Subjects: The Crunch point, low and non-alcoholic drinks may not turn out to be money-spinners, energy efficiency measures – essential investment or expensive folly
Authors: Paul Chase, Glynn Davis, Nathalie Dalton-King
The Crunch point by Paul Chase
As I write, prime minister Liz Truss has just resigned, and we’re told there will be a new PM within a week. Truss’ appointment as PM, and the attempt she and her chancellor, Kwasi Kwarteng, made to chart a radically new economic policy, fell foul of the market’s belief that the UK just couldn’t kick the debt can any further down the road. Cue the departure of the chancellor and his replacement by Jeremy Hunt. From that moment on, it was only a matter of time before Truss resigned, because as she has herself now acknowledged, she has no chance of carrying out the mandate on which she was elected.
But away from the psychodrama of Westminster and who’s in and who’s out, this does feel to me like a seminal moment. The inflation the government and the Bank of England are grappling with is a product of the vast money printing that was needed to finance the response to the covid pandemic. They can try and blame it on the war in Ukraine and global factors as much as they like, but our current economic malaise was made in Downing Street and Threadneedle Street, where the hapless governor of the Bank of England sits.
Our ability to borrow £375bn to cope with the pandemic persuaded some in government that so-called austerity was indeed a political choice, so why not borrow more to finance tax cuts? ‘Trussonomics’ has been portrayed as a libertarian economic experiment in market economics, when in fact it was nothing of the sort. In reality, it was an experiment in a kind of radical Keynesianism. Tax cuts financed by borrowing would stimulate the economy in a grand pump-priming exercise. Sweeping away restrictions and red tape would free up the supply side so that growth would square the circle. In one bound we would be free because falling tax rates would lead to soaring tax revenues as the animal spirits of entrepreneurialism were unleashed.
Rishi Sunak correctly described this as fantasy economics, and the markets duly delivered their verdict. The grown-ups came back into the room to stop the children from doing any more damage. But the current crisis has its genesis not just in the government’s response to the covid pandemic, but in the financial crisis of 2007/08, and even before that.
Between 2010 and 2019 we borrowed £750bn, of which half was created by the Bank of England through quantitative easing (QE). Since 2001 we have borrowed £1.4tn. Ultra-low interest rates and money printing that carried on long after the financial emergency was over has created a great deal of inflation. However, before this year, that mainly manifested itself through the housing market and the stock exchange. Rich people got even richer. Then, in 2020, we had the pandemic and even more money printing. Along comes Truss and signals a third borrowing splurge and the markets cried “Enough!”
Those who decry the influence money markets have on government policy would do well to reflect that their influence is a product of how much we owe them. ‘The markets’ is just the collective name for all those financial institutions – banks and pension funds – that lend the government money. The UK government’s annual income from taxes is around £700bn. While we don’t repay government debt out of income, because old loans are repaid by taking out new ones, the interest we pay on government debt is repaid out of income. Interest on government debt is now around £100bn a year – just over 14% of our tax revenues are spent on servicing our debt.
A lot of pigeons will come home to roost over the next few months. The Brexiteers’ mantra of “take back control” looks pretty empty now, based, as it always was, on a kind of golf club reactionary nostalgia for the glory days of the Empire when we could do what we wanted. Our current situation is analogous to the Suez crisis of 1956, when President Eisenhower stepped in and stopped our adventurism in Egypt – telling us to withdraw or else all American financial support for us would be axed. Today, our national humiliation comes not as a result of a decision taken by an American president, but by the decisions of the faceless people who run the money markets.
We have reached a crunch point. If, as some people believe, the current turmoil in the Conservative government is a ‘Remainer coup’, then in my view it is long overdue. Britain has only ever prospered when it has been part of something bigger than itself. That something used to be the Empire, but then we saw our future as part of the Common Market, and later the European Union. The idea that we could leave and become Singapore-on-Thames – a maverick state that could suck investment out of the rest of Europe – and we could go it alone has now been exposed as a delusion. The adjustment is going to be painful. Buckle-up!
Paul Chase is director of Chase Consultancy and a leading industry commentator on alcohol and health
Low and non-alcoholic drinks may not turn out to be money-spinners by Glynn Davis
Earlier this year, the Blue Naan restaurant in Felixstowe jettisoned its long-standing alcoholic drinks menu and went all in on an alcohol-free list, with an impressive selection of beers, wines, pre-mixed spirits, mocktails and soft drinks that certainly give it a unique proposition in the market.
The array of options represents a lot of sourcing effort by the restaurant’s owner, Johnny Hussain, who has been successfully running the high-quality venue for 20 years and wanted the drinks offer still to complement his food menu, despite going alcohol-free. He has built the restaurant into a very busy operation, with customers enjoying his unusual menu that includes unique fusion dishes such as chicken tikka stir fry and tandoori jerk chicken.
This striking move has not been done to boost revenues. Quite the opposite, in fact, as he admits the primary reason for taking such a route has been to reduce his numbers of diners (while also better aligning with his Muslim faith). “We had a staffing nightmare, and I thought if we took alcohol away then we would see a decline in customers. We did see a fall in numbers, and it’s now manageably busy rather than ridiculously busy,” says Hussain.
One noticeable change among the reduced customer base is the drop in the consumption of the non-alcoholic versions of beer. Whereas many people previously ordered three or four pints over the course of a meal, this has dropped to two, or in some cases, to three for the alcohol-free options. Hussain also says the younger customer base has had less of an issue with his ditching of alcohol compared with the older demographic.
This greater focus on health by younger people is certainly reflected in the findings of various research reports. For the 18 to 24-year-old Generation Z grouping, 65% state they have a desire to drink less alcohol, versus 55% for all adults. This is a jump on the 32% figure in 2021 and 40% in the previous year, according to KAM research. The only surprise to me is that more people did not say they planned to moderate their consumption. Even the most excessive of drinkers is surely likely to express a desire, however unfounded, to reduce their intake.
However, I’m dubious as to the value of the research when it states that one in three pub visits are now alcohol-free. Is this really a surprise today when the reasons we visit pubs have become increasingly broad? It is no longer simply about embarking on a drinking session because pubs are now much more multi-faceted. Often visits involve food, family meals out, quizzes, a mid-morning coffee, and an increasing number of people are using the pub as a place to work when it’s more about downing tea and coffee rather than wine and beer.
What I’m not doubting though in the alcohol-free drinks milieu is the increasing abundance of better-quality products, which has absolutely helped drive demand. Sales of low and no-alcohol beer, for instance, have almost doubled in the last five years, according to IWSR, with big guns like Heineken and Budweiser spending heavily on marketing (and funding plenty of research that says good things about the category).
This growth spurt has taken the category to 3.1% of the UK beer market, which sounds impressive, but is it? Judging by the previous expectations of brewing giant AB InBev, it represents a pretty poor performance. Six years back, the brewer stated its aim was for low and no-alcohol beers to account for 20% of its sales by 2025, but it has since acknowledged that this is not going to happen as the current level stands at a mere 6%.
While non-alcoholic and low-alcohol drinks undoubtedly represent an interesting and growing part of the market, I can’t help feeling that much of the research and marketing has arguably painted prospects for the category that are much greater than will ultimately be the reality. On the evidence today, I reckon they look unlikely to make much of a dent into the full alcohol market. Consider that alcohol is predicted to enjoy a compound annual growth rate of almost 16% over the next three years, according to Statista, which beats the growth seen in alcohol-free beer over the past five years.
Rather like Hussain has found at the Blue Naan, the adoption of non-alcoholic and low-alcoholic drinks is not going to help attract customers (quite the opposite could be the case, in fact), nor are they going to be some big money spinner for hospitality businesses. But that’s not to say they don’t have a place in helping companies achieve other aims that might be more focused on health, wellness and faith, rather than just being about hard cash.
Glynn Davis is a leading commentator on retail trends
Energy efficiency measures – essential investment or expensive folly by Nathalie Dalton-King
Today, sustainability has not only become an environmental priority (think Sir David Attenborough and Blue Planet), but it turns out to also be financially imperative, with food and energy prices skyrocketing and oil and gas security no longer guaranteed. This is especially true for hospitality businesses, which typically use 355,000kWh of energy per year.
To keep to our budgets and ensure continued growth, it’s vital we reduce our energy usage. But how can we do this? What can we afford that will make a big impact? The answer is lots. “Whoa!” I hear you cry. “We’re still recovering from pandemic lockdowns! We’re having staffing issues and food prices are rising quicker than we can blink! We don’t have the time or money to make these changes!”
I beg to differ. You don’t need to convert your whole kitchen away from gas (although many venues are). According to Juliane Caillouette-Noble of the Sustainable Restaurant Association, you just need to re-think common practices. Go back to basics for starters:
· Turn it down
· Switch it off
· Keep it clear
· Keep it dust-free
It’s easier than you may think. It shouldn’t be a solo activity either. Make your staff aware of the need to conserve energy and, importantly, why that need exists: for business profitability and environmental sustainability. Get them to buy into it and become actively engaged. Encourage (request, demand…) they change their habits: put lids on pans, only switch on the dishwasher when full, keep fridges de-iced and the ventilation clear. Set up some healthy competition between sites to meet targets, and to share and implement best practice.
“They’re such small changes,” you may respond. “They can’t make much difference.” They may be the quick wins, but they can reduce costs by up to 10%, according to the Carbon Trust. None of these things cost money to change, just time and inclination: an easy win.
If you really want to prove they make a difference, you need to do an energy audit. Simply walk around your venue at different times of the shift and note how energy is being used. Which lights are on when they needn’t be? Which rooms are too hot or too cold? Which equipment is on full when it needn’t be? Then you can identify energy-saving opportunities.
Obviously, immediate changes are great, but it's essential to plan for the future too. These quick wins can be boosted to up to 25% with longer-term solutions. They need some strategic thinking and initial outlay, but the return on investment is definitely more significant.
Modern technology is taking leaps and bounds in this area too. It wasn’t that long ago that we were being told to replace incandescent bulbs with those wiggly CFL ones. Now it’s LEDs all the way! They are relatively inexpensive yet emit the same amount of light as traditional bulbs. Importantly, they last up to ten times longer and could reduce electricity used for lighting by up to 80%.
This is only the tip of the (rapidly melting) iceberg too. As I mentioned the top of this piece, replace gas with electric, for example. Induction hobs can save up to 70% on running costs while also decreasing the heat in your kitchen, creating more comfortable working conditions. Got to be a win-win, surely? Automation is becoming a reality too: Timers, heating systems, building energy management systems (BMS or BEMS), heat recovery systems – very sci-fi!
If you need further convincing, take a look at Pizza Hut. They underwent a major transformation programme between 2011 and 2016 focusing on two fronts: capital investment in technology and equipment and behavioural change. The company invested £1.5m in a range of improvements including smart meters, LED lighting BMS and other technologies. As a result, their electricity and gas were (5% and 22% respectively) lower in 2016 than 2012 across their property estate.
So, what are you waiting for? Get that notebook out and take a trip around your venue. Chat with your team, pick their brains and get them involved. Check out the great sources of support available through the Sustainable Restaurant Association, who have partnered with Flow Learning by MAPAL to create a free resource, Be Energy Smart. It’s a great resource to share with your teams and drive an immediate impact.
MAPAL Group is a specialist in back-office hospitality technology, and sustainability is integral to all its product decisions. Flow Learning can help you educate your team on your objectives and compliances. Digital checklists enable your team to perform and monitor actions you introduce. The Be Energy Smart resource is free and has been created for everyone in the sector, not just our customers. To adapt a well-known saying: “The best time to start was 20 years ago. The second-best time is now.”
Nathalie Dalton-King is learning experience designer at Flow Learning by MAPAL