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Morning Briefing for pub, restaurant and food wervice operators

Fri 1st Dec 2023 - Friday Opinion
Subjects: Rockets, feathers and the price of trust, trading times, maintaining habits, tangled trends 
Authors: David Read, Glynn Davis, Alastair Scott, Phil Mellows

Rockets, feathers and the price of trust by David Read

This week, a report by the Competition and Markets Authority (CMA), the UK’s competition watchdog, found that some branded food suppliers pushed up prices this year to retailers by more than their costs increased. The report is likely to reopen the row sparked in January when the then Tesco chairman, John Allan, claimed it was “entirely possible” that suppliers were taking advantage of the supply chain crisis to artificially raise prices.
 
On Monday evening, we hold our annual Foodservice Price Index (FPI) Briefing, where alongside an impressive cast of sector experts and leaders, we will be giving our usual download about the cost of food and drink. The CGA Prestige Foodservice Price Index measures the cost of food at the kitchen door, using more than ten million lines of transactional data every month. The most recent data is for October, where inflation was running at 16.7%. Comparable data for supermarket pricing shows 8.5%, a little over half the level of the year-on-year climb in hospitality.  
 
FPI peaked at 22.9% last December. When inflation was climbing (which started with a rise to 4% in January 2022) it took just 11 months to reach its peak. It’s approaching a year since then, and we are still well into double figure levels of inflation. This provides strong evidence for the widely held view that inflation always rises like a rocket and comes down like a feather. 
 
One of the things that gives me the most pride in our sector is that our culture is based strongly upon relationships. We choose to do business with people that we like and trust, and when this happens we learn to rely on them, even to the level where they feel like a part of our own team. The desire to have a business partner that will watch our backs is much stronger in hospitality than most other sectors, and in my opinion, this is something that we really should cherish. 
 
But we should also never forget that there are multiple other stakeholders who rest within your supply relationships that you rarely see, and a whole range of circumstances that your supplier rarely shares with you. Every business has shareholders, investments and investment plans, development projects, initiatives to drive margin and cash, return on investment evaluations, bankers, debtors and, critically, other clients and competitors. Most of these things go on day-by-day, behind the scenes, driving prioritisation, use of resources and management of margin. 
 
When inflation is stable, the level of flexibility the supplier has to margin up over time is relatively constrained. But in times of high inflation it is much easier, on the way up and the way down, for suppliers to grab a few points of margin by “surfing” ahead or behind rising and falling input costs. 
 
There are basically two buying methods to mitigate this. The first is to adopt a spot-buying strategy where you competitively bid everything really regularly. This can have its place, particularly if you are buying volatile commodity products upstream of your wholesaler. But it can be massively resource intensive, create volatility in operations and lead to sudden shortages of supply. The other is to seek benchmark data from a trusted third-party source. 

It has certainly been a feature of the past year that we meet with potential clients who have done really well managing the level of inflation. This leads them to consider that they are performing well, only to discover when we do market benchmarking that they still have a double-digit percentage opportunity because their starting position was weak.
 
A high proportion of operators we encounter are in long-term supply relationships, yet have never checked just how commercially competitive their actual pricing is within the overall market.
 
Inflation is falling and, barring unforeseen events, will continue to come down in the year ahead, but you need deflation for the cost of goods to actually fall. In the meantime, prices will go up more slowly, and from a higher base. For me, the lesson here is yes, continue to trust your suppliers. But like you do with your own team, check their work regularly. Trust is for grown-ups. 
 
If you would like to attend our event on Monday and hear more about the cost of food/drink, and a range of other sector issues, there are still a few spaces available. More details can be found here.
David Read is founder and chairman at Prestige Purchasing

Trading times by Glynn Davis

The Delaunay restaurant in London’s Aldwych was buzzing when my family pushed opened its solid doors to celebrate Martinstag on 11 November with a dinner of goose, dumplings and red cabbage. We were immediately hit with the welcoming vibrancy of the room and atmospheric (beauty-enhancing) lighting, helped by the traditional St Martin lanterns adorning the tables. 
 
If we’d have taken our time over dinner, we could have almost seamlessly gone straight on to breakfast, because this restaurant, along with sister sites The Wolseley in the West End and newcomer Wolseley City, which opened its doors for the first time last month, are unusual in their all-encompassing trading hours. They are pretty much open from very early breakfast right the way through to lunch, and on to afternoon tea and then dinner. They are based on the chameleon-like Viennese coffee houses that have traditionally traded all hours in Austria.
 
Being open all hours, trading all the various day parts, has pretty much been the holy grail for hospitality businesses, with everybody from Pret A Manger, Starbucks and Greggs over the years looking to broaden their hours beyond their recognised core trading periods. It’s the route through which to sweat those expensive real estate assets. But things are changing, and a new approach is being taken up by a growing number of operators. They are being much more selective about their opening times, which does not leave their employees sweating quite so much.
 
Trading times very much came under the microscope during covid-19, when even the likes of Le Gavroche decided to curtail lunch service as filling staff vacancies became a much bigger challenge, and there was an unwillingness by Michel Roux Jr to overwork the existing team. The cost-of-living crisis has exacerbated the situation, as managing the outgoings when trading levels are under pressure has become vitally important and a crucial aspect of survival for many businesses.
 
There is also the factor of the working week changing and reduced commuting activity in favour of working-from-home, which is resulting in more hospitality operators choosing to open later in the morning, and maybe bringing the shutters down earlier in the evening. According to UKHospitality, as many as 37% of its members are reducing their opening hours, and 22% have cut back on the days they open. 
 
This is reflective of the evolution of high streets in general as retailers are also cutting their opening hours, according to the Local Data Company, which found banks and supermarkets at the forefront of this having reduced their hours by the most, by an average of 8% between 2020 and 2023.
 
Lucy Stainton, commercial director at the LDC, says: “As the cost-of-living crisis hit, the reality for many businesses is that it’s more cost effective to trade for fewer hours, especially high energy businesses such as pubs.” It is now some years since it was pretty much a guarantee that pubs would be open from 11am. There was something reassuring about this, but in reality, today it’s a largely pointless and very expensive exercise. Many pubs, even in the suburbs of London, don’t open their doors until into the afternoon.
 
This is very much the case with the micro-pubs that have sprung up around the country over the last decade or so. The owners have often been the sole employee, so opening hours have tended to be focused purely on their peak periods. These compact pubs have also often been run as lifestyle businesses.
 
I can recall speaking with the original licensee of The Conqueror Alehouse in Kent, who set himself the modest target of earning twice what he would receive if he was on unemployment benefit (and to also keep things below the VAT level) when he opened his 25 square-metre pub in Ramsgate, with seating for a mere 15 people. At the time, he told me: “It has easily exceeded that, but you’ll never be a millionaire. However, it’s a very nice, pleasant life, as it is just like having your mates around for a beer.”
 
From the likes of the tiny Conqueror pub, with its maximum capacity of 23, to the vast Delaunay dining room, which can do 350 covers for dinner, there is an evaluation taking place over the opening hours required for optimum effectiveness. The days of rigid open-all-hours approaches are gone, and instead, businesses need to better tailor their trading times to new customer behaviors, underlying market economics, and the work-life balance of both owners and employees.
Glynn Davis is a leading commentator on retail trends

Maintaining habits by Alastair Scott

Two weeks ago, I wrote about changing behavioural habits in the industry. Operators have their sights set on growing productivity and engagement among their teams with an urgency that hasn’t necessarily been there historically. As well as this, we are all looking at performing operational tasks more effectively. We want to do things quicker and better. 
 
Of course, we have always strived for happy and busy teams in our businesses. But if we take the ongoing battle with retention and increasing labour costs, and add that to the promotion of the more balanced ways of working Generation Z are attracted to, many old school operators have had to rethink the behavioural habits they teach and maintain in their restaurants and bars – for managers as well as team members.
 
In an ideal world, we want to foster an environment where staff know and perform best practices, which in turn creates a more engaging and positive place to work. 
 
I also spoke about the difficulty of establishing behavioural change compared with process change, as the latter is made easier at the hands of technology. Your teams, however, cannot be programmed to maintain the best working practices that systems make easy to identify and implement. Often, we have the tools to make better decisions, but we are not in the habit of using them consistently and to their full advantage.
 
There is, however, a case to be made about using process change to enforce best practice habits. I have heard many managers say: “Let’s get labour cracked once and for all.” Sadly, it never seems to happen. There is a slow move back to people writing rotas to suit themselves rather than the business. There is a slow move back to the costs being just a bit off, then a bit more off, until we finally sum up the energy to re-embed the habit – again. 
 
So, the real question is, how do we reinforce positive habit change? The answer is, by turning it into a process. Take the habit of writing a shift planner as an example. It’s the most important document of the day; it records what everyone is doing, helps them to stay busy and focused, and drives team behaviour as well as customer service. But, as a discipline, it is scarcely ever trained and never really enforced. 
 
It seems to me that the only way for vital activities like this to not end up in the “too difficult” box is to turn them into a measured and automated process. Embedding processes is an ongoing effort. We need to be regularly monitoring the adoption of these new processes; we need to make sure they remain relevant and effective, and we need to recognise and reward people who adhere to them. 
 
Software makes all of these things possible. That’s the great advantage of it. Once you commit to excellence, it will become a part of your business. 
Alastair Scott is the chief executive of S4labour and owner of Malvern Inns

Tangled trends by Phil Mellows

Academic research generally doesn’t play well in the alcohol industry. Too often, of course, that’s because the research sets out as yet another attempt to pathologise drinking. And too often, that’s based crudely on the quantity consumed over a certain period. Typically, by a rat posing as a person.
 
As we all know – even scientists, when they look out from their labs – drink is drunk in many different ways, and in many different contexts for many different reasons. We also have an intuitive sense that some kinds of drinking are worse for you than others. Going down the pub for a beer with your mates has got to be healthier that sitting alone with a bottle, hasn’t it?
 
Since 2009, one bunch of academics has been trying to get to grips with the neglected complexities of drinking culture by studying a broad taxonomy of drinking “practices”, or “occasions”, as the industry prefers to call them.
 
It’s the same bunch that’s been working on the evidence to support minimum unit pricing (MUP) – SARG, which has just changed its name from Sheffield Alcohol Research Group to Sheffield Addictions Research Group to reflect a wider scope. Though in some ways that’s surely narrowing the scope, as it’s not exclusively concerned with addiction, but never mind.
 
While the MUP business has been attracting all the attention, professor John Holmes and his team have been examining the weekly drinking diaries of 213,470 adults in the UK, and in their words, “finding the patterns in their behaviour, analysing how practice-level changes link to trends in alcohol-related harm”.
 
In fact, they’ve been using the same Alcovision data that informs Kantar, the market research the trade relies on. If nothing else, it shows that alcohol researchers can’t really boycott the industry, as some would insist. The industry understands the market better than anyone because its profits depend on it.
 
The latest results from SARG’s work cover the period from 2009 to 2019, before the pandemic rudely chucked all the numbers in the air. They show medium term trends that may, or may not, be resuming, if KAM’s latest Pub Roadmap is correct that the market is finally stabilising. 
 
One trend is a shift away from midweek drinking towards the weekend. This is marked by both a decline in the daily “wine o’clock” phenomenon at home, and longer on-trade sessions on a Saturday that are more likely to take place in city centres. 
 
Walking through the middle of Nottingham only last Saturday, I noticed that by 4pm, the bars and casual dining places were rammed, so it must be true.
 
There’s clear empirical evidence too, from my travels, that more pubs and bars are making the commercial decision to stay closed early in the week, certainly since the pandemic. But it was happening before that, reinforcing the consumer trend by reducing the opportunities to visit pubs on Mondays and Tuesdays.
 
SARG also notes “a move away from the stereotypical pub crawl” before arriving at the club. “This may help to explain the concentration of the night-time economy into a smaller number of late-night venues,” it says.
 
Evening excursions are not as likely to involve a meal, yet people are drinking less on their “big night out”. Over the decade, revellers spending more than four hours on the town fell by 24 percentage points (pp) and those consuming 12 or more units were 19pp down.
 
The type of drinks people are consuming might also be playing their part in evolving drinking occasions. The shift to spirits, led by flavoured gins, is well established and, SARG suggests, “may have disrupted routinised connections between drinking, food and mealtimes because spirits accompany food less well than wine”.
 
It continues: “Such disruptions may then support conscious or unconscious reductions in weekday drinking.” It’s an interesting theory, but I’m not so sure. After all, there is such a thing as “gin o’clock”, and it seems more likely that people make a decision not to eat out, thereby opening an opportunity for spirits.
 
One thing that’s proving resilient is the urge for middle-aged blokes to go down the pub. They’re more inclined to do that on their own than they were in 2009 though, and when friends do get together, there are fewer of them, drinking less, hitting beer sales in particular.
 
Hospitality businesses will be aware of a lot of this and adapting their operations accordingly. But it’s hard to divine what it means for public health and SARG’s hopes that it can influence alcohol policy.


The trends just seem too tangled to be confident that pulling on a particular policy lever will achieve any desired result, and no levers have so far been suggested. I’m happy, though, that at least researchers are beginning to appreciate the muddled world in which we all live.
Phil Mellows is a freelance journalist

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