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Morning Briefing for pub, restaurant and food wervice operators

Fri 11th Nov 2016 - Friday Opinion
Subjects: English fizz is rising to the top, foodservice needs to up its game, and ten emotional moments of truth
Authors: Glynn Davis, David Martin, Chris Edger and Tony Hughes

English fizz is rising to the top by Glynn Davis

On a bright early evening recently the sun was setting over the vineyards at the Chapel Down winery in Tenterden, Kent, forming a scene not too dissimilar to one I experienced last year when visiting the Champagne region of France.

Not only is the weather in some of the southerly parts of the UK becoming rather French-like in character, but some of the wines are also heading towards being indistinguishable from – and might we say in some instances superior to – their French counterparts. Certainly if we give credence to the blind tastings that have taken place in recent years.

I’d been threatening to visit Chapel Down for some years because I’ve been enjoying its wine since the early days of it appearing on wine lists. My first recollection was finding it on the menu at the Hotel du Vin in Bristol and, through a mix of curiosity, patriotism, and the fact it was cheaper than Champagne, there was no way I was going to select prosecco over a bit of home-produced fizz.

Whenever visiting a Hotel du Vin this was my preferred tipple but it was extremely rare to find it anywhere else. Much has changed in recent years and English wines – particularly sparkling – are becoming much more commonplace in restaurants and bars and it is no longer the cheap alternative to Champagne.

Highlighting its rise is Julia Stafford and her Wine Pantry shop that opened in mid-2011 in Borough Market to sell only English wines. At the time this made her something of an oddity but she wasn’t, of course, because we now know she was pretty smart and it just happened she was well ahead of the curve. Her business is now on the expansion trail, with a much larger unit in the famous market and a growing online sales operation, including supplying Amazon Fresh.

For English sparkling wine its greater availability has gone hand in hand with rising demand, as thirst for the drink has increased and ultimately helped push up prices. Average prices for UK sparkling white has risen 19% year-on-year (according to Brand View for the 52 weeks to September 16) to become the second most expensive region for sparkling whites at £11.62, behind New Zealand but edging ahead of France at £10.90.

This realisation by British drinkers that home-grown wine has gone well beyond the joke stage can be seen by the fact Nyetimber has just launched Tillington Single Vineyard, a 2010 vintage, which sets a new pricing benchmark at £75. This puts it right up against some of the top-name Champagne brands.

At Chapel Down, the days of flogging its fizz at £4.99 are now long gone and the average retail price of the 300,000 bottles it sells each year is a rather respectable £21. Helping the cause is the way the company has taken on board some of the Champagne producers’ savvy use of clever brand-building and marketing of their products as premium goods through impressive storytelling.

Judging by the difficulty of finding a spare space on a vineyard tour, this suggests the story is being told to an increasing number of people at Chapel Down. It is certainly done in style at its Tenterden winery, where there is a smart deli/wine shop, tasting area and The Swan restaurant and roof terrace bar.

Even though this original site has little more than 20 acres of vineyards (compared with the 200-plus Chapel Down sources its total grape requirements from) it is the spiritual home of the company and the perfect place to tell the story of the wines and the terroir of Chapel Down.

Such scenarios are being repeated around the south of England, where vineyards are on the up and increasingly their owners are relating their interesting stories to a growing band of consumers who have new-found appetites for indigenous British produce – in both liquid and solid forms.

An important stamp of credibility for English sparkling wine was the announcement last year that Champagne house Taittinger had purchased 69 hectares in Kent, which should be producing its first bottles within seven years. Pommery is also on the lookout for land in the UK.

While we are clearly set to see a lot more English sparkling wines on restaurant and bar lists it has now gone well beyond the point when we will see its price nearer to that of prosecco, as it is now pitched firmly up against quality Champagne.
Glynn Davis is a leading commentator on retail trends

Foodservice needs to up its game by David Martin

“We’ve become very good at selling cheap food and expensive drink” – wise words from my early days in the pub industry. I can’t claim them – they were the views of a forthright former colleague. He’d moved across town to become marketing director of Greenalls, which could have been dangerous if only it had brewed decent beer.

His words go back 30 years but his view still resonates on several levels:

• because it highlights a fundamental inconsistency in the retail proposition
• because subsequent trends in the drinks market have exacerbated the situation
• because of potential parallels in the future of the food market

To the first point, on the mismatched value proposition between out-of-home food and drink pricing, it can still be argued – on the evidence of consumer research data – that few, if any, out-of-home brands match JD Wetherspoon’s reputation for value across food and drink. Even Ryanair eventually realised dirt-cheap flights with punitive add-on fees might not be the best route to a positive brand reputation.

On the second point, the Retail Price Index (RPI) provides (almost) 30 years of high-level history for on and off-trade drinks pricing. The long-term widening gap in the price of drinking in and out of home is not news – but the scale of the movement might be. Price inflation in beer at home during that period has been 56%. For beer in the on-trade, it has been 246%. If drink was deemed comparatively expensive 30 years ago, what does this say about the present day?

Market data from CGA Strategy/The Nielsen Company shows that during the past 15 years, the price ratio for beer between the on-trade and off-trade has widened from about two to almost three. On supermarket deals, which will be influential in consumers’ perceptions, the gap gets bigger. At the time of writing Morrisons, for example, was selling promotional packs of Carling and Fosters for £1.58 and £1.59 per litre respectively, compared with CGA Strategy/The Nielsen Company’s reported average lager price in the off-trade of £2.08. This extends the on-trade/off-trade price ratio up to four times. In the London market, the gap will be wider still.

It’s no wonder the out-of-home beer market has steadily shifted in a premium direction in the meantime, as the old blue-collar customer base has dwindled, arguably priced out. The resulting evidence is clear in product category trends. But over and above that, to justify a price premium of three-to-four times, out-of-home venues had better provide a meaningful experience premium.

So what about food? The industry’s ability to sell what might be perceived as relatively inexpensive food undoubtedly helped the UK consumer to enthusiastically adopt the eating-out habit – the days when consumers in focus groups can afford to say “I can’t be bothered to cook”.

But long-term inflation comparisons between grocery and out-of-home food are also unhelpful. During that near 30-year perspective, RPI inflation for food has been 111%, but for “restaurant meals” – the RPI’s best proxy for eating out – prices have risen 223%.

For almost a decade from 2005, the gap in these two price indices moved relatively little. But since the second half of 2014, the gap has widened, in other words eating has been getting more competitive – with deflation in the price of in-home food of about 5% since the second quarter of 2014, while the price of restaurant meals has inflated by 4%.

This takes us to the third point, the future for pricing, where the National Living Wage is surely going to nudge the pricing gap further apart because of differences in the labour ratio. The Association of Licensed Multiple Retailers’ recent benchmarking report shows payroll costs account for about 28% of pub/bar sales on average. Contrast this with the food retail trade, where the equivalent ratio for the major supermarkets typically ranges between 7% and 11%, according to Grocery Insight industry analyst Steve Dresser.

The precedents from the drinks market suggest we will see differential socio-economic effects in the foodservice market, with contrasting consequences for geographies and market segments, and they are unlikely to favour those venues trading to poorer consumers.

A recent piece in the Washington Post on the risks of a US “restaurant recession” considered the industry’s disappointing recent demand and traffic data. It included the role of relative prices of in-home and out-of-home food – something also recently referenced by McDonald’s chief executive Steve Easterbrook in comments on recent trading. In the US, compared with a year ago, food-out-of-home inflation was up 2.8% in August, while food-at-home pricing was down 1.9% – it’s the same pattern, and a similar gap, as we see in the UK.

It’s instructive to check out readers’ posts from that Washington Post piece, even if these kinds of forums often degenerate into shouting matches. So with apologies to the sensitivities of my market research profession, here is a small sample of plain-speaking examples:

• “with the minimum wage hike, they are all getting too expensive”
• “they ask a premium price for unfresh food”
• “when the quality of food is no longer there but the prices are stupidly high, of course people will stop eating out as often – and restaurants will suffer”
• “we are eating at home because the costs for everything and minimum wage went up. No more of our hard-earned money for poor service when you can live like a king at home for one-fifth of the cost”

We have been warned. Foodservice will need to up its game even further in future, not least because the growing band of restaurant delivery consumers – the modern-day “can’t be bothered to cook” – are mostly drinking at take-home prices with their motorbiked meals.

In the recent words of business author and blogger Seth Godin: “Average stuff for average people is getting ever more difficult to sell. If that’s all you’ve got, get something else.”
David Martin is managing director of market and customer insight resource Red Circle

Ten emotional moments of truth by Chris Edger and Tony Hughes

In Propel Quarterly (autumn 2016), we highlighted the personal qualities inspirational leaders in hospitality exhibited to tap into the emotions of their teams (Spiritual, Holistic, Optimistic and Proactive – SHOP). We argued that – to date – much of the writing on effective leadership in hospitality contexts had focused on quality human resource management and engagement, but largely failed to square the circle. Because, in the end, as Daniel Goleman (the high priest of emotional intelligence) observed: “Great leaders move us. They ignite our passion and inspire the best in us. When we try to explain why they are so effective, we speak of strategy, vision or powerful ideas. But the reality is much more primal. Great leadership works through the emotions.”

Science has discovered that emotional reflexes are far quicker than cognitive thinking patterns, moving us – due to primal survival and pleasure instincts – to react to our feelings more rapidly than rational thought! Leaders who are able to generate positive feelings (and neutralise negative feelings) among their teams stand a far better chance of securing outstanding hospitality behaviours. Dry logic rarely (or slowly) stimulates. Sensory appeal rapidly galvanises!

In our next book, eMOTION! – How Inspirational Leaders Mobilise Superperforming Teams, in addition to expanding on personal qualities, we attempt to extend the frontiers of thinking on service leadership practice. We highlight the “Ten Emotional Moments of Truth” inspirational leaders need to address at each stage of the employment cycle in order to generate optimal outcomes. In doing so we highlight how inspirational leaders “move people” into action through mobilising specific positive feelings. But what are these Emotional Moments of Truth? What positive feelings should they generate and which practices do inspirational leaders apply at each stage of the employment cycle to “shift” behaviours?

1. E’VOCATIVE EXPERIENCE’ – Design (generating love) – the start point for inspirational leaders is designing a hospitality experience that sears itself on to the hearts of all participants and recipients, creating deep-seated levels of attraction and attachment. How? By standing for something good, creating a warm personality and providing distinctive and generous benefits to all that interact with it. Inspirational leaders understand that if customers love their product and service, staff will love it too!

2. ‘E’NTICE TALENT’ – Hire (generating desire) – inspirational leaders need great service personalities to deliver a great product but many will be embedded elsewhere – what they need to do is create a great hunger, appetite and thirst to join their “elite team”. How? By promising “worthwhile work”, taking an “uncorporate” approach to hiring (by putting their peoples’ stories up front) and by “winning over” opinion formers (parents, peers and careers advisors) as well as potential applicants. Declaring they are not hiring for “what you have done in the past but what you are capable of achieving in the future” is a message inspirational leaders deploy to create desire!

3. ‘E’NTHRAL HEARTS AND MINDS’ – Onboard (generating awe) – once on board, inspirational leaders exceed newbies’ pre-set expectations, engendering feelings of amazement and wonder. How? By offering a warm welcome on the first minute of the first day, providing a thorough immersion programme (including heart-warming stories, legends, symbols and icons) and “coupling” them with buddies who help and uplift them.

4. ‘E’QUIP SKILLS – Train (generating confidence) – at the same time newbies are furnished with the wherewithal and resources to do the job, adding courage, conviction and boldness to their endeavours. How? By clearly establishing key principles (“your job is to make customers happy!”), backed up by technical training for quality, behavioural training for emotional intelligence (including non-verbal communication and “mood” management) and cognitive training for problem-solving and planning.

5. ‘E’NERGISE SERVICE’ – Lead (generating enthusiasm) – “front-line” leaders make it their primary objective to win the “shift battle” through galvanising their teams – creating a sense of verve, zeal and fervour to service customer needs. How? By making sure units are “set up for success” pre-session, setting the dynamic tone by modelling desired behaviours “out on the floor”, adjusting their leadership styles according to individual requirements (task-led for “don’t knows” and delegation-led for “can do’s”), rapid-decision making “in the heat of battle” and “getting peoples’ backs” when unwarranted criticism arises.

6. ‘E’XCITE BEHAVIOURS’ – Recognise (generating joy) – inspirational leaders recognise that recognition has a profound on behaviours; animating and enlivening people – creating surprise and delight! How? By rewarding “service behaviours” through transparent (and timely) incentives, giving pay increments for the acquisition of extra skills and competencies, providing staff (and particularly managers) with some “skin in the game”, always celebrating success together and what we call “planned spontaneity”, that is instantly rewarding and recognising people when you have “caught them doing it right!”

7. ‘E’MPOWER ACTIONS’ – Autonomy (generating trust) – hospitality-based inspirational leaders know that given their teams’ requirement to service multiple occasions, needs and “touch points” they should “outsource” a degree of delegated authority and decision-making to the front line. This not only generates higher customer satisfaction but also makes staff believe in the reliability and truth of the organisation, making them feel more valued and in control! How? By providing clear guidance on “no go”, “check then go” and “go” parameters, allowing signature acts of self-expression, actively encouraging feedback on improvements (that are listened to and acted on quickly) and – in extreme circumstances – allowing people to apply “patch-ups” and “workarounds” to ensure business continuity.

8. ‘E’NRICH CAREERS’ – Develop (generating hope) – inspirational leaders will also make sure maximum opportunity is given to both “ambitious” and “pillar” staff to enrich their careers through development paths and programmes that meet their aspirations for progression or career sustainability. How? By providing clear progression paths, accredited and certificated professional development programmes (that “mean” something to the outside world), effective career transition mechanisms that reduce “transition shock” for those switching jobs (upwards or sideways) and targeted mentoring/on-the-job coaching that helps individuals to grow and/or progress.

9. ‘E’XCLAIM SUCCESSES’ – Communicate (generating pride) – at the same time, inspirational leaders ensure they have open, honest and vibrant communications that enhance feelings of belonging, achievement and satisfaction. How? By focusing content around key messages (with a fixation on progress and growth), cascaded through channels (such as face-to-face, digital “pulse” briefings and “closed” social media circuits) that are quick, visual and impactful.

10. ‘E’VALUATE PERFORMANCE’ – Review (generating gratitude) – finally, inspirational leaders must have performance review systems in place that enable people to know how they are performing and “where they stand”. These will (largely) promote feelings of relief and thankfulness among staff, most of whom want to be perceived as doing a good job. It is also an opportunity for inspirational leaders to have courageous conversations with people who are not “cutting it”, suggesting that great opportunities lie for them elsewhere! How? Through regular “formal” performance appraisals and coaching plus – most importantly – “informal” ad hoc discussions that reduce levels of fear and anxiety among “self-critical high performers” that they aren’t doing as well as they should!

In summary, emotions are the most significant motivator of human actions. Positive emotions at the workplace unleash discretionary effort, creativity and a desire to fulfil customer needs. As such, we have identified ten stages in the employment cycle where inspirational leaders either consciously or unconsciously deploy a number of practices that generate emotion – love, desire, awe, confidence, enthusiasm, joy, trust, hope, pride and gratitude.

We would offer two further insights. First, we accept that negative emotions can be beneficial; our ability to process negative feelings (that is, seeing reality with clarity rather than excessive optimism) has been proven to lead to higher levels of resilience and better mental health. Second, humans can cultivate and reposition their emotions from negative to positive and vice-versa. However, it is the “magic touch” of the hospitality inspirational leader that mobilises positive emotion – reframing perspectives, moving feelings, shifting behaviours to create the conditions for “super performance”.
Professor Chris Edger is a multiple author on retail leadership and Tony Hughes is a luminary of the European foodservice scene

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