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Morning Briefing Strap Line
Fri 18th Nov 2022 - Friday Opinion
Subjects: It could have been a lot worse, collaborations between branded food operators and retailers very much on the menu, a strategy to beat the cost-of-living crisis, thoughts on COP 27 and what it means for hospitality
Authors: Paul Chase, Glynn Davis, Amber Steynings, Bob Gordon

It could have been a lot worse by Paul Chase

In advance of the autumn statement there was considerable speculation about what the chancellor would announce. There has been much expectation management, and “it could have been a lot worse” was my initial reaction as Jeremy Hunt avoided some of the worst policy options that were aired in advance of what we mustn’t refer to as a ‘mini budget’ lest it spooks the markets!

Politically, this fiscal event has planted the government right in the middle of the centre ground, making it difficult for the opposition parties to criticise without sounding ‘Corbynite’. The accusation from the opposition parties that the government has crashed the economy rings hollow when you recall that the real cause of the inflation we are suffering was the vast money printing needed to fund the response to covid, and in particular supporting people and businesses during periods of lockdown and restricted trading.

The opposition parties criticised these policies as being too little, too late. They are therefore all implicated in the unwanted knock-on effect – high inflation. The whole political class misunderstands the causes of inflation, which is central bank mismanagement of monetary demand, not external price shocks which, in the absence of excessive money creation, would only affect relative prices, not the average level of prices. The real cause of the invoice we’ve all been handed are the disastrous lockdown policies we, and many other countries, initiated. Well, we are all paying that bill now.

It seems Lord Philip Smith was right on the money when he suggested in last week’s Propel Opinion that a realistic ‘ask’ for the hospitality sector would be a continuation of the business rates relief scheme. This from the government website: “The government is going further to support businesses and the high street by reducing the burden of business rates, providing £13.6bn of support for businesses over the next five years. This includes freezing the multipliers, increasing relief for retail, hospitality, and leisure to 75%, and reforming transitional relief on the revaluation by exchequer funding the scheme and abolishing downward caps. This builds on the government’s existing commitment to reform the business rates system by delivering more frequent revaluations, which will ensure rates better reflect current market values.”

There is precious little in the autumn statement that supports growth. However, the government’s assumption that inward migration will be 65-88% higher than previously expected across the period of the forecast should help ease labour shortages for our sector, and for other sectors too. I doubt it will please too many Conservative voters, or the right wing of the parliamentary party, including the current home secretary. But in the short-term, it will help to address the shrinking tax base and improve productivity. Further measures to bring older people back into the workplace are needed, and the chancellor is looking at the position of people who are long-term sick and what can be done to make them economically active.

I also welcome the decision to reduce the net public sector borrowing requirement to 3% of gross domestic product (GDP). This means an annual budget deficit of around £66bn and is consistent with the very modest ambition of reducing debt as a percentage of the structural deficit in the medium term, if we can assume a return to growth. If a Tory government wants to implement significant tax cuts in the future, it will have to be much more radical in pruning public spending and rooting out waste.

Overall, public spending equates to around 48% of the UK’s GDP. Reducing that to 35%, combined with an annual budget deficit of 3% of GDP to smooth out peaks and troughs while running a balanced budget over the trade cycle – together with allowing bank base rates to normalise at 5% and monetary growth also at 5% – would enable government to cut taxes on incomes. But before the gain, the pain.
Paul Chase is director of Chase Consultancy and a leading industry commentator on alcohol and health

Collaborations between branded food operators and retailers very much on the menu by Glynn Davis

There have been many unexpected repercussions of covid-19, but it’s difficult to know how we reached the point whereby the Primark store on London’s Oxford Street now contains a sausage roll swing located within a ‘Tasty by Greggs’ café. Amid the fast fashion goods, the in-store diner serves up the food company’s iconic rolls alongside pizza and a new hot version of the popular ultra-sweet Yum Yums.

This is the second such café, following the initial trial outlet in Birmingham earlier in the year, and comes alongside the Iaunch of a limited-edition range of Greggs clothing and clogs produced with the fashion retailer. Who would have seen that one coming? Such collaborative activity is increasingly blurring the lines between branded food operators and retailers and has taken off to a dramatic degree in recent months as both sectors come under pressure to sweat their brand values and physical assets.

Particularly active right now are the major supermarkets that have, rather ironically for food sellers, delivered a pretty poor level of foodservice over the years. Their in-store cafes have typically been rather depressing environments serving up a humdrum range of dishes requiring minimal culinary skills. They have hardly been great adverts for the stores’ retail offering.

Change is certainly afoot at Morrisons, including at my local branch that housed an old school café, which has recently been overhauled and expanded to become one of the retailer’s new Market Kitchen food courts. It now serves up a range of own-brand offerings including Bird & Baste for roasted chickens and Char & Smoke for flame-grilled meat and vegetarian dishes. Such has been the positive reaction to the upgraded offer that it is now being rolled out to further Morrisons stores and, more radically, a number of standalone Market Kitchens are being opened following the success of the first unit in Manchester.

Meanwhile, Sainsbury’s is ratcheting up its foodservice offer through the extensive roll-out – to potentially 250 stores over the next three years – of its joint-venture with Boparan Restaurant Group (BRG) to open ‘restaurant hubs’ that incorporate BRG-owned brands Caffe Carluccio’s, Gourmet Burger Kitchen, Ed’s Easy Diner and Slim Chickens. Reflective of the success of this multi-branded proposition is the recent license agreement with Deep Blue to bring in the Harry Ramsden’s fish & chip offer into future hubs.  

The introduction of recognised food brands into supermarkets is not particularly new as Tesco brought in Harris + Hoole, Giraffe and Euphorium Bakery into some of its stores. Although they were largely removed, this was more down to the fact the grocer had bought these businesses and, at a later date, came under financial pressure to divest non-core operations, and so these restaurant businesses got the chop. 

The asset-lite arrangements possible through joint-ventures look to be a much better route for retailers and could lead to further opportunities for food operators to tie-up with the major grocers. This might be a possibility at Marks & Spencer, where its food marketing director, Sharry Cramond, has recently been appointed director of hospitality, with the remit of overhauling its 330 in-store coffee shops. The retailer is not averse to joint ventures with foodservice brands as it earlier this year began supplying a range of its food products into Costa Coffee outlets.

This supply of products between retailers and food operators (in both directions) is certainly another potential rich seam of opportunity judging by recent activity from the likes of Itsu. The brand has been accelerating its activity in the grocery sector, with its sales in this category growing at an impressive 50% annually. The prediction is that this revenue stream will soon be generating £100m of sales annually as the company drives greater levels of new product development, which has seen the launch of new frozen products and the first moves by Itsu into chilled food-to-go.

Such juicy additional revenue streams have not been lost on the likes of Franco Manca, which has just launched an initial range of cook-at-home sourdough pizzas in 500 Tesco supermarkets, with the potential for this to be extended into further stores. Such a move is right out of the playbook of Pizza Express, which moved into grocery years ago in what was regarded as a suicidal move for the brand. It did not work out that way, and retail sales became a very valuable part of the business, while it was other moves that would ultimately deliver a near-death experience for the company.

In these straightened times for all consumer-facing businesses, it is likely that we will see more of this collaborative cross-sector activity, including in ways that might not seem immediately obvious. Sausage roll swings in fashion stores suggests nothing should be off the table.
Glynn Davis is a leading commentator on retail trends

A strategy to beat the cost-of-living crisis by Amber Steynings

How does the future of your bar, restaurant or hotel look right now? According to a recent survey, confidence is lower now than during covid. Closure fears hang over many businesses as we approach 2023. A surge in energy costs and other price rises are likey to be with us for some time, and there is a corresponding fall in the number of customers eating and drinking out of the home. 

In spite of these pressures, many venues will not only survive, but actually turn these pressures to their advantage. And so can you, but planning is everything. This is not at all daunting, it simply means having a strategy based on what will work for you. It can be a fun thing to do, as well as being necessary to ensure your survival. Use the criteria below to benchmark your current way of working.

Strategy for staffing
Low unemployment in the UK may be a positive, but not if you’re struggling to find managers, front of house or waiting staff. Think about the advantages of potential new staff beating a way to your door as your reputation grows! Fewer absences and staff who are fully motivated to go that extra mile – essential if you want to place your brand or product ahead of the competition. You can do this by:
• Setting out your values. They should include staff wellbeing and honesty, loyalty, openness and supporting and caring for one another. Reiterate constantly.
• Being ambitious. Ask staff to contribute ideas and changes. 
• Listening to your staff. Do they feel genuinely valued and cared for? 
• Training and recognition. Be open and serious about this. Industry approved workshops or e-learning are now available. Recognise the work they do, often late hours, dealing with awkward customers, smiling and being an ambassador for your business. Use praise freely! 
• Individual wellness and mental health. There is plenty of advice (and help) out there, much of which is freely available, but the initial responsibility lies with you. 
• Proper mentoring. Staff who are fully engaged in your working team from the outset will remain motivated and involved. Many will be ambitious, so help them.
• Finally, advertise your vacancies and tell them about these values and benefits. Use indirect methods too. Contact universities, for example, who can direct people keen to join hospitality. 

Customer Service
Delivering great service isn’t complicated, but it requires consistency and genuine empathy. Average service won’t cut it anymore. No doubt many of you think you are already good at this, but how do you know? Are you getting honest, independent feedback? 

Remember, there is no better advertisement for a restaurant, bar or hotel than a happy customer who feels valued as a person. There is no worse advertisement for a business than a bad experience. Ask the customer what they really think about you. Openness will enable you to make any tweaks in your service delivery and retain customer loyalty.

It’s all about social media
How good is your social media profile? Have you ever had honest, anonymous feedback? Without this, you cannot know what your customers really think. Does your online presence encourage upselling of products? Many businesses neglect this opportunity and lose income as a result.
• Create attractive content. Customers respond well to beautiful photography and video to get them engaged and feel inspired. It makes the customer want to be there!
• Grab new audiences. They are out there – they are the ones who have not been to see you yet, but who are still keen to go somewhere memorable and exciting. How do you target and reach them? It’s easier than you think, but you must have a plan.
• Go all out on the décor. Everyone loves those Instagram moments to share with friends and family, which also gives you great content!   • Create a seasonal or celebratory webpage. Target customers at different times to attract attention, such as Valentine’s Day. This means web traffic can be tracked and all your marketing activity performance measured.
• Give the gift. Make sure you have gift voucher options set up and create gift boxes for online e-commerce.

Aim to secure pre-booked sales
Many venues fail to prioritise advanced sales, relying too heavily on walk-ins. Offer incentives, especially for large bookings. Set out with a modest target for pre-bookings, and aim to raise this as you gain in confidence and experience.

Exploit the 6pm rush
Earlier dining for many means a healthier lifestyle, evenings freed up and less competition for tables. Make sure you take advantage, by:
• Targeting parents/grandparents with children (think sophisticated child menus, with highchairs and space a priority)
• Encouraging home workers with a relaxed atmosphere and casual dining options while they work on their iPhone or tablet.
• Adding family friendly photos and promotions to your social media – more than 60% of customers book online.

Other tips designed to help you retain your competitive edge
• Respond to enquiries quickly with warmth and friendship. Knowledge is so important here, if you are going to provide a consistent and friendly face of your business to an ever more discerning public.  If you fail to respond quickly, customers will go elsewhere.        
• Set up collaborations with your local community businesses and public sector. These will generate a lot of attention on social media. Customers love that you have arrangements with other brands they already adore, especially local ones. Offering incentives for staff will always prove attractive and give you the edge over your competition.
• Keep specific corporate customers in mind. Sometimes groups want to visit you, especially for more unusual sporting and recreational activities. Go for it!
• Plan your Q1 2020 promotion now! It may be busy, but plan for 2023 Q1 so this can be in the market throughout December and beyond. 

To succeed, you will need to develop your strategy against the points raised here. A plan to deliver it should be clear and concise, with everyone invoved in your operation on board. Take regular soundings from staff and customers to monitor your progress. This may seem like hard work, but once you start, it becomes second nature and everyone will come to believe in your vision and want to be a part of it. 

The threat may be real – a triple whammy of rate rises, tax hikes and spending cuts – but the opportunity to capture your customers is still there. Many will do it, using their determination to change what they do in the light of what works. And so can you!
Amber Steynings in the founder and chief executive of strategic sales and business development experts Bums on Seats

Thoughts on COP 27 and what it means for hospitality by Bob Gordon

The hospitality sector is strong and resilient, but boy has it been a tough time. Successive waves of crisis – Brexit, covid, energy prices and cost of living – and as the country moves into recession, predicted to be one of the longest in modern times, we barely have time to get up from one wave before the next one comes crashing over us. 

It may not be front of mind for everyone, but the biggest wave has yet to break. Climate change isn’t just one wave, it is multiple tsunamis, and there are many signs that they’re already on their way. Gas prices were increasing before the Russian invasion of Ukraine. The price of soy in 2022 is more than double the long-term average, and the extreme temperatures this summer interrupted supply, from tomatoes in Spain to chicken in the UK. 

The sector has accelerated its sustainability efforts substantially over the last five years, and it is now commonplace for hospitality companies to have undertaken a carbon footprint (over 90% of Zero Carbon Forum members have completed a footprint). Operators are reducing energy consumption, managing waste more sustainably and engaging their teams and their customers. It’s a strong start, but let’s be clear, these are easy pickings – the hard work is yet to come. 

The sector must take greater responsibility, and our governments must take greater responsibility. The international process of COP must deliver, because currently it isn’t delivering enough! Let’s quickly recap on where we are. Global average temperatures are 1.2 degrees warmer than pre-industrial averages. The world’s scientists have told us that we need to limit warming to a maximum of 2 degrees, ideally 1.5 degrees. Anything beyond that will have disastrous consequences.

At 1.2 degrees of warming, we are already witnessing extreme weather events that are impacting the global population. In hospitality, we are contending with interrupted food supply and increasing volatility in the market. As with many business sectors, hospitality thrives when the operating environment is consistent and predictable. Without consistency, costs will continue to go through the roof, challenging the sectors’ existence.

The UN has stated that there is “no credible pathway” to avoid breaching 1.5 degrees of warming. It is clear to all that commitments made by nation states are insufficient. Even if countries step up and honour their pledges, we are expected to see an increase of more than 2.5 degrees. 

COP27 appears to follow the pattern of previous meetings. Individuals are calling out the scale of the challenge and the lack of progress. Some governments are making positive noises, but others are playing politics with the language. In reality, action is what’s required. Targets have been missed, commitments are lacking, and we’re just talking about the basics. At COP26, governments committed to revise their plans within a year, but 85% have failed to submit their homework. What is the action that will deliver change?

The biggest and quickest way to cut your carbon footprint is to transition away from fossil fuels. In hospitality, 80% of the ZCF’s members are on renewable electricity contracts, and many are transitioning away from gas, working towards being powered by 100% renewable energy. 

To really drive down emissions and accelerate change in hospitality, we have to reduce the impact of the food and drink we serve. Many businesses are introducing energy efficient equipment, training teams to reduce energy consumption and transitioning deliveries to electric vehicles. However, where we can have the biggest impact is by collaborating with our suppliers to improve our understanding and reduce the impact of our food, such as sourcing local and seasonable ingredients and communicating and educating our customers to reduce plate waste and increase and promote plant-based menu options.

The hospitality sector may be too distracted by the immediate crises to turn its attention to COP27. However, if there is one lesson it can teach us, it’s this. We must collaborate, and we must work together if we are to overcome this life-threatening challenge. The UN secretary-general, Antonio Guterres, said it well in his opening speech: “This is our only hope of meeting our climate goals. Humanity has a choice – co-operate or perish. It is either a climate solidarity pact or a collective suicide pact.”

Collaboration offers the biggest opportunity of all. If we improve alignment of our understanding and our action, we will have more impact. If we all talk to our supply chain with the same voice about the same issues at the same time, there will be more clarity to enable action to be taken. The future of our food supply chain, and therefore our sector, depends on it. 

Despite our challenges, by creating the Zero Carbon Forum, the sector has shown how industries can devise a pathway to cut carbon at pace and implement it.  In just over 12 months, we’ve launched our industry roadmap and identified the 150 initiatives businesses in the sector can take to reduce emissions. The sector shift to buying renewable power has saved more than 500,000 tonnes of carbon alone. Through our action groups, we will secure our food supply and our sector’s future. Collaborative action for the sector is our greatest asset.
Bob Gordon is director of the Zero Carbon Forum, an industry collaboration supporting the hospitality sector to reach net zero together at pace

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