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Morning Briefing Strap Line
Fri 10th Jun 2022 - Friday Opinion
Subjects: Justification for MUP has failed, what’s happening in Chicago, pubs with rooms have staying power, hospitality should value creating great memories

Authors: Philip Kolvin QC, Paul Charity, Glynn Davis, Ann Elliott

Justification for MUP has failed by Philip Kolvin QC

Almost certainly, in imposing minimum unit pricing (MUP) on its citizens, the Scottish government was unmindful of the opinion of Nikita Kruschev that economics is a subject that does not greatly respect one’s wishes. To that opinion, we must now add econometrics, whose practitioners, it now seems, are not necessarily very good at predicting the behaviour of addicted drinkers. Who knew?

We know this now because Public Health Scotland has just published a 350-page report on the impact of MUP on those drinking at harmful levels, the conclusions of which stand in diametric opposition to previous forecasts. I have read (most of) it, so you don’t have to. 

First, however, let’s recap. All the way back in 2009, the University of Sheffield published its study commissioned by the Scottish Government on the likely impact of MUP in Scotland. It pointed out that Scottish people drank more per head than English people, and that the more you drink, the worse your health outcomes, with greater harms among deprived populations.

From that, it was a short hop to the econometric conclusion that if you charge addicts more per unit, they will drink less and so live longer, healthier lives. They even put a number on it: over the first 20 years of a 50p MUP, there would be precisely 2,036 fewer deaths and 38,859 fewer hospitalisations. Trebles all round, as one shouldn’t say.

Loins duly girded, the Scottish Government passed legislation to put MUP into effect, kicking off the Whiskey Wars – a Homeric journey through the courts of the Unions (both British and European), culminating before an unusually-constituted seven-person Supreme Court, all about whether the new laws offended free trade principles in the Euro Treaty. Life is too short to recount the ins and outs. Suffice to say, the Scotch Whiskey Association lost, the Government won, and MUP was unleashed on the Scottish population in 2018. 

Fast forward four years. The new report, Evaluating the impact of Minimum Unit Pricing in Scotland on people who are drinking at harmful levels, is of unimpeachable pedigree. Its authors are drawn from respectable institutions across four separate nations, and the work systematic, thorough, evidential and detailed. The conclusions come undiluted.

When it comes to harmful drinkers, at whom MUP policy is, after all, directed, the findings are unequivocal. They have not reduced their intake but have maintained it by switching from cider to spirits, cutting back on food and energy consumption and borrowing. Crucially, it reads: “There is no clear evidence that MUP led to an overall reduction in alcohol consumption among people drinking at harmful levels or those with alcohol dependence.”  

Furthermore, the study uncovered no evidence of changes in the general health of harmful drinkers. For balance, it is right to point out that the report confirms that those other than harmful drinkers (particularly the largest-purchasing households) have reduced their consumption, and there is yet hope that MUP may prevent future cases of alcohol dependence in younger generations. However, that is small beer when judged against the avowed purpose of the MUP legislation. 

In short, the justification for the legislation has failed. Technically, the conclusion is that there is low price elasticity in relation to alcohol among harmful drinkers. More colloquially, addicts are addicted. Help may lie elsewhere: it does not lie in artificial price-hikes, particularly when these unnecessarily deplete the disposable income of the non-addicted majority in the midst of a cost-of-living crisis.

Just as you don’t eat dinner on a table without legs, when the key reason for a policy disappears, the logic is that the policy must go too. Whether Holyrood will so readily admit that its experiment has failed remains to be seen. The industry and consumers are watching.
Philip Kolvin QC is a licensing expert and Patron of the Institute of Licensing

What’s happening in Chicago by Paul Charity

Chicago never fails to offer new things to see, to do, to eat. Last month, we covered more than 100,000 steps in five days spent looking at diverse neighbourhoods such as Fulton Market, Lakeview, Ukrainian Village and Wicker Park – and we walked every single aisle of two massive pavilions at the world’s largest restaurant show. Central to restaurant change: plant-based menu options, smart technology, convenience, premiumisation and multi-channel explorations. Here are my top six observations.

1. American service: In short, it is still jaw-droppingly good. At one coffee shop (Goddess and the Baker), the waiter decided we had waited too long for our order to arrive, voided the cheque, offered us anything we wanted from the menu and suggested we take something with us on the house. At another restaurant, the smiley waitress checked back six times during our 45 minutes of eating time – it felt like she genuinely cared about our experience and it was never obtrusive. The quality of service is, of course, driven by tipping, with restaurants recommending at the payment stage that 20% to 24% of the bill should be added as a tip.

2. The benefits of premiumisation: Starbucks is ubiquitous but retains a premium position – there were no fewer than four Starbucks stores within two blocks of our hotel. But the market position remains much more premium than, for example, Dunkin Donuts, whose stores look universally behind on the investment and maintenance curve. A good example of the halo effect of premiumisation comes from the five-storey Starbucks Roastery on the Magnificent Mile, which burnishes its coffee credentials with an experiential cafe, high-end bakery, cocktail bar and quality design. It underscores that Starbucks is a premium brand for which you should expect to pay more.

3. Being famous for something: There are a fair number of Chicago restaurants that are consistently busy because they are focused on one thing – deep pan pizza. We tried to eat at Giodarno’s twice (it actually has 50 locations nationwide) but decided against the boredom of waiting for an hour. At Pizzeria Uno, we joined other tourists making a deep pan pizza – our teacher told us this restaurant makes $500,000 a year out of these early morning pizza classes. The astonishing recent success of Popeyes is a reminder that even a 50-year-old brand can gain enormous energy by creating a hero menu item – in this case, a piece of chicken covered in a buttermilk batter and a special flour that create a crunchy texture. From 2019 to 2020, Popeyes posted four of the best like-for-like results in the history of quick-service – the final quarter saw like-for-likes up 37.9%. This single sandwich added an average of $8,000 a week to sales at each site.

4. Evolved models: The pandemic has led to a quickening of the evolution of some business models that are still in their relative infancy in the UK. Flynn Restaurant Group has 73,000 staff and 2,355 restaurants nationally. It is a franchisee. It is the largest operator for Arby’s, Pizza Hut, and Applebee’s; the second biggest for Taco Bell and Panera; and fifth biggest for Wendy’s. The pandemic saw it buy 937 Pizza Hut and 194 Wendy’s stores for $552.6m when a fellow franchisee went bankrupt (allowing a thorough estate cleanse). It’s the kind of company that doesn’t exist in the UK. It has placed bets on mature brands in parts of the market that have performed well for a long time. It is privy to lots of general learnings that come from being deep inside multiple systems. Interesting, no?

5. Automation and staff shortages: Automation is increasingly seen as the solution to staff shortages. I counted no fewer than eight companies showcasing robotics at the National Restaurant Association Show, which was back to full strength after two missed years. For some, robots still belong in science fiction movies, but restaurants in the US have begun to extol their virtues. BurgerFi uses robots to carry food to tables and bring empty plates back – an augmentation of staff capability. The National Restaurant Association’s 2022 report found 77% of quick-service operations didn’t have enough staff – and 78% of operators say they expect automation and technology to help with this. Meanwhile, operators are being more forthright about the benefits they offer. Chipotle was offering, by way of an advert in its own window, a three-year pathway to $100,000 a year. Another restaurant, Spy on Ontario Street, was offering a $500 up-front bonus for new staff. But the current staffing and costs challenges are reinforcing the move to omni-channel. And one very well-known Asian brand was making it very clear that its ghost kitchens were profitable in a way that made it question the traditional bricks and mortar model.

6. The Brits are coming: The US foodservice industry is enormous. Its franchise systems are world-beaters. But the UK has begun to have an influence on the US scene. Nando’s, the Hoxton, Flight Club and Soho House are all in evidence in Chicago. At the show, Coca-Cola, occupying the most prominent of central slots, was proudly displaying its Costa Coffee machine technology, with this particular machine producing ice (staff told me there are fewer than 200 machines so far in the US as the manufacturer in Switzerland struggles with shortages of parts). And British technology is starting to make inroads too. Hats off to our friends at Yumpingo, for example, busy making inroads in the US and taking a stall at the show. 
Paul Charity is founder and managing director of Propel. This article first appeared in the Premium Friday Opinion slot.

Pubs with rooms have staying power by Glynn Davis

Settling in for beers on the terrace of The Frogmill pub before enjoying dinner in the candle-lit restaurant, and then finally retiring to bed after a supposedly relaxing game of shuffleboard over a post-prandial drink, neatly encapsulates the beauty of staying in a pub.
 
On a recent visit to this lavishly refurbished historic pub on the outskirts of Cheltenham in lush Cotswold countryside, it was easy to see why a growing number of overseas tourists are falling for the charms of staying in a British pub. During April and May, as many as 44% of bookings on the Stay in a Pub platform came from visitors from beyond these shores, which compares with only a very modest 17% pre-covid.
 
The Frogmill is part of Honeycomb Houses – the managed division of family-owned Brakspear – which consists of nine high quality venues that the company is looking to expand. It recognises the rich potential of this part of the market that is not only attracting more overseas money, but is also well placed to tap into the staycation boom that now looks to be firmly established on the leisure landscape in the UK.
 
Brakspear is investing heavily in the category, with £35m spent on its existing properties so far and further funds committed to future units as it plans to add one or two new pubs per year – as long as they hit the criteria of bringing in £40,000 minimum sales per week and have an optimum 30 rooms, which will help it achieve a profit of 25%.
 
Working with the likes of Stay in a Pub and experimenting with influencers is helping Honeycomb drive impressive occupancy rates of over 95% across the majority of its pubs, with weekends commanding £160-220 per night and a minimum of £100 charged at other quieter times. This is certainly premium territory, and as Tom Davies, chief executive of Brakspear, modestly states: “Pubs with rooms are a viable place to stay and the UK is now seen as a credible destination for family holidays.”
 
People are clearly willing to pay for the right quality proposition, and across all bookings on Stay in a Pub, the average value is £220. This does not include food and drink, which is invariably a decent part of the bill for most people, because the beauty of the model of such properties is that food and beverage is very much part of the appeal for staying guests. Across the Honeycomb business, food represents 50% of turnover, drink 30%, and accommodation 20%.
 
Such appealing attributes have clearly not been lost on others in the industry, and in the Honeycomb heartland of the south west of England, the competition is intense, with Davies highlighting the likes of Young’s, Fuller’s, McMullen’s, Charles Wells, Liberation Group and Shepherd Neame all vying for similar properties. Fuller’s made its prominent mark in the area with its 2019 acquisition of Cotswold Inns & Hotels for £40m, and on which it spent heavily to bring them up to the required standards. 
 
On top of this acquisitive grouping, there is the voracious RedCat Pub Company, which continues to add to its portfolio – with more than 100 pubs now under its control since it was formed in February 2021. A key component of its strategy is to grow its pubs with rooms (or coaching inns, if you prefer), which began with the purchase of The Coaching Inn Group. Ten properties have been added in short shrift since that initial deal was struck, and the two most recent, The Pheasant Hotel and Blakeney Manor Hotel in North Norfolk, came in late May. Unlike Honeycomb, it is spreading its net wide as it targets prominent pubs with accommodation across the UK.
 
It’s not often, if ever, that I’ve felt inclined to follow tourist trends, but in the case of their growing desire to stay in pubs, I reckon they might be on to something. I’d recommend we all follow suit and enjoy the full hospitality that these quintessentially British icons now provide, given that a growing number of them are safely in the hands of very capable operators.
Glynn Davis is a leading commentator on retail trends

Hospitality should value creating great memories by Ann Elliott

It’s very humiliating ‘achieving’ a personal score of 40 in a game of ten pin bowling. A child of six can beat that without even having the sides up. I didn’t go on to redeem myself by smashing it at table tennis either. In fact, I spent more time scrabbling around the floor trying to find the ball and apologising to others as I collected it yet again from around their feet than I did around the table. 
 
We did have a fantastic family experience though, and I am always surprised and grateful that our kids choose to do anything with us at all. My memories of family occasions are incredibly precious, and becoming increasingly so when neither of them lives with us anymore and live very independent lives. Being together as a family during lockdown and playing lots of games (inside and out) feels incredibly special in retrospect. 
 
We all spent the platinum jubilee weekend away together in an Airbnb in Arundel, because holidays, even just for a few days, are such a major way to continue creating great memories. The trip to AMF Bowling in Worthing was part of the weekend, and we haven’t laughed so much together for a long time. Mainly at my expense, of course.
 
So, this experience made me think yet again about how our sector can ensure our customers leave our venues with happy memories – so they want to share, recommend and return. This is more important than ever now. It is inevitably going to be more expensive for guests – certainly this year, if not beyond – to continue to create happy family memories by going out to venues. I can see a picnic in the park replacing visits to the cinema, or a trip to the playground replacing a visit to McDonalds.
 
Of course, I am not talking about the city of London here. I am talking about ordinary, everyday guests who live outside of the rarefied London atmosphere and are having to watch every penny they have. I suspect they are still going to want their holiday abroad to create those major memories and will cut back on those occasions here that don’t return the memories for the money spent. 
 
Having thought about it for a few days, I believe our time together spent bowling and playing table tennis created memories for all sorts of reasons. It was fun, it was relaxing, it made us all laugh. We talked, we celebrated when any one of us managed a strike, and we had the odd beer or three. We could all be ourselves. Yes, it was competitive socialising in its broadest sense, but it was distinctly uncompetitive in others. The only competition I won was the one for having to say “sorry but I can get my ball” the most times in an hour session. If I am honest, I can’t remember how much it was – probably less than £50 for two hours for five of us, including drinks. That’s a great investment in creating memories and well worth it for me. We are still talking about it this week and wondering how we can all do it again.

Interestingly, while hospitality businesses run surveys that ask about recommendation and revisit, I don’t think many businesses measure their success in creating memories for their guests (and measuring that sort of emotion isn’t relevant for all hospitality businesses, or even all customer occasions, of course). I have never been asked to run a survey which asked guests ‘how successful were we in helping you create great memories from your time with us today on a score of one to ten?’ Perhaps we should, it might surprise us.
Ann Elliott is a hospitality strategist, connector and adviser

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