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Fri 17th Oct 2014 - Friday Opinion |
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Subjects: Benchmarking the industry, better burger and touring London
Authors: Kate Nicholls, Martyn Cornell and Ann Elliott
What benchmarking the industry tells us by Kate Nicholls Last week the ALMR published the eighth edition of its annual Benchmarking Report, the most comprehensive and definitive sector report, which identifies market trends and benchmarks business performance and operating costs. This authoritative source of information is used by politicians, industry analysts and valuers as the most accurate source of information regarding the licensed hospitality sector. Drawing information from single, multi and national site operators, from pub, casual dining and late night markets, it gives a unique insight ,cut by trading style, size of business and ownership model.
I am always fascinated to see the story emerging from the raw data provided to us by operators about the health of our industry and the way in which it is changing. With eight years of data to mine, there are really insightful trends to examine: turnover shifts and offer mix, plotting market trends and cost lines against the recession timeline and the erosion of differentials between market segments over time as costs and margins squeeze.
But there are also the individual stand-out stories from each edition. Last year, this was clearly around the bottoming-out of the wet-led decline and the fact that community locals were turning the corner. This year, it is the turn of the high street to step into the limelight.
In fact, over the course of the eight Benchmarking Survey rounds, the high street has gone from the Cinderella of the sector – the source of high volume vertical drinking, symptom of decline and something to be embarrassed about – to become the star turn. What is really surprising is that it has also replaced the community local as the average pub in terms of our survey data, on costs, turnover mix and margins. It is not just that the high street has become politically fashionable, it is the new normcore. And it is outperforming the market in almost every success metric: like for likes, investment, jobs and growth.
Over the course of the Benchmarking Report’s seven-year history, we have observed the emergence and domination of the food-led pub. In 2007, food-led pubs accounted for one in four outlets in the managed universe, the third largest trading style. Food-led outlets now lead the way, accounting for a third of the total managed universe, with significant transfer into the food-led segment from other trading styles. According to the data from CGA, there are now 12 new openings for every single closure in the food-led market segment with openings being driven, in particular, by branded high street operators. They now account for over half the growth in licensed retail overall.
It has become a truism over our survey period that food-led businesses will outperform the market, and they are now joined by their high street counterparts, where informal and casual dining is as important as capturing the late-night market. These are genuinely hybrid outlets and they are playing a significant role in defining and evolving the UK’s eating and drinking-out market.
High street and casual dining venues saw almost double-digit growth in like-for-likes over the past year, more than twice as much as the sector as a whole. Last year, like-for-likes on the high street increased by 9.9% on average, the highest increase in any sector and this compares favourably to the survey average of 4.8%. Over the past five years that our survey has been recording detailed like-for-likes, food-led businesses have seen their turnover increase by 44%, high street businesses by 24% and community locals by just 14%, effectively standing still, as inflation ran at the same amount over the same period.
At the same time, this year high street businesses recorded above-average levels of investment, with capex of 3.4% of turnover – 17% more than the sector average.
In a survey which noted a general tightening of margins, again, high street food-led businesses bucked the trend. Gross margins on food sales stood at 64% with wet margins at 66.6%, both around three percentage points above the survey average and six percentage points higher than their wet-led community counterparts.
High street and food-led pubs are arguably the strongest aspect of a sector that has shown consolidation during tough economic times. The UK’s town centre and suburban retail and eating-out markets have undergone something of a renaissance over the past few years, with casual dining brands at the heart of this growth. This year’s ALMR Benchmarking Report shows what a robust offer we have, and what an exciting time this is for eating-out.
There is also a note of caution in this year’s report. The cost of doing business has continued to rise as national and local authorities continue to burden retailers with prohibitive legislative costs. Operating costs associated with legislation now stand at a record high of 5.5% of turnover. Of course, this seriously affects a business’s chances of succeeding and, in an increasingly competitive marketplace, the margin between success and failure for high street operators is thin.
This is where we come in. The ALMR’s Manifesto for jobs and growth in licensed hospitality sets out some of the principle ways in which national and local governments can encourage this diverse and lucrative part of our economy. We are lobbying with the government to ensure a fair and flexible property market, tackling the competitive disadvantages in the business rates regime, commercial lease terms and rents which hold back high street investment. We want to reduce the unnecessary costs of doing business and encourage licensing officers and planners to have a positive regard to economic growth in their decisions. Finally, we want to see responsible operators who invest in their people and their property incentivised through tax credits.
The sector is well placed for further growth and our Benchmarking Survey shows that high street casual dining and food-led outlets are leading the way. If we can continue to impress upon the government the need for flexibility and fairness, we look set to capitalise on this great work.
Kate Nicholls is chief executive of the Association of Licensed Multiple Retailers
My idea of a better burger by Martyn CornellA few years back I had a colleague whose then heavily pregnant wife suddenly announced one evening that she wanted – needed – absolutely had to have a hamburger, right now, right there. And not just one of the packet-of-12 stick-under-the-grill supermarket burgers every family has in its freezer, but the full greasy, chewy burger van variety, with double onions, extra fat, and tomato sauce staining the paper napkin. As it was 11 in the evening in a small country town, the only answer was for the husband to fling on an overcoat and drive his wife in the car down to the local railway station, where a burger van was parked permanently to cater for the late-night starving who rolled home on the last trains. My colleague parked, left his wife in the car, ordered the burger, waited for it to be cooked and loaded with onions and ketchup, and brought it back to the car. His pregnant love golloped it down, looked at him, and said, licking the grease and sauce off her fingers: "I'll have another one of those, please." So the poor chap had to go back to the bemused burger van man and say: "I'll have one more just like the one you gave me five minutes ago, please."
I had a burger moment myself at the weekend – not that I'm pregnant, that's just natural gut – and took the family off to Gourmet Burger King for a fix of protein and carbohydrate. The otherwise Nando's-loving teenage daughter likes GBK, so that's all right. Alas, my nearest GBK is, it turns out, closed for refurbishment, so it was round the corner to Bill's. There's nothing actually wrong with Bill's burgers. But just like my colleague's wife, I knew exactly what sort of burger wanted: the kind that almost falls apart when you attack it with a fork, slightly bloody in the middle, and with proper tomato sauce on the side. There's nothing wrong with the Heinz ketchup Bill's provides, either. But the burger was too, too solid flesh, needing a knife to tackle it rather than a fork, and the ketchup, because it was Heinz, wasn't the runny, slightly sloppy sauce I was looking forward to when I set off that evening. Frankly, I was looking for something messy, and Bill's, excellent though it is at catering for the families of the slightly above middle middle-classes, was too Laura Ashley, too controlled for my needs that night. Still, at least Bill's understands, as an increasing number of chains do, that the standard line-up of beers from the major brewers no longer cuts it: I was entirely happy with my craft-brewed Camden Brewery pale ale.
But that's the trouble with even apparently simple foods, like burgers. While we'll happily accept the restaurant's own take on les cuisses de grenouilles façon du chef, or les pétoncles sauteed à la Niçoise, because we don't know any better (or at least I don't – you may eat frogs' legs every day), I suspect we all have a view about exactly how we like a burger, like my colleague's wife, because we've all eaten so many of them. I have seen earnest discussion on how to achieve the perfect burger bun: experts apparently agree that you are best off with a mixture of brioche dough and sourdough, which will give you both great toastiness and good crust, and a soft, sweet middle to soak up the essential juices. Waitrose is currently selling the Hestonburger, where the champion of molecular gastronomy has apparently gone to the trouble of ensuring that every strand of ground beef in the burger is aligned in the same direction as every other strand.
Martyn Cornell is managing editor of Propel Info
Touring London by Ann ElliottWe have been working lately with Paul Chantler from FrogPubs, whom I met on the ALMR/Propel Chicago NRA trip earlier this year (I hear on the grapevine that only a handful of last year’s contingent haven’t rebooked, which is saying something).
Paul has seven brewpubs and restaurants in Paris and was really interested in seeing what is happening in London, so yesterday I took him on a bit of a tour. We did not have time to see very much, but enough to give him a hint about what is going on (a soupcon you might say) in the market place.
I would have taken him to see the new Loungers Kino lounge in Kettering if I had had the time, which is truly the most beautiful place I have seen for a long time. It is simply stunning and a joy to be in. It challenges all the rules (at least visually) of operating a bar in a small market town and I can understand why it is a huge success. Anyway, not enough time to go north and south, so we have left that to his next visit to the UK
I could have shown him the coffee bars I love in London – Workshop, Tap and Foxcroft and Ginger. Or great breakfast places, including Princi, the Delauney and Searcy’s in St Pancras. Or wonderful burger places like Dirty Burger, Handmade or MeatLiquor. But I had limited time so focused on showing him a great bar in the city, one of my favourite pubs, my latest find in brilliant restaurants and one of the leading chain restaurants.
First stop was the Drift at the Heron Tower. It is not necessarily my favourite Drake and Morgan bar but they have done a fantastic job with a split-level site. The welcome was friendly enough, they had my reservation and the menu is as comprehensive as ever. It did not wow, though, which was a shame. It has wowed me in the past, but every part of the customer experience just seemed a touch off. In fact, we left without finishing our lunch. I am sure it will be on top form next time I go and this was just a one-off experience
Next we were off to show him the Jugged Hare, just to demonstrate how pub design has evolved in recent years. It just feels warm, comfortable and welcoming – I love this pub. We wanted to stay but had to move on.
I wanted to show him Sticks ’n’ Sushi in Henrietta Street. Vic Searle introduced me to the brand a few weeks ago. I hate to say it but I am not a great fan of sushi (or more particularly sushi rolls) but the food here is beyond compare. The portions are the right size, the food tastes beautiful and the service was sublime. They specifically recruit people who have big smiles and small egos, and it shows, as our waitress was friendly, knowledgeable and helpful. Andreas, the operations director, was in there, co-incidentally, and spent time talking to us about the concept. I am a convert to sushi now, but guess it will be some time before they have a site in Milton Keynes or Oxford.
Lastly on to Bill’s, which Paul hadn’t seen before. After one-and-a-half lunches I wasn’t in the mood for eating so had one of their super-green smoothies. A large glass was less than £4.50 and almost a meal in itself. I know it’s not the Bill's of Lewes or Brighton (the original and arguably the best) but it is still great, and a classic in terms of design and operational efficiency. We had outstanding service all the way through from beginning (three hellos from the team) to the end (six goodbyes from the team) with a friendly, helpful waiter serving us in between
The visit just reinforced how wonderful London is for eating and dining. For my money we knock Paris into a cocked hat (apart from FrogPubs that is of course). Vive la difference.
Ann Elliott is chief executive of sector PR and marketing agency Elliotts
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