In last Friday’s Propel ALMR’s Kate Nicholls wrote a thoughtful piece about the long road ahead for those opposed to minimum unit pricing (MUP) who think that European law will provide a quick fix. Kate is surely right to warn that the legality or otherwise of MUP remains far from clear cut.

MUP as currently proposed by both the Scottish and British governments exists nowhere in Europe. In recent years Greece, France, Italy, Austria and Ireland have all attempted to set a minimum price for tobacco products, using public health as a justification, and all were rejected by the European Court of Justice. But MUP for alcohol will nevertheless be judged on its own merits.

But it certainly isn’t the case that only a few product lines will be affected. Drinks’ producer Diageo predict the effect on prices of a 40 pence minimum unit price would be that 45 per cent of all alcohol sold in the off-trade in England and Wales will have its price increased overnight - 64 per cent of vodka, 55 per cent of whisky, 50 per cent of beer and 29 per cent of wine. And nobody will be fooled by the ‘sunset clause’ – once MUP is there it will be extremely difficult to repeal it. If alcohol consumption continues to fall it will be proclaimed a success, if it doesn’t the cry will go up: “Is this really the right moment to abolish price controls?”

Which brings me to the latest health statistics for Scotland (NHS Scotland ‘MESAS’); the highlights are:

• 78 per cent of Scots now drink within government recommended weekly guidelines

• Alcohol consumption is down 14 per cent since 2004 and down five per cent over the last two years

• Alcohol related deaths are down 25 per cent since 2003 and down ten per cent since last year

• Alcohol related hospital discharges down 12 per cent over the last three years and last year alone discharge rates fell across ALL age groups and both genders

• Alcohol liver disease is down four per cent over the last three years which is “an indication of an early downward trend”

• Prosecutions for the crime of drunkenness are down 26 per cent since 2001

• Prosecutions for drink driving are down 35 per cent since 2001

• Proportion of pupils drinking (13-15) has fallen by 31 per cent since 2002

 

The Scottish government’s own regulatory impact assessment estimates that MUP set at 50p would deliver a 5.7 per cent decrease in alcohol consumption over two years – as compared to the five per cent reduction that we have seen without its introduction! Here is where the test of ‘proportionality’ may be applied. At a time when all the indicators are moving in the right direction, how can the Scottish government argue that MUP is ‘necessary and proportionate’?

 

The European Commission has declared that in its view MUP is contrary to EU regulations and, helpfully, have sent David Cameron a nine-page legal opinion to back up this claim. No doubt Westminster will be able to rustle-up a posse of English (and Scottish) lawyers who will be able to argue precisely the opposite!

 

But the legal argument shouldn’t blind us to the fact that, in terms of its international implications, MUP is an old-fashioned trade dispute. Scotch whisky (and other spirits) isn’t only sold to the other 26 countries of the EU, but to over 200 countries around the world. The fact that there may be a big problem of alcohol-related health harms in East Kilbride means diddly-squat to a grape grower in Chile. All he sees is that the price-proposition of his cheap wine exports has been taken away from him and sales are suffering. He will be pressuring his government to retaliate with an import tariff against Scotch whisky.

 

The fact that the Scottish government, in the middle of a recession, is prepared to risk damaging Scotch whisky - its biggest export earner (£4 billion sales annually) - and at a time when all the relevant consumption and health indicators are moving in the right direction, is a testament to how unbalanced policy can become when ‘public health’ is elevated to the level of a societal value that trumps everything else. Meanwhile, for the Conservative-led Coalition Government alcohol-bashing and ‘standing up to Europe’ have both become dog-whistle issues and asserting their right to introduce MUP speaks to that core constituency of support.

 

So much for ‘necessary and proportionate’; perhaps only the judges can save us.

Earlier this week I was training a group of restaurant managers on neighbourhood marketing. They were really engaged and enthusiastic and could see what they could achieve by being really involved in their local community. They could appreciate the benefits of building their own databases, sending out regular emails, Tweeting, Facebooking, holding events and engaging with their local media.

When it came to local networking, however, they were significantly more hesitant - the thought of visiting local businesses or of being involved in local networking groups filled many of them with total horror. It’s easy to understand why - I have seen even the most confident of people baulk when entering a room full of people they don’t know.

So how can managers break out of the comfort zone of their own site’s four walls and speak to potential customers in the real world outside of their own environment? Here are the areas we discussed in the training session:

1. As in many things – this is very much to do with having the right mental attitude. It might be a bit simplistic to encourage you to think ‘What would I do (or say) if I wasn’t afraid’ but that will help you get into the right mood before you step into an alien environment. Yes, you will feel apprehensive and yes, you might feel worried about what people think of you but actually it’s the worry that fills you with fear not the reality. As Susan Orbach would say, ‘Feel the fear and do it anyway’. Acknowledge the fear but get on with it.

2. Try to stop worrying about what people will think about you. The key here is to stop thinking (and worrying) about yourself and simply to think about those you are talking to. Put yourself in their shoes. How are they feeling? How can you put them at ease? Ask them questions instead of thinking about what you are going to say and be genuinely interested in their responses. Surprisingly, strangers can think you are totally fascinating without you having to say anything - but only if you are really interested in what they have to say.

3. Approach any meeting, be it a formal networking event or a meeting with someone you haven’t met before, thinking, ‘How am I going to help those I talk to or are introduced to?’ For managers that might be as easy as an invite to your restaurant, the offer of a free glass of wine, a table booking on a busy night, help with a charity event or the mention of private room hire. As a manager you are in a very unique position – you have something to give and something people like. Free food always goes down a treat in any sort of office environment!

4. If you really do have to talk about yourself (perhaps in response to a question) keep your response brief – have a two/ three line ‘stump’ speech to hand – “I run The Dog and Duck just round the corner. We do the best French food in London but it’s our hospitality, which makes us different. Why don’t you come and try us on me? Do you eat out often?”

5. Follow up those you have met with an email and try to maintain contact. Just because someone doesn’t reply to your first or your tenth email, doesn’t mean they might not take you up on your offer at some point in the future. Don’t take it personally. People have incredibly busy lives.

Networking isn’t hard – it’s the coping with the fear around it that is.

Moscow is a fascinating place to live and do business. I am constantly reminded that one year of market evolution here is the equivalent of five years in other markets, and when you consider Russia’s recent history its easy to understand why.

The fall of communism only dates back to 1991, so effectively the market as we would recognise it is only about 20 years’ old here. Which means there is a lot of catching up to do. Think how much of a head start some of the brands in the US or UK have had since they were founded – McDonald’s 1954, Red Lobster 1968, Berni Inns 1955, Beefeater 1974. 

Yet when I walk around the centre of Moscow its hard to keep that perspective. They say that in Moscow ‘wealth is worn with pride’ and apparently now Moscow is home to more billionaires than any other metropolis in the world. After a difficult couple of years of economic downturn, the Russian economy is strengthening and Moscow is now frequently listed in the Top Five of the most expensive cities in the world in terms of living cost, alongside such notable company as Tokyo and Geneva.

A recent financial report of the Russian market, endorsed by Ernst and Young, highlights some of the positive economic indicators available to us:

• Russia is the largest market in Europe with 142 million people

• Russia is the best GDP growth market in Europe

• Consumers are amongst the most confident in the world and by far the happiest in Europe

• Russia has one of the best budget balances in the world

• Unemployment at 5.4 per cent is one of the lowest rates in Europe

So the opportunity for the eating out market here is fantastic. But to achieve the potential that this market has there is a lot of work to do. Remember the film ‘Groundhog Days’ where Bill Murray as a TV weatherman finds himself in a time loop. Sometimes it feels like that here. All of the lessons we learnt in the UK market over the last 20 years, largely learnt from our observation of the US market, we are learning again in the Russian market!

• Eating out as a way of life rather than an occasional treat is only recently becoming a lifestyle, led from the habits from the younger generations

• We did a focus group with some mid 20s females recently who were talking of their basic need for comfortable and stylish venues away from the male drinking culture – again a lesson that we learnt back in 1995 when All Bar One was launched

• We have gone back here to life before the smoking ban, where the best parts of the restaurant are used as smoking sections. There is strong political desire to ban smoking in public places and it appears likely that this will happen in 2013

• And whilst the demand for eating out is growing quickly, the core infrastructure to support the restaurant industry here is still very limited. I quickly learnt that the products and services that we have learnt to take for granted in our developed markets are much more basic here. From the sourcing of quality ingredients, to the recruitment of experienced restaurant professionals, the supply chain to the restaurant market here is undeveloped. We have to be much more self-reliant within our company.

So we have to be much more pioneering here. But the opportunity for the successful early settlers is fantastic. And fortunately for me, I am already blessed by three factors:

• Rosinter has developed over the years a fantastic portfolio of sites in some stunning locations. There is much work to do to bring the restaurant offers up to a standard that a sophisticated Western eating out market deserves, but at least we have the locations to develop in.

• We have some stunning people in both our restaurants and our support centre. Dedicated, attractive and intelligent people that you would yearn to attract in the UK. Again, not necessarily trained or experienced in the standard of offer we aspire to, but the will, passion and excitement to learn is there.

• And we have a strong opportunity from our brand portfolio to work with. Take Costa for example where we have the opportunity to roll this great brand out across the country. With the relative market saturation of coffee shops in the US and UK, this is a great example of the scope of opportunity ahead.

The potential is exciting, with plenty of challenges ahead. Never a dull day in Moscow!

We can’t get far into any working day without hearing talk of the headwinds facing the pub sector, whether it’s the wider economic pressures, excessive tax burdens, imposition of the late night levy and so on.

It’s not quite so easy to reel off the list of tailwinds but it is important that we recognise and leverage them, whilst we continue to tackle the headwinds. One area of opportunity which I am keen to develop across the Punch estate is letting rooms. Historically the provision of overnight accommodation was central to the role of hostelries across the UK, with many still referencing Inn or Hotel in their titles today.

People are travelling more than ever and the demand for accommodation has grown, but so have the expectations of customers. Pubs need to respond in both terms of the quality of their offer and also the effectiveness with which they market it.

It is a prize worth pursuing – even at a modest average room rate of say £50 per room per night and 65 per cent occupancy, that is £12k of high margin income per room per annum plus a halo effect on bar & kitchen trade, with some pubs following the hotels and selling breakfast as an optional extra.

Give me a comfortable room in a friendly pub any day over the functional, characterless offer from a large hotel chain. There are some pubs already setting the pace and I have stayed in some excellent examples on my weekly travels. On the whole, there remains a lot of potential to unlock. At Punch we have around 2,500 letting rooms across the core estate and for every £1 we can help our partners put on each room per night, that equates to circa £1m of additional annual income.

We are now actively pursuing this business development opportunity across our estate. Our approach may sound like common sense. I think it is:-

• Offer – be clear on your target market budget, mainstream or premium?

• Rooms – ensure room quality is fit for the target market. We have developed room specs for the three segments above.

• Consistency– are your rooms as good as the rest of your pub and vice versa? It’s no fun booking into a pub which looks great only to find the rooms are dated, in poor decorative order or have poor bathrooms.

• Marketing – this is could be a separate article on it’s own but as a priority, ensure you have all online routes to market covered and linked to a quality website. The distributors take a commission per cent but can materially increase bookings with circa 30 per cent of bookings coming online. There is a choice of provider. From our initial tests results have been good.

• Bookings management – use a dynamic bookings management system to make access easy for your online bookings, ensuring you are only ever advertising rooms which are available. They also allow you to adjust your prices quickly in response to availability / demand.

• Accreditation – for a relatively small fee, getting your rooms accredited can help ensure you are meeting the standards customers will expect and also drive up bookings. They claim up to 15 per cent extra occupancy – something we are testing.

Bringing letting rooms up to date for today’s market or adding rooms to a pub’s offer are obvious ways to broaden a pub’s income streams and improve overall profitability. Consequently it is an area I would encourage all operators to actively consider, as we are doing through the Punch investment programme.