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Morning Briefing for pub, restaurant and food wervice operators

Fri 22nd Dec 2023 - Friday Opinion
Subjects: Riding the waves – UK hospitality’s transformative four years, happiness through hospitality, what’s on the menu from COP28, a tale of two breakfasts
Authors: Mark Bentley, Glynn Davis, Stephen Nolan, Ann Elliott

Riding the waves – UK hospitality’s transformative four years by Mark Bentley

Over the past four years, the UK hospitality industry has weathered a storm of challenges, from the disruptive uncertainties of the pandemic to escalating inflation, a cost-of-living crisis, labour shortages and unexpected disruptions like train strikes. It’s been a rollercoaster ride with numerous highs and lows, and just when optimism surfaces, another curveball seems to be hurled into the mix.
Rather than delving into the intricacies of the challenges faced during this period, let’s take a moment to rewind to 2019 – a time that, in the grand scheme of things, feels not so distant. Reflecting on this period allows us to gauge the substantial changes that have occurred and ponder their implications as we look ahead to 2024.
One useful metric to gauge this evolution is the consumer “share of wallet” across different sectors of the hospitality industry. Leveraging HDI’s card spending data, which tracks the purchasing behaviour of 10.2 million people across the UK hospitality sector, insights from the 12 weeks ending 5 December paint a revealing picture. Delivery emerges as the frontrunner, claiming 12.5% of UK hospitality sales – a significant leap from its 6.5% share in 2019. Coffee and sandwich shops follow suit, securing 12.7% of hospitality sales with a 2.0% increase. This shift means an additional £8 out of every £100 spent on hospitality now flows into delivery and coffee and sandwich shops. Meanwhile, casual dining has seen the most substantial drop in spending, with its share down by 3.3%, with pubs and bars collectively attracting 4.8% less spending than they did in 2019.
On the brand front, delivery aggregators understandably emerge as key winners. However, in the realm of bricks and mortar, Greggs shines as the standout performer, with almost £2 out of every £100 spent in UK hospitality finding its way to its shops, up from £1.60 previously. Other notable winners include Loungers, Craft Union, and the broader category of “competitive socialising” venues. Conversely, late-night, city-centric venues have faced challenges, seeing a decline in their share of the wallet – a struggle exacerbated by shifting socialising patterns since the pandemic.
Analysing the success stories prompts the question: What lessons can we glean from these brands? The pace of opening new sites clearly plays a pivotal role in overall share growth, and with Greggs recently opening a record 17 shops in one week, it’s clearly not going to be slowing down anytime soon! However, I believe that the ability to scale businesses is intricately tied to delivering a relevant consumer proposition consistently, with the ability to really understand their customers and tailor their offers effectively to local markets being key differentiators for the most successful businesses. Whether it's Greggs’ commitment to quality and affordability, Loungers’ mastery of all-day hospitality, or Craft Union’s demonstration of sustained demand for traditional pubs at the heart of communities – the common denominator across these very different businesses is having a relevant consumer proposition executed with brilliance.
As we gaze into 2024, my sense is that the broad shape of the hospitality sector is going to remain relatively stable. While significant shifts in socialising and working patterns have occurred, they’ve largely stabilised, and we’re unlikely to witness further dramatic changes in how people engage with the hospitality sector in the coming years. Despite inevitable challenges, such as further inflationary pressures with the national living wage increase in April 2024, businesses can now adopt a more strategic approach and plan for the future.
A standout feature of the last few years, even with the cost-of-living challenges, is the fact that consumers are increasingly demanding experiences and are willing to pay more for quality – the rise of competitive socialising venues and the phenomenal growth of world lager offer some very clear examples of this in action. However, growing visit frequency and attracting new customers is likely to continue to be a significant challenge for hospitality businesses. Against this backdrop, being able to maximise spend per visit through optimising price, mix and menu architecture is more important than ever for operators, which is where investing in customer insight work to help operators better understand their customers, competitors and local markets will really pay dividends. Quite simply, operators cannot afford to leave value on the table when it comes to tailoring their offers. 
As we chart the future of UK hospitality, lessons from the past four years are clear: stability is on the horizon, but challenges persist. In 2024, success hinges on data-driven decision-making, understanding customers and strategically optimising offers. Embracing these insights will be key to navigating the evolving market and seizing opportunities in the year ahead.
Mark Bentley is the business development director of Hospitality Data Insights (HDI), provider of card spending insight and pricing data to the UK hospitality sector. He is a former category management controller at Molson Coors Beverage Company and a qualified beer sommelier. This article first appeared in Propel Premium, which is sent to Premium subscribers every Friday. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email to upgrade your subscription.

Happiness through hospitality by Glynn Davis

Apparently drinking alcohol is very unfashionable. Try telling that to the people increasingly packing out the recently opened Devonshire pub in London’s Soho between 11am and noon, before most pubs in the area now choose to open.

The reason for this is because renowned landlord Oisin Rogers, co-owner of The Devonshire, reckons the particular guests who frequent pubs at these most traditional of opening hours are the most important contributors to the success of any pub business.

Meeting him in his pub at 11:30am he tells me: “There is a certain guest at 11am. They are a mix of fabulous drinkers with the best stories and the craic. They will be entertaining and you should always look after them. They are proper pub people and should be treated as the most important [customers].”

The present unfashionability of drinking also did not deter the outpouring of affection for Shane MacGowan following his recent death. This not only celebrated his craftsmanship with a pen but there was an equal amount of heartwarming tales told by a wide cross section of people about his heavy drinking over many years that was arguably integral to his art.

The underlying move away from drinking alcohol also did not put off the people – including myself – who packed out the (albeit bijou) Coach & Horses pub in Soho for the recent run of the Jeffrey Bernard is Unwell play starring Robert Bathurst. We enjoyed the stories and anecdotes of a journalist whose output increasingly revolved around his drinking at alcoholic levels. 

Clearly there is a dark aspect to these stories but for the vast majority of people a trip to the pub for a “drink” is incredibly positive. Rogers suggests the underlying principle behind his new pub is simply to make people happy and that this will drive the profits that creates a sustainable business. His customers’ thirst for his much-lauded Guinness has been integral to the out-the-traps high footfall he enjoys from the 11am opening time onwards. 

Although the pub serves critics-approved food in the upstairs dining room, it is largely a wet-led pub on the ground floor and Rogers has been meticulous in the fixtures (many from eBay), the layout, high-end dispense equipment, and recruiting skilled staff to cosset the drinkers that now flock across the threshold. He has a love for drinking pubs and reckons part of the problem with many wet-led ventures right now is that they are surrounded by doom and gloom rather than happiness. 

“Everyone tells you the end is nigh. All the talk [in the industry] is about people drinking [cheap] alcohol from supermarkets, about needing increasing help from the government, VAT, and electricity going up. This does not make anyone happy. We’d never say any of that. You’ll not hear from us about VAT,” he says.

The end is certainly not nigh for a batch of 50 pubs that were highlighted in The Standard recently as London’s best pubs. They are predominantly wet-led and include The Devonshire and Coach & Horses alongside lesser known pubs such as The Palm, The Chesham Arms and The Ivy House. I’ve been to many of these pubs over the years and each one fills me with the happiness that the best operators manage to successfully imbue in their venues. 

It’s the same feeling I get from visiting the pubs of some of the better independent wet-led operators in the capital such as Grace Land, Bloomsbury Leisure Group and Barley Pop whose venues tend to have a smattering of food available but it’s more about the drinks and where customers’ faces are more likely to be smiling than being filled.

This happiness thing is also proving a key differentiator in the restaurant industry. It is fundamental to one of Europe’s most successful, fast growing food companies, Big Mamma Group. Two Frenchmen wanted to open Italian restaurants around Europe and were told they were mad but they ignored this advice because they knew they had the secret ingredient. Tigrane Seydoux, co-founder of Big Mamma Group, says: “Most people said ‘don’t do it’ but our vision was to put happiness in it. It was not about revolutionising Italian restaurants but just about putting some fun in them.”

It’s the same philosophy for Gareth Ward, owner of renowned Ynyshir restaurant in Wales who justifies his £380 per head set menu on being memorable for more than just the hefty cost. He has stated: “I want people to say they had some tasty food and we let their hair down. That they forgot about all the stuff that is going on outside the door and had a great night…I want people to remember Ynyshir and smile.”

A couple of pints of Guinness at opening time at The Devonshire will do the very same thing for me for a tad less money. It might not be fashionable but that potent combination of alcohol and happiness served in a proper pub can be life-affirming.
Glynn Davis is a leading commentator on retail trends

What’s on the menu from COP28 by Stephen Nolan

I’ve recently got back from a whirlwind few days at COP28, where Nutritics has been playing a key role in helping the organisers deliver climate-friendly menus.

As chief executive of a company that helps hospitality and foodservice operators run more sustainable and more profitable operations, it doesn’t get much bigger than being asked to help out at the most important global gathering on climate change. From expert consultation with 80-plus caterers at a workshop in October, to our Foodprint and Ten Kites technology being used by every food and beverage concession at the congress, and being invited to present our work to delegates, I’d like to think we left our mark out in Dubai!

Presenting at COP28 was huge for us, but we were preaching to the converted. Anybody attending the conference is already fully aware of the climate crisis and the urgent action required. To the 99% of businesses outside the COP bubble, it can all feel a long way removed from the realities of day-to-day operations. So, why should the hospitality sector care about COP28? Here are three key outtakes from the conference.

Food for thought
You’ve probably heard the stat before, but it bears repeating: one-quarter to one-third of global greenhouse gas emissions come from our food systems. So, it’s remarkable that “Food, Agriculture and Water Day”, on Sunday, 10 December, was the first time a COP conference had ever devoted a day to food.

This year was also the first time world leaders have committed to tackling the massive impact that food and agriculture has on climate change. In total, 134 countries – including the US, China, the EU and the UK – signed the Emirates Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action, requiring countries to include food and agriculture in their next round of emissions reduction plans – known as Nationally Determined Contributions (NDCs) – that represent their commitment to helping meet the goal of limiting global warming to 1.5°C above pre-industrial levels.

This declaration is not legally binding, so the next step will be to turn these high-level plans into workable solutions with the setting of targets and timelines. Time will tell if this also results in regulation, but operators can expect awareness of food’s impact on climate change among consumers, employees, and investors to steadily increase in the coming years – making it all the more important to get to work on that net zero strategy!

Meat me halfway
Meat and dairy farming are responsible for around 14% of all human-induced greenhouse gas emissions, partly due to deforestation to clear land for pasture, partly due to methane emissions from livestock, and partly due to fertilisers – which emit more carbon than global aviation and shipping combined.

A study earlier this year in Nature Food journal suggested that halving meat consumption globally could reduce food system emissions by nearly one-quarter if the calories were replaced by other food types. Clearly, this won’t happen overnight, but it is workable. At the Climate Conscious Catering workshop, much of our work helping COP28 caterers to deliver a 1.5°C-aligned menu focused on swaps that chefs could make to reformulate menus for lower environmental impact, better health, and lower cost.

Even the most progressive operators are unlikely to cut meat on their menu by 50% next year, but we do anticipate that more will adopt a “Plant-Forward” culinary approach in 2024, increasing the ratio of vegetables, pulses, and grains in our food. This still allows for meat, fish, and dairy, but recommends the use of higher-quality and sustainably sourced ingredients, having a positive effect on both reducing environmental impact and cost.
Waste not, want not
The UK government has already targeted a 50% reduction in food waste by 2030, and the Food and Agriculture Organisation of the United Nations (FAO) followed suit last week. This target is to tackle the facts that around 14% of all food produced is lost between harvest and retail, and 17% of total global food production is wasted (11% in households, 5% in foodservice and 2% in retail).

Among the raft of measures outlined by the FAO to achieve this reduction are public policies – which could mean the return of the buy one get one free ban, controversially scrapped by the UK government last year – and moves to change consumer behaviour regarding portion size. A recent WRAP study found that 48% of people waste food when eating out mainly because of excessively large portion sizes, and the link between portion size and value perceptions is one that the FAO is keen to address. 

Operators can expect a renewed focus on food waste in 2024, and with WRAP data suggesting that food waste costs UK restaurants a massive £682m per year, this can not only play a part on your sustainability journey, but also improve your bottom line.
Stephen Nolan is chief executive of foodservice technology company Nutritics

A tale of two breakfasts by Ann Elliott

Ikea is not everyone's ideal place for their 31st birthday breakfast, but that's where my daughter wanted to go last Friday to celebrate her big day. Mention Ikea food to anyone and they say “meatballs” automatically. That’s hardly surprising when eight plant balls are only £3. No one though, has ever said “breakfast” to me in the same sentence as Ikea.

Despite being a pretty regular customer of Ikea, online and in person, I hadn't really registered the fact it does in fact serve breakfast. But it does. A coffee and a croissant costs £1.

There is a system of course. Pick up an empty cup and pay for your coffee before filling up. But the moment you wander aimlessly around not knowing what to do, the team is there to help. The staff are friendly, smiling and don't look at you as if to say: “Where have you been for the last 15 years?” So, yes, the customer does the work but does anyone mind when they only pay £1?

It was clean, pleasant, busy and undeniably great value for money. Customers included young families, older couples, mums and daughters like us, and girlfriends meeting together. A complete mix. With food that cheap, we had absolutely no expectations so we could relax and enjoy the start of our day with the best bit, looking round the amazing room displays, still to come.

Breakfast the other day was a different matter completely. Three breakfasts in fact, all in Battersea Power Station – Dishoom big breakfast, Arcade small breakfast and Control Room B, a coffee.

I love Dishoom. This site felt slightly less ornate, simpler than others but no less inviting or enjoyable. The team was just outstanding for our table of five. My fresh seasonal fruits topped with creamy yoghurt infused with fresh vanilla pod was £8.20 and my bottomless chai £3.90. Everyone else had the bacon naan roll for £8.90 each – each one filling the plate completely. It’s the sort of dish that arrives and everyone takes a second or two to recognise the brilliance of what's on their plate.

We were treated to breakfast by Danny Nolan, my niece's husband who co-owns Interiors UK and had fitted out the restaurant (and Arcade), so I'm not sure how much the final bill was. Presumably though it came in quite a bit more expensive than Ikea. At face value, however, it felt like exceptional value for money all the same.

Then on to Arcade itself for a second breakfast. I have to say that this place completely blew my mind. I like Arcade at Centre Point but this felt like it was on a different scale completely. There’s 500-plus covers, goodness know how many brands/concepts, an efficient order/pay system, impactful bar, superb atmosphere, and friendly team. It’s absolutely brilliant and awe-inspiring.

I had heard about Control Room B from Inception Group co-founder Charlie Gilkes himself so had to go and find it. I was too full for more food but coffee was fine. Charlie had said that this site didn't need too much embellishment as all the original workings for the control room were still there. They are and it's just fantastic. This place is so much more than just a bar – it's an events space, an experiential space, a games space. Inception Group has really made the most of all that this historic room has to offer.

Battersea Power Station itself is also so much more than I had ever thought – a thrilling mix of restaurants, pop-ups, bars, quick service restaurants and retail. It’s the best place I have experienced for all-day shopping, eating and drinking. I had to be dragged away. It's just fantastic, with more space to come. Whoever had the vision to develop this whole complex deserves massive recognition and congratulations. I can't wait to return and not just for breakfast next time.
Ann Elliott (she/her) is a portfolio non-executive director and board advisor

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