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Morning Briefing for pub, restaurant and food wervice operators

Fri 27th Jan 2023 - Friday Opinion
Subjects: Experiences could be a bigger profit-driver than food for pubs, have we reached peak vegan, dessert concepts fit well with changing eating patterns
Authors: Ann Elliott, Louise Palmer-Masterton, Glynn Davis

Experiences could be a bigger profit-driver than food for pubs by Ann Elliott

I was thinking this week, if I were to open a pub now, would I bother serving food? Finding chefs, either here or abroad, is now very difficult and ties up masses of head office resource finding, recruiting, inducting, training and retaining great talent – a cost which isn’t always considered when determining how much profit is made from food and food alone.

Team wages, before the impact of the rise in the minimum wage due to hit in the second quarter, are proving tricky to handle and anticipate. It’s challenging at the best of times to manage team hours, but predicting food sales and covers (on which hours will be based) with any accuracy is now a real headache. When working out hours and schedules, operators have to consider city versus neighbourhood trading patterns, strike versus non-strike days, lunch versus evening, start of week versus Friday/Saturday as well as the impact of working from home days, waves of illness, the cost-of-living crisis and the reduction in footfall when it’s freezing outside.

As an operator, I was always used to working with wage costs of around 30% to 32% – now its more like 35% plus – and that’s for a business with food and drink. Those percentages will be much higher if allocated to food alone. Back of house costs probably account for more than 60% of total wages in many businesses, which in turn has a disproportionate impact on the profits and losses.

Needless to say, utility cost increases hit hardest back of house where, of course, much of the equipment using gas and electricity sits. It is apocryphal that ovens are switched on when chefs arrive at whatever time of day and switched off when the kitchen closes. This habit is changing now, helped by technology and a change in attitude towards utility wastage and the impact on the environment, but it still does happen. Operators are very aware of what pieces of equipment earn their keep, and that focus on efficiency is constant. The question remains though – how much more profit might be made if a business didn’t have both the capital and revenue costs of having a kitchen and producing food?

There are other support costs of course associated with serving food – food buyers, food chain supply managers, food development roles, executive chefs, chef trainers, health and safety executives and menu designers, writers and printers. The time expended on looking at maximising food profit margins and menu development can be considerable – changing just two or three dishes on a menu takes an unbelievable amount of team effort. It’s an industry in itself, and that’s without even mentioning copy checking, which is a complete nightmare.

The increase in operator food costs last year probably exceeded 15% in most businesses, and it won’t be much less than this in 2023. These increases cannot all be absorbed in margin reduction. They can be mitigated by reducing portion size, minimising food returned on a plate and/or moving to less expensive products and suppliers. Of course, these increases can be passed on to the customer, but bill shock might be an outcome. An increase in spend per head will be a definite outcome, covers and visit frequency decline is likely to be another

I think if I were to open a pub now, then I would look to a Swingers model (if I had the space) or to the Mr Foggs model (and I do appreciate it’s a cocktail bar, not a pub). Here, the experience is all, the interiors are just superb, the attention to detail phenomenal and the service is exceptional. Yet it serves very little food. In fact, it’s not even mentioned on their website, although I think it serves nibbles and the like to accompany the drinks.

Not every pub has to serve food. Now, more than ever, a creative view is needed of what customers really want when they go to a pub. And if it really is food, how much are they really prepared to pay for it, and potentially, how much are operators prepared to lose by serving what they do now?
Ann Elliott (she/her) is a portfolio non-executive director and board advisor

Have we reached peak vegan by Louise Palmer-Masterton

An argument kicked off this week when Bloomberg published a story about Impossible Foods and Beyond Meat titled: “Fake Meat Was Supposed to Save the World. It Became Just Another Fad.” Impossible Foods, of course, fought back, claiming the article misrepresented facts and was a hate opinion piece against plant-based meat, and in particular, Impossible Foods and Beyond Meat, the two largest players in the USA.

One of my LinkedIn associates posted an image of the Bloomberg article juxtaposed alongside an article from the Daily Mail from December 2000 that claimed “the internet may just be a passing fad, as millions give up on it”. I believe the same was said of Jeff Bezos and Amazon. It’s almost like we spend our energy pretending something isn’t happening in the hope that will stop it happening!

This reminds me of the well-known “three stages of acceptance”, generally wrongly attributed to Mahatma Ghandi, but which nevertheless gives insight into human societal behaviour. When disruption comes along, or anything that upsets the status quo, there seems to be a succession of three stages. Firstly, whatever it is gets dismissed and ridiculed. Then if it doesn’t go away, it is attacked. Then, well, I’ll come on to that in a minute.

So, it would appear plant-based meat in particular has passed the being ridiculed and dismissed phase (this was in my own upbringing – vegans and vegetarians were viewed as odd and Sosmix was never going to catch on), and is well and truly into the being attacked phase.

Both Plant-Based News and Vegconomist published counter articles to the Bloomberg piece, with Vegconomist reporting the Bloomberg article was “rife with one-sided anecdotes and editorialised framing” and “scarce of any data to support its position”. The Vegconomist article also pointed out the Bloomberg article had completely ignored the explosion in plant-based meat outside of the US, both in terms of new brands entering the space and in terms of consumer take up.

Plant-Based News reported that in fact the global plant-based meat category has expanded to a $7bn global market in just ten years, and Impossible Foods had achieved record sales every year since it first launched, including in 2022. Impossible Foods also pointed out: “It’s not just vegans and vegetarians buying our products either, more than 90% of individuals purchasing Impossible Foods say they also eat meat — a clear indication our product is attracting meat eaters and flexitarians.”

This definitely concurs with our own experience at Stem & Glory. The majority of our customers are not vegan. Most are meat eaters and flexitarians enjoying vegan food. And they are growing in number. Plant-based catering is also on the rise, both in corporate and private settings.

It makes sense to me how businesses whose business model involves meat and dairy, whether as a producer or restauranteur, find this shift towards plant-based food generally a bit challenging. When change is unwelcome, humans do dismiss, then ridicule, and then attack.

Marco Pierre White seems to have the right idea. He has embraced the idea of plant-based meat with a collaboration with Redefine Meat and their very realistic 3D-printed vegan steaks. Pierre White has acknowledged publicly that the world needs to eat less meat, and “Redefine Meat’s products give you all the sustainability and health benefits of plant-based without the compromise on taste and texture”.

As plant-based meat becomes more and more realistic, more and more chefs will be working with it, and more and more diners will choose it. Pierre White gives good prominence to vegan dishes on his Steakhouse Bar & Grill menu – with four choices of starter, main and dessert, and two of the mains being made with plant-based meat. Giving good choices and well executed vegan dishes is definitely the way to nudge diners to choose plant-based more often.

The third stage in the three stages of resistance to disruption? Well firstly, they are ridiculed and dismissed. Secondly, they are attacked. Then finally, they win. So, no, we have not reached peak vegan. In reality, it is just starting to tip into the mainstream. We can expect exponential growth from here.
Louise Palmer-Masterton is founder of vegan restaurant brand Stem & Glory

Dessert concepts fit well with changing eating patterns by Glynn Davis

When Eurostar announced its annual January release of discounted tickets, I jumped online to bag a pair for a trip to Paris for lunch at one of my favourite restaurants, Le Train Bleu in the Gare De Lyon train station. Not only do I like train travel and restaurants, but this particular establishment has a Neapolitan rum baba dessert pretty much permanently camped out on its prix fix menu. 
 
Although I don’t have a sweet tooth, I am a tad partial to a baba when in Paris as they tend to serve it with a bottle of rum on the side so that diners can keep the rum-to-sponge quota to their personal taste. Back home in the UK, my preference is definitely for savoury courses, which might put me in the minority because we are experiencing something of an explosion in specialist dessert-focused venues on our high streets and in our shopping centres.
 
We’ve recently seen London become home to the world’s first donutelier with the opening of Donutelier Roladin, which its owners suggest is selling the “most innovative and luxurious donuts the world has ever seen”. Needless to say, the prices are at the premium end of the scale, just like they are at Italian luxury chocolate and gelato maker Venchi, which is rolling out stores in the capital. This is also the case at Anita Gelato, which opened its first UK outlet in London’s Covent Garden and is serving delights like its milk chocolate and salted pretzel flavoured confection.
 
Setting the premium benchmark in desserts is undoubtedly Cédric Grolet, who has been lauded for his pastry lab at The Berkeley hotel, which serves a predominantly dessert-focused tasting menu for a punchy £135. Although this high-end venue has garnered much media coverage for puddings, the real action has been in the mainstream market, where a plethora of brands are opening affordable venues across the UK.
 
Heavenly Desserts has grown its footprint to more than 40 outlets and is currently rolling out new units in Scotland; Lazy Sundae is a newcomer in the north and recently opened a second unit in Manchester; Cookies & Cones has signed a deal with Primark and is opening the concept within the clothing stores; and Floozie Cookies is on the march, with stores and kiosks located in malls and city centres. Meanwhile, at Borough and Old Spitalfield’s markets, Humble Crumble has people queuing around the block for its reinvention of the classic English dessert.
 
The big guns also continue to expand, with Kaspa’s recently announcing the prospect of up to 500 sites in the UK, which will include small stores and kiosks as well as takeaway/delivery-only sites. This flexibility of footprints is very much in the thinking of rival Creams, which currently operates 100 sites in the UK. Julian Reilly, property and franchise development director at Creams, says the older restaurants averaged 4,000 square feet, but this has dropped to 1,500 square feet, with kiosks and grab-and-go outlets now a major feature of the group. This has reduced the cost of fit-outs to half the level of that before covid-19.
 
The desserts category certainly enjoys a number of economically advantageous features, according to Reilly, who says the ability to trade on secondary high streets reduces costs, along with the prior use of properties not being important as dessert concepts do not need alcohol licenses, extractor fans or a change of use. 
 
Ingredient costs also sit well when compared with the requirements of traditional restaurants and the increasing cost of proteins and other savoury ingredients. Creams also benefits from vertical integration with its own gelato manufacturing capability, and Reilly reveals it is building a facility for making waffle mix and cookie dough to further help its margins.
 
These various dessert concepts are also enjoying a fertile landscape of demand as the pandemic led to a surge in demand for sweet treats, according to Foodhub, which found puddings overtook a number of fast-food takeaway favourites including pizza, curry and kebabs during the summer months. Desserts also fit well with the changing patterns of eating today. Whereas a dessert would have only been consumed after a savoury course as part of a balanced meal, the move to more flexible dining behaviour and snacking has very much changed this dynamic.

Those people old enough will no doubt remember a memorable Milky Way advert with the strapline ‘the snack you can eat between meals’. This thinking is no longer relevant, because for many younger people, the ‘snack’ itself is now the meal. And with puddings and sweet treats often playing the role of this new meal type, we can expect to see many more dessert specialists appearing up and down the country.
Glynn Davis is a leading commentator on retail trends

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