Subjects: Promises promises, BrewDog taking a bite out of the Apple, partner or parasite, creating amazing management performance
Authors: Katherine Doggrell, Glynn Davis, Victoria Searl, Alastair Scott
Promises promises by Katherine DoggrellWhen thinking about who to highlight to your children as a role model, someone who lives their values, there are plenty of options. Greta Thunberg seems pretty hard to distract from her cause. Mother Teresa had a lot going for her. Attendees at the Propel Multi-Club Conference were pretty convinced by Sir Alastair Cook, who has scored a lot of runs and is very tall.
It’s more unusual to start naming politicians, unless you’re William Hague at the age of 16 swooning at the sight of Margaret Thatcher at the Conservative Party Conference. For the rest of humanity, you can find politicians in the same rotten barrel as journalists and people who have to spell out the hilarious names they want written on coffee cups. The only guidance they can give is what to do if a taxi driver gives you a blank receipt book.
The event had as its backdrop how the current government is going to break an election promise and tax us all up the wazoo. Rachel Reeves has protected us from the shock of it all when it comes by telling us over and over that we’re skint and Brexit is bad. Again with the shocked faces.
So, cover us with surprise on the news that the promise of a revitalised high street might also be gone with our tax breaks. One might almost think that talking about how great pubs are was just a way to sound like you’re Down with The Man.
Luke Johnson, co-founder and partner of Risk Capital Partners, was not William Hague-ing it. He told attendees: “Obviously, we have incompetents in charge in the government who don’t understand the sector. Managing the workforce will be made ever harder and more costly and less efficient. The number of walking wounded has grown. Too many operators are surviving rather than making any return.”
Alex Reilley, chairman of Loungers, added: “We rode our luck really well and took risks at the right time. We founded Loungers on £30,000, but the cost of entry is now higher, and a lot of that is regulatory. You need to spend a lot more money. It’s hard to know why people would do that now.”
So, is it time to turn around the open/closed sign and nail the doors shut in hospitality? Attendees thought not, which was good news all round for everyone reading this. Harry Goss, partner at McWin, said: “I don’t think it’s that bad, but I think that the negativity does affect investing and valuations.
“If you look across Europe, hands down the UK is the most attractive restaurant market. If you look at margins in this part of the sector, they’re quite good, if you look at return on capital, it’s good. You have to pick winners, but if you can deliver stable, long-term growth, it’s an industry that has proved resilient. I get cold sweats about the Budget too, but there’s a lot going for this industry.”
David Roberts, partner at CMS was also chipper, commenting: “There is clearly a cycle. The sector is good at riding these things out; it’s so resilient. As we move to a four-day week, there’s going to be more time to enjoy this industry. We’re going to come back strongly.
“There’s a lot of friends and family and family office funding going on, a lot of transactions having foreign purchasers. The UK is a lot like the Premier League; we’re a proving ground. The UK is quite unique and wonderful in this respect.”
Yasha Estraikh, associate partner at Piper Private Equity, said “socialising is still a consumer driver”, and as such, he was prepared to get involved, at a number of different stages. He said: “We can get involved as early as three or four sites if they’re doing big numbers. We have a way to talking about growth: seven, 17, 70, which are growth inflection points. They’re not fully scientific. The big difference is the people – the people from zero to seven are deferent from 17 to 70.”
Goss agreed, commenting: “We’re very simplistic in what we do. We’re looking to scale proven concepts and help them grow their growth story in the life of the investment.”
Is Reeves right? Is it all about Brexit? Could Europe be our saviour? Johnson’s favoured solution was, “to bin the employment rights bill”, elaborating that, “most business models come down to labour”. He said: “At the end of the day ,the labour piece has to shift. The European scheme to bring in under 30-year-olds could potentially bring in more labour.”
Reilley said: “As a sector, we’re very good at operating brands at scale, which is not true of everywhere in Europe.” David Page, the former chairman of Franco Manca, owner of Fulham Shore and ex-chief executive of PizzaExpress, shared Johnson’s “incompetent” assessment, and said: “Europe is 20 years behind us in terms of trusted chains.”
So, is it all just a matter of the government’s perception of us? Is it as suspicious of us as we are of it? Michelle Hazlewood, partner at leading sector licensing firm John Gaunt, brought it home. She said: “The law looks at you as a place where problems occur rather than as a place where there are opportunities. We have an opportunity to unlock our value to the country.”
Value? Sounds like someone Reeves can look up to.
Katherine Doggrell is Propel’s editorial advisor and founder of NewDog PR. 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 kai.kirkman@propelinfo.com to upgrade your subscription.
BrewDog taking a bite out of the Apple by Glynn DavisBack in the early days of BrewDog, I interviewed its co-founders, James Watt and Martin Dickie, during which time every question was fielded with gusto by Watt. Dickie, meanwhile, sat in silence. When I enquired whether he ever said anything, his response was: “No. I just brew beer.”
Rewinding the clock back to the early days of Apple, I’m thinking a similar scenario could probably have been played out with the technology company’s two co-founders, Steve Jobs and Steve Wozniak. I’m sure Jobs, the marketing guru, would have been the motor-mouth, while the quiet, studious Wozniak would have responded to my question with: “No. I just build circuit boards.”
I reckon there are other parallels between these two companies. Please bear with me on this. They were also both founded as scrappy businesses looking to disrupt markets. Apple had the large monolithic computer makers like IBM in its sites while BrewDog had a visceral dislike for the large global mega-brewers that it pitched itself up against in a David versus Goliath-like battle.
Both companies grew on the back of having some terrific marketing. There is no doubt that Jobs sits atop the pile of marketing greats as he sold a device that people had no idea why they would want or need one. Likewise, Watt did an incredible job in the early days at BrewDog (helped by its agency Manifest) with a catalogue of headline-grabbing stunts.
Some highlights: it launched the world’s strongest beer in a limited run of only 12 bottles, encased in dead stoats, squirrels and a hare; it drove a tank down the high street to promote the opening of its first London pub; Watt rode bare-chested on horseback mimicking Vladimir Putin to promote a beer protesting at Russia’s anti-gay laws named “Hello My Name is Vladimir”; and it threw dozens of “Fat Cat” stuffed toys from a helicopter while flying over the City of London during an Equity for Punks fundraising.
But amid all the marketing wheezes, both companies had quality products behind the bluster. Wozniak was an engineering genius who developed pioneering circuit boards (with limited materials and no budget), and when the first Apple PC hit the market, it looked like something from another planet had landed.
Similarly, Dickie was no slouch in his chosen field, having co-created Jaipur IPA when at Thornbridge Brewery in the very first days, and that is still its top-selling beer after almost 20 years. There is no doubt he created some quality beers at BrewDog, including the flagship Punk IPA that set it apart from the competition and attracted mainstream drinkers into the craft category.
Along the way, both companies brought in experienced “adults” to help them run their respective businesses. At BrewDog, they’ve had a variety of senior executives in the door, including Gareth Bath in the early days, and more recently, Asda chief executive Allan Leighton, who joined as chairman. At Apple, John Sculley was tempted to join as chief executive while working at Pepsico, with Jobs’ immortal line: “Do you want to sell sugared water for the rest of your life? Or do you want to come with me and change the world?” However, the relationship soured bitterly, and Jobs was forced out from the business in 1985.
While the departure of hard-charging and demanding Jobs was played out in the media, the quiet Wozniak left around the same time without any fanfare whatsoever. It’s been a similar story at BrewDog, where Watt had been engulfed in accusations from employees of creating a toxic workplace culture, which was lapped up by the media before he departed in May 2024. Meanwhile, Dickie quietly departed the scene earlier this year.
The exit of the founders from both businesses coincided with their creations suffering tough trading in their respective markets. Such was the cratering of Apple that it faced a near-existential crisis, and Jobs ultimately made a triumphant return in an attempt to save the business from collapse. We all know how this played out, and Apple did ultimately change the world.
At BrewDog, it is still early days after Watt’s departure, but troubles at the (admittedly a seller of hoppy water rather world-changing technology) business are obvious. It has initiated a programme of pub closures and suffered reduced sales in the on-trade. Losses have continued to mount, and there is also the issue of the increasing debt load on the company held by its long-standing shareholder, TSG, which is no doubt calling the shots behind the new chief executive James Taylor. If things get really desperate at BrewDog and it comes close to hitting the rocks, it wouldn’t be too improbable to see the Jobs-like return of Watt.
Glynn Davis is a leading commentator on retail trends
Partner or parasite by Victoria SearlHave you ever heard of the parasitic wasp? The creature injects its larvae into a living host, such as a caterpillar or spider. On the surface, everything looks normal, and the caterpillar continues functioning as normal. But inside, something else is happening. The larvae have started to feed on the caterpillar’s (non-vital at first) organs, keeping it alive while it grows and grows. Then, when the larvae have reached maturity, hunger takes over and it consumes the vital organs, taking every last drop of goodness from the caterpillar before shamelessly moving on to the next one.
It’s a process which is clinical, efficient and entirely justified – it’s just what parasitic wasps do, after all. In entirely unrelated news, I run a WhatsApp community called Customer First, through which I’ve had countless conversations around why, for such a customer facing sector, we’re not so great at the customer thing – particularly in the way we market to them. It’s in my nature to spot patterns, and the explanation that surfaces the most, is our old friend, private equity.
Picture a burger brand for example, full of cool touchpoints and an early adopting fanbase. Either the founder or market (or both) decide that turbocharged growth is the logical next step, and a deal is done. At first, all parties are vocal about how “nothing will change” or “how aligned everyone is”, and all appears to be well. But then an aggressive roll out gets underway, at a rate which far outpaces organic growth. Firstly, out of the natural location hotspots, and quickly into the tertiary ones.
The brand hits a major challenge. Because the early adopters have moved on to something cooler and less “chainy”, but the mass market has a wide repertoire of value brands at their disposal and requires incentivisation to be excited about paying £16 for a cheeseburger, when their nearest point of price reference might be a Five Guys at best. So prices come down, and the larvae is feeding now, but on the margin – and the edgy little touches that once made it an Instagrammer’s dream, are quietly pulled away.
Now these new locations, which were sometimes selected using a great deal of skill and market knowledge but more often were selected due to the delicious rent free period that accompanied them, have to trade beyond all the early marketing team attention. And, it’s fair to say, there’s disappointment. Every new site feels like a fresh sting to the P&L. So the database steps up to help, blasting out a self-serving monologue of untargeted, whole database communications, and everyone turns a blind eye to the customer experience and brand impact, because the volume of communications show encouraging spikes of revenue.
But this is not sustainable, there is only so much caterpillar. So, does the brand stop to reflect, realising that it needs to slow down and reconnect with its customers before real damage is done? Of course it doesn’t! Because even if the founder or key people (assuming they managed to hang on this long) knows this would be the right thing to do, the hunger for like-for-likes gets more acute by the day.
Now, the average customer lifetime is just 15 months, offering you a very short window to give and receive the most value, or do enough to stretch beyond that. And all this chaos has meant you’ve lost great swathes of your most valuable customers, and your database is being depleted by the day. It feels like you’re having to peddle much, much harder just to stay still – and that’s because you are. Your focus on indiscriminate business as usual communications is at the cost of carefully designed lifecycle communications – so any new database growth is dropping straight to the bottom of a very leaky bucket.
And so, the sites keep opening, the numbers get more disappointing, and the real chaos begins. Rebrands, restructures, “back to basics” initiatives, cost savings and operational projects are launching by the hour. And the customer base is confused, although they don’t care, because you’ve not done enough to secure them. Something else has opened up anyway, and they have a 50% voucher to spend.
Everyone is working round the clock, but ignoring the customer relationship management, flashing like a lighthouse in a storm. Despite the rich nourishing data sitting within it, no one wants to understand how it could drive the business – partly out of ignorance, partly out of arrogance, but mostly out of fear – that doing anything other than simply hammering it might negatively impact the ever increasing demands on revenue.
There’s really no way back. The private equity will exit, investment intact, but the host is now absolutely hollow. It doesn’t have to be this way. If private equity used the data it can tap into more wisely, it could grow strong like the larvae, without sacrificing the caterpillar in the process. How?
1. Your data identifies who your customers really are. Not anecdotal evidence or generic pen portraits like “savvy saver”, but a deep dive into your customers’ current value, the risk they represent and the opportunity waiting to be tapped.
2. Your data can tell you where to open (or, more importantly, where not to), and helps you predict how people will behave when you have, making for a much smarter roll-out strategy.
3. Your data tells you how to deliver the most effective marketing, which meets the recipient where they are in their lifecycle, and not just driving the frequency you want to see in the short term, but high margin value beyond the 15 months.
Brands – it’s time to choose investors who can commit to feeding the host as they grow their larvae, building more meaningful and commercially beneficial customer relationships in the process – or become yet another, hollow carcass.
Victoria Searl is founder and chief executive of DataHawks Customer Intelligence, using data to increase customer value for forward thinking hospitality and retail brands. This article first appeared in Propel Premium.
Creating amazing management performance by Alastair ScottSometimes, we pin business performance all on the manager. Of course, the manager is the leader of their business unit – they set the tone, hire the people and drive the business forward. They decide on all the activities of the business and make the difference. True? Not completely, in my view.
The problem with this argument is that if a manager works five days a week, they might only run five shifts. But in most businesses, there are 14 shifts across the week, so a manager could only be running a third of them. The other two-thirds are run by assistant managers and team leaders – people who are just as critical to the day-to-day running of the operation and in the service levels, the team engagement and the efficiency of the business.
The more administration-heavy a business is, the more the proportion of the business a manager sees reduces. The more the business uses fixed tasks rather than slack tasks, the more this reduces. So increasingly, the face of the business, and the shift leadership, is down to team leaders and assistants – the management team rather than the manager. These are the people who interact with guests, make decisions in real time and shape the experience on the ground.
Of course, the manager appoints these people and drives them to perform just as well when they’re not there. But therein lies the challenge. It’s one thing to lead when you’re present – it’s another to lead through others when you’re not.
I was in my own business on a Sunday when the manager was about to leave at the end of a busy day for him. His challenge, as he left, was to motivate and energise a tired team to keep up service levels through the Sunday evening, get all the slack tasks done, get the team out efficiently at the end of the night and leave the business set for success the next day. That’s a tall order, especially when energy is low and the finish line is in sight.
We all know how often this fails to happen. Sunday has traditionally been the graveyard shift of the industry. If we did trade visits, we should really do them on a Sunday night – that would tell us what our businesses are really like. It’s easy to look polished on a Friday night when everyone’s switched on. Sunday night is where the cracks show.
My point is that every shift leader is a vital part of the guest experience. We should think less about the manager and more about the management team – including every person in the business who leads a shift and is the leader in their business at that time.
In our sites, that’s about eight different people: several who open the business, several who close, and the key team of senior managers in the middle who run the bulk of the busy shifts. Each of them plays a distinct role in shaping the guest experience and the operational success of the business.
But to create great performance as a business, each of those people must care as much about the customer as the next manager. They must know how to do slack tasks while delivering to the guest. They must be really efficient and have great restaurant eyes. I think that’s a pretty hard task to do.
When did you last train your team to do this? When did you last observe the “walking and chewing gum” challenge of opening and serving or, even harder, closing and serving?
I’ve recently been frustrated with how our teams leave the business, and I’ve asked a manager to do the close with the team to make sure we do this really well. The underlying message being that we both agree it hasn’t been done as well as we’d hoped.
Some people are brilliant when they’re being managed, but less good when they’re trying to motivate themselves. I think too often. we let these people open and close. Of course, some are brilliant in those circumstances. But do we think about this as we decide who should open or close?
My thesis here is that we should talk less about manager performance and more about management performance – bringing up the weakest area of the business and making it better.
And maybe I need to go and see my own sites more on a Sunday evening, just as I’m winding down. Are you, as a previous boss of mine used to say, going to be comfortable or correct?
Alastair Scott is chief executive of S4labour and owner of Malvern Inns
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