eating off a plate rather than a half soggy take away container where you are actually eating bits of the container along with your food, I am sure you will agree there is some merit in that. So, why do we all eat plastic or cardboard wrapped refrigerated take away food every single day? Convenience has trumped taste, and businesses have adopted the grab-and-go model as their core business model.
At most of our better-known lunch businesses in cities, you can’t actually get food or drink unless it is in take away packaging. Our first London restaurant is near St Pauls, right in the old Square Mile. I’ve always been struck by the sheer volume of people that head out for lunch in that small area every single day. Now, obviously some of these people do find their way to a restaurant for lunch, but the overwhelming majority are heading to a store or takeaway to grab a lunch on the go. 
Their takeaway lunch will undoubtedly utilise some kind of single use packaging, and with meal deals being an attractive proposition for people watching their budget, lunch could well involve three or more separate items of single use packaging. Let's do the maths on that – there are an estimated 32.5 million employees in the UK. Statista reports that the average adult will eat in a restaurant two to three times a month. If we generously assume that one of those visits is to a restaurant at lunch time, that leaves another potential 8 billion other lunch opportunities.
Statista also tells us that 39% of working people will buy lunch out of home twice a week (I have a feeling in the aforementioned square mile this might, in fact, be five times a week). That is a whopping 1.3 billion lunches bought on the go in a year – or 5 million every single day. If you take our meal deal example above, with three or more items of single use packaging in just one persons’ lunch, that is potentially 15 million bits of single use packaging discarded in one single lunch time. Just in the UK. 
It’s really not the case that we are off the hook if we use biodegradable packaging, as sadly, compostable is not the answer. Compostable containers are widely made from virgin materials, which increase the carbon footprint of the product and do nothing to solve the issue of mass disposability. The sheer energy to create this packaging, just for one single use, not to mention the fact that, sadly, most of it never does end up being recycled. Research shows it’s moving away from single use anything that has the greatest carbon impact. The leap we all need to make is to start viewing everything on this planet as a valuable commodity.
Reusable cups and boxes do seem to offer a good solution to the single use issue, but with currently less than 5% of people taking up reusable coffee cups, and even less reusable lunch boxes, clearly a significant shift in mindset of both operators and customers is needed to move away from accepting mass disposability as the norm. Businesses could make it easier for their customers to use reusable boxes and cups. You could introduce discounts and incentives that give a greater financial incentive to use reusable, make your take away menu lunch box friendly, introduce your own box and cup swap schemes. Make these schemes the norm and don’t accept that people can’t change. With the right amount of energy and support, we can help make mass disposability an occasional luxury rather than a day to day staple.
In my view though, the single most significant shift that would change this issue of packaging and mass disposability in the blink of an eye would be to turn the VAT rules on their head. If it became the VAT rule that dining in a restaurant off a plate was VAT exempt (instead of the 20% it is now), and single use packaging wrapped refrigerated grab-and-go food went to 20% VAT (instead of the 0% it is now), then it would no longer be a better business model to exploit this VAT rule. Businesses would accelerate their creativity in avoiding single use packaging, and with the significant positive consequences this would have for the environment in terms of packaging, it’s an absolute no brainer to me!
Louise Palmer-Masterton is the founder of Stem & Glory

The investor appetite by Rob Johnson

Looking across the consumer sector, we’re seeing a shift in spending back to experiential retail and leisure – anything consumers can enjoy with others. From eating out to exercising and holidays to days out with the family, these sub-sectors are generally seeing a resurgence in demand and, at the same time, increasing their appeal to investors.
But what are the key assets that investors look for in hospitality and leisure businesses, and how can business owners looking at the next stage of growth attract attention in a busy marketplace? Strength of concept is paramount. This industry is full of business models based on short-term trends and crazes, often imported from overseas – trampoline parks, axe throwing, trendy exercise classes, regionally-themed bars and restaurants.
Many of them enjoy short-term success but ultimately stagnate as interest wanes over time, or excess supply comes into the market. We look to invest in strong concepts with proven longevity to ensure customers will keep coming back time and time again. How do I gauge whether a concept has staying power? I’ll try it myself. If it was fun for one night but couldn’t see myself (or others) going again, I would question whether the business has a sustainable proposition.
The next area we look at is scale. It’s one thing to find one or two good sites and operate them well, it’s another to replicate that success at scale. A growing multi-site business needs to have appropriate team structures that allow decision making and responsibilities to be delegated. It also needs fit-for-purpose back-office systems and software, the ability to consistently select the right sites (which gets harder the further you move away from your heartland), and so on – the transition can be challenging. We tend to get involved with companies once they have gone past the “proof of concept” stage, having demonstrated they can operate multiple venues successfully.
The other side of the coin when it comes to scale is how easy will the business be to scale from here? How many towns and cities are the business already in? How many more are left to go? How easy is it to find suitable units? How much competition is there and how many sites can the market support? Scalability is critical to demonstrating you have a high value opportunity, and therefore maximising the price a buyer may be willing to pay for your business when the time comes to sell.
Now it’s time to get into the numbers, by which I mean short payback periods and a healthy return on capital. When a business is expanding, I want to see that each new site recoups its set-up costs within two to three years. If it takes much longer, I’d question whether the business model is viable in the long term. Another way to measure the relative attractiveness of the investment opportunity is to compare a site’s set-up costs with its annual earnings to assess the return on capital. Depending on the specific sub-sector of the leisure and hospitality industry, I would typically expect good operators to be achieving a return on capital of 30-60%.
The next area of focus is a well-invested core estate. Opening new sites is crucial, and often the most exciting part of any roll-out. However, a common mistake is to get carried away with expansion at all costs and forget about what you already have. To stay relevant, even well-established sites need to be refreshed and upgraded from time to time. If a business is not continually investing in its existing estate and sales start to go backwards, then opening new sites simply becomes an expensive way of standing still.
Lastly, don’t forget about data. It’s crucial to gather accurate insights about individual site performance and customers so you can easily identify and respond to any problems before the damage is done. The best operators will have embedded systems and reporting tools that allow management to view financial data and customer reviews in real time. Another benefit of having robust data at your fingertips is in helping to maximise site profitability. A data-rich business can ensure the right products are on offer at the right prices at the right times, with promotions targeted at filling capacity during quieter hours.
Rob Johnson is an investor at BGF with investments in businesses including Arc Inspirations, Yorkshire Wildlife Park and Coppergreen Leisure Resorts

Over here and planning to go everywhere by Sarah Travell

Last May, Abigail Pringle, chief development officer of Wendy’s, the third-largest quick service restaurant chain in the US, said that two decades after its last aborted attempt to grow here, the time was right for a return for the business to these shores. The reason given was that the UK’s burger and takeaway market is growing, she said. However, the fact that after over a year into the pandemic, opportunities to take sites on UK high streets at more reasonable rental levels had increased, would surely also have played a part in the company’s thinking? 

Of course, it hasn’t been the only US brand to take the opportunity to launch into the UK market, with Wendy’s peer Popeyes making its debut here last November. Both have ambitious expansion targets, with Wendy’s planning to open 50 sites here this year alone. But, as the latest Propel multi-site database shows, they are not the only ones looking to make a mark on the UK’s hospitality sector. 

The Propel Premium database of multi-site companies, which Virgate sponsors, has now grown to include 2,439 companies, which operate 65,197 sites. An additional 31 companies, which operate 90 sites between them, were added during April 2022. One such company was another overseas player, Paris Baguette, which hails not from France but South Korea, and which operates just under 4,000 bakeries worldwide. The brand, which is owned by the SPC Group, has already lined up two openings in London – in Kensington High Street and the Battersea Power Station development, but believes there is scope for plenty more. Last month, it told Propel that it plans “significant push” into UK, and initially hopes to expand to 250 sites here. Jack Moran, formerly chief executive of Le Pain Quotidien, who will oversee the brand’s growth here and in Europe, said: “Our vision is to re-establish the neighbourhood bakery café as the heart of the local community. To that end, we will engage in significant franchising as we want the owner/operator to be from the local community.”

The brand will come up against another international bakery brand, Ole & Steen, that continues to build on launching its own debut site in the UK at the end of 2016. The Danish baker company will open its second regional site in the UK later this summer. The 18-strong business, which already operates a site in Oxford’s Westgate scheme, will open a site in Kings Edward Court, Windsor. The company recently increased its presence in London, with an opening at More London, after taking over the former Caffe Nero site at the scheme near London Bridge. It will also open a two-floor, 2,411 square-foot corner site at 39-43 Neal Street, Seven Dials, which will be its largest in the capital so far and sit alongside more than 100 global locations.

Alongside burgers and bakeries, the UK’s pizza and pasta category remains one of its most fiercely competitive, as the continued roll out of the likes of Rudy’s Pizza and Franco Manca testifies, and the evolution of more established brands, such as Zizzi, ASK Italian and Gusto Italian, highlights. That hasn’t stopped the Italian business Miscusi looking to join the party. The Italian pasta concept, which was founded by Alberto Cartasegna, launched in Britain earlier this year in Covent Garden. It is now set to double up in the capital with a site in Upper Street, Islington. Originally launched in Milan, Miscusi has 13 restaurants in seven Italian cities. Miscusi champions a Mediterranean diet and the brand’s ethos is “rooted in respecting the planet through the power of food”. At the beginning of 2021, the business secured a €20m investment from MIP, a venture capital fund, and the American fund Kitchen Fund, which includes SweetGreen as an investment, to aid its growth plans.

Meanwhile, in coffee, fast-growing New York-based chain Blank Street Coffee hasn’t even launched here yet but is already laying down plans to disrupt the UK’s market. Founded by Vinay Menda and Issam Freiha in Williamsburg in summer 2020, it is to launch in the UK this June, in Fitzrovia, with plans to make London its “second-biggest city”. The business, which operates circa 30 sites in New York, plans to open two-dozen shops in the UK this year. Last year, the company raised $60m, including $25m in Series A Funding from General Catalyst Partners and Tiger Global Management, to fuel its expansion plans. Key to the Blank Street formula is to undersell its competitors. A Blank Street latte sells for $3.50 – for comparison, at Starbucks a grande latte costs $4.95 and at Dunkin’ Donuts, a medium latte goes for $4.29.

Other overseas brands continue to circle the UK market, buoyed by the site opportunities available and the fact that eating and drinking-out remains part of the social fabric. Of course, they make the market even more competitive for UK operators looking to expand and, as we advise our clients, financial presentation and records will need to be very much in shape for anyone looking to attract investment in such a climate.
Sarah Travell is the founder and chief executive of Virgate, sponsor of the Propel Multi-Site Database. The database is one of the benefits Premium subscribers receive. The go-to database 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. Companies can 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 to upgrade your subscription.

Alcohol and obesity by Paul Chase

Are we becoming a nation of fatties? Is obesity a growing problem – a veritable epidemic? Consider this from The Times: “Britain is on track to be the fattest nation in Europe in a decade, with the rise in obesity driven by takeaway services such as Deliveroo and sedentary lifestyles, a World Health Organisation expert has warned. By the early 2030s, 37% of British men and women are expected to be obese, a report from global health chiefs says. The present figure is 28%.” 
The track record of the World Health Organisation and other authorities on this issue in predicting the future path of obesity has been lamentable. In 2006, a Department of Health report predicted that 28% of women and 33% of men would be obese by 2010. In fact, it turned out that obesity levels remained stubbornly stable at 26%. The Lancet published a report in 2011 which predicted that nearly half of all British men and 43% of British women would be obese by 2030. Well, currently, in England the figure for 2021 remains at 28% – high, but not growing. Have we not had enough of predicating health policy on the false predictions of epidemiological modelling?
Over the past few weeks, there has been a blizzard of comment from the usual anti-alcohol zealots about putting calorie information on the labels of alcoholic drinks, and on beer fonts in pubs – something they’ve been calling for since 2014. This followed hard on the heels of the introduction of mandatory calorie counts on menus for food premises operated by companies with more than 250 employees. The idea that alcohol contains “empty calories” – that it has no nutritional value – is widely propagated in anti-alcohol circles. There is no moral panic bandwagon the puritans of the anti-alcohol lobby are too proud to jump on. The “obesity epidemic” is just another false flag operation that gives them the opportunity to bash the booze.
Let’s get a couple of facts straight: Firstly, people don’t drink undiluted ethyl alcohol, they drink beverage alcohol like beer, which does indeed contain a whole range of nutritious ingredients. Beer contains high levels of most B vitamins, notably folic acid. It is one of the richest sources of silicate in the diet, which has been linked to a reduced risk of osteoporosis in moderate drinkers. It contains significant levels of soluble fibre and antioxidants, at least one of which – ferulic acid – is absorbed by the digestive system of the drinker. 
It might seem obvious that since beverage alcohol contains calories, then it contributes to weight gain in the same way that doughnuts or chocolate bars do. If the drinker imbibes to excess and doesn’t burn off the calories with exercise, then he or she will put on weight. The first law of thermodynamics applies – consume more fuel than you burn, and your body will store the excess. Actually, it’s not that simple. Most people think the main sources of calories in beer and other beverage alcohol is carbohydrate. Wrong. It’s alcohol – and any alcoholic drink will deliver calories in proportion to its alcoholic strength. Extensive research shows that moderate drinking of beverage alcohol doesn’t correlate with weight gain, and some studies show a small reduction in weight for women who drink.
The reason that alcohol doesn't necessarily increase weight is unclear, but the research suggests that alcohol energy is not efficiently used. Alcohol also appears to increase metabolic rate significantly, thus causing more calories to be burned rather than stored in the body as fat. Other research has found that the consumption of sugar decreases as the consumption of alcohol increases.  Whatever the reasons, the moderate consumption of alcohol is not correlated with weight gain and is sometimes associated with weight loss in women. The evidence for this is based on a large number of studies of thousands of people around the world. Some of these studies are very large indeed; one involved nearly 80,000 and another included 140,000 subjects.
The moderate consumption of alcohol is associated with better health and longer life than is either lifelong abstention from alcohol or abusing it – and this holds true, despite all the desperate attempts by neo-prohibitionists to debunk the claim. However, heavy drinking is associated with cirrhosis of the liver and other health problems. The key word is moderation. In relation to weight gain, the facts are that while beers, wines and distilled spirits all contain carbohydrates, they contain no fats whatsoever. 
Now, I realise that government ministers change regularly, and Sajid Javid has a lot to contend with besides spurious claims about alcohol contributing to the so-called “obesity epidemic”. But should he want to know where the claims I am making come from, there are numerous studies he can look at. Here’s just five of them to get him started:

· Istvan, J., et al. The relationship between patterns of alcohol consumption and body weight, International Journal of Epidemiology, 1995, 24(3), 543-546
· Mannisto, S., et al. Alcohol beverage drinking, diet and body mass index in a cross-national survey, European Journal of Clinical Nutrition, 1997, 151, 326-332
· Prentice, A. M. Alcohol and obesity. International Journal of Obesity, 1995, 19(Suppl. 5), S44-S50
· Colditz, G., et al. Alcohol intake in relation to diet and obesity in women and men. American Journal of Clinical Nutrition, 1991, 54, 49-55
· Cordain, L., et al. Influence of moderate daily wine consumption upon body weight regulation and metabolism in healthy, free, living males
Paul Chase is director of Chase Consultancy and a leading industry commentator on alcohol and health

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