Things that happen on the margins, by definition, occur on the side, unless you’re really shocking with a ruler. Margins of error, winning margins, narrow margins, these are not mainstream. But, as we know from the Olympics, if you fail to touch the side of the swimming pool a fraction of a second ahead of your opponent, it’s the difference between a gold medal and spending the rest of the event complaining that the French didn’t give you enough red meat.

 

Here in hospitality, the margins have been moving into the centre of operators’ minds since the pandemic and are no longer just a matter of 3am thought, but the daylight hours too. This week’s Propel Multi-Club Conference underscored the impact they are having not only on sleep, but on valuations. 

 

Lizzie Ryan, partner at Imbiba, told attendees that the investor had changed its parameters when running the slide rule over businesses and that “where we have looked at businesses with a three-year payback, now we look at two-year.” She added: “Part of that is the size of the fund, and part of that is margin erosion.”

 

How to force these pesky margins to the back of your mind? For Andrew Fishwick, founder of Hestia: “One of the reasons the premium sector is appealing is because it’s easier to juggle the margins. We’re always in the business of renting seats, but there are more ways to engage with your customers. The very clever entrepreneurs might only have one food truck, but they’re already thinking about the cookbook.” 

 

Robin Rowland, partner at TriSpan, was cautious about those smaller operations, commenting: “If you’re a one-site business, this is going to be difficult for the next six months. One thing you can’t do is pass on price.”

 

Because in the foreground of this year’s event was the Budget; the first for this government, the first delivered by a woman, and the first to have been leaked even harder than Budgets from the preceding party, which was a very leaky outfit indeed. 

 

The news for the sector was higher minimum wage, and a “desperately disappointing” (John Webber, head of business rates at Colliers) response to the issue of business rate reform with no consultation, just a discussion document, which, he added “hardly put a sticking plaster over the gaping wound rather bringing in any fundamental reform”. 

 

The assembled were equally saddened, with Des Gunewardena, founder of D3 and co-founder D&D London, commenting with a rueful half-smile: “The news on national insurance and rates will probably cost us half our profits next year. It’s quite a dramatic Budget, and a challenging one for our sector. We might remain a one-restaurant start-up.”

 

Fishwick was more chipper, with: “I think we’ll go to the pub and rant about it and then get on with it.” By the time you read, this the getting on with it should be underway. The uncertainty that has been hampering deals, booking events and upgrading to extra bacon is now, if not completely behind us, then being processed. 

 

Craig Rachel, director of AlixPartners, said: “The biggest barrier to dealmaking at the moment has been uncertainty. You need to introduce some pragmatism to deal structures to make sure the risk is shared, either with an earn out or downside protection.”

 

Rowland was also solutions oriented, despite the fairy tale imagery, commenting: “I don’t want to kiss a lot of frogs. Trying to get deals done in this market is tricky because people want to protect their private wealth, but you need to put the pedal to the metal at some point.” 

 

He was echoed by David Campbell, chair of Rare Restaurants, who said: “Any sale requires a willing buyer and a willing seller, and it’s hard to match those two. Debt is also hard to find at the moment. The only way to unlock that logjam is for someone to say they’re going to sell for a lower price. Private equity has to release that money at some point, otherwise it can’t raise more money, so it will have to.”

 

So, while we wait for private equity to realise it is going to have to sell for less than it’d like – as ski season approaches – what about those tricky margins? The answer, the sector is rapidly concluding, is technology. 

 

The eating-out industry has so far been more resistant to technology than its hospitality cousin, hotels, where if you can’t order a burger from bed on your phone, then you can expect TripAdvisor to crash under the weight of your complaints.

 

But the margins are calling. Campbell said: “The capacity of people using artificial intelligence (AI) is doubling every six months. I would encourage everyone to embrace AI – there was an agricultural revolution, industrial revolution and the internet, and this is the fourth revolution. If Tesco is doing it, so should we.”

 

And Tesco was indeed doing it, with Adam Martin, managing director Tesco Hospitality, adding: “Operational technology is the key for us.” 

 

There will, of course, be someone who goes too far. Joe Heather, general manager for UK & Ireland at Deliverect, informed the crowd that you could use your device to order “a pizza and a vibrator” to your door. 

 

Whether it would still be hot is a matter for your delivery consultant. Whether you can deploy technology to ensure there’s profit left on top is a matter for your chief technology officer. 

Sitting at the bar in my local pub, the Great Northern Railway Tavern, earlier in the year, I noticed the regular guest lager produced by the brewery I co-owned, Bohem Brewery, had been replaced by a specially brewed lager for the pub by Gipsy Hill Brewery.

 

The deal had just been struck and the sales guy from Gipsy Hill happened to be in the bar celebrating securing a new regular line, having shoved out a competitor. I grudgingly congratulated him. This little cameo was indicative of the craft beer scene for some years. At times, I’ve sat at bars and seen a procession of brewery salespeople wander in flogging their wares to managers drowning in beer choices. 

 

It’s been so cutthroat that successes like that at the Great Northern have been insufficient to save Gipsy Hill from selling out to Sunrise Alliance Beverages Group. It has not been a celebratory exit for its founders but merely a move that helped it avoid falling into administration. The deal gave the brewery a valuation of £5m versus around £20m when it crowdfunded in 2022 as debts were mounting.

 

Its downfall follows that of another major London player, Wild Card Brewery, which ceased trading last month after racking up insurmountable debts. Again, it raised money through crowdfunding. These two operators are not alone in pulling in money from beer fans and accumulating debts as they seek to service pubs in an incredibly competitive market.  

 

My experience at Bohem Brewery, in which I was a founder shareholder when investing in early 2017, has highlighted how I reckon it is near-impossible for a start-up brewery to succeed if it does not have sufficient guaranteed channels to market – namely in the form of its own pubs and bars. Selling into the on-trade is incredibly tough and few small breweries manage to achieve sustainable profits. Even the very best brewers, such as The Kernel and Burning Sky, with exemplary products acknowledge the precariousness.

 

That’s not to say this was not recognised by the craft brewery industry (breweries operating pubs is hardly a revolutionary strategy) but many focused elsewhere. In the rush to drive down production costs, many breweries chose to expand their capacities, which meant they needed to sell even more beer beyond their own outlets and employ more salespeople to trip over each other in pubs up and down the country. Overcapacity has been rife, new brewing kits sitting idle and businesses haemorrhaging money.

 

The solution to these ills over the years has been crowdfunding, which has been the equivalent of life support for many breweries, which have invariably failed to deliver on the grandiose plans they promised their new shareholders. The money has ultimately been used as working capital, which has dwindled away as losses mount.

 

Many breweries would have been hopeful in the early days of ultimately selling out to a bigger player and retiring on the proceeds, but that dream died years ago. Only Beavertown Brewery and Camden Town have sold out to bigger players for significant premiums, but that was years back. The latter was almost a decade ago. 

 

The more likely and less appealing exit we have seen emerge recently is to sell to the roll-up players and private equity firms that have sniffed an opportunity as distressed assets abound in the sector. Among them are Cadman Capital Group, which has Conwy Brewery and Anglesey Ales in its portfolio, and Breal Group’s Keystone Brewing, which has snaffled up the likes of Black Sheep Brewery, Brew By Numbers, Brick Brewery and Purity Brewing. 

 

Gipsy Hill buyer Sunrise Alliance Beverages Group evolved out of St Peter’s Brewery in Suffolk and has also bought Portobello Brewing, Wild Beer Co and Curious Brewery. The latter two were purchased from Risk Capital Partners. The Luke Johnson-led firm had originally seen an opportunity to build a portfolio of beer brands, but it didn’t happen.

 

Beyond the fact these brewery brands and their assets are going cheap, I’m still puzzled that there is an appetite among investors to build portfolios of breweries and beer brands. There are no examples, to my knowledge, of where it has worked. It’s normally a recipe for closures. When Johnson and Risk Capital Partners tapped out, my concerns were further heightened.

 

My own involvement with Bohem Brewery has shown that independent breweries without a decent pub estate to sell their beer through will face ongoing pressures, and sadly, there will be more failures. It’s why I sold out at a painful 80% loss. Along with many other craft breweries, Bohem has produced some excellent beer, but as an investment, these businesses can leave a sour taste in the mouth.

As someone who has spent more than 20 years working across both the retail and hospitality sectors, seeing things from all sides of the retailer, supplier and agency divide, I’m fascinated by how often these worlds are perceived as separate and distinct. It can feel like they’re parallel universes, destined never to meet. Of course, there are some valid differences, but I’ve long believed there’s far more similarity than many realise, and each sector has plenty to learn from the other. This was echoed recently by Andrew Garton, chief executive of Individual Restaurants, who, reflecting on his own personal journey from retail to hospitality, recognised that there’s a lot of learnings from retail for hospitality “in terms of detail, financial controls, and what really makes a difference”.

When I moved into the hospitality sector eight years ago, I was struck by the stark difference in data availability. Retail has data in abundance – highly accurate EPOS reads, named account data for detailed performance insights, and consumer panels and loyalty data that offer an in-depth view of shopper behaviour. Paradoxically, retail’s abundance of data can sometimes lead to “analysis paralysis”, especially without the skills to interpret what really matters. Hospitality, by contrast, has typically relied on high-level market reads. Operators can assess their performance in broad terms against a general cohort, while suppliers often have only limited performance insights, pieced together from published company reports or trading statements. 

These differences are understandable, given retail operates within a more structured, product-focused framework where barcodes make tracking far simpler. Hospitality, by nature, is a people business, and factors like gut feel, intuition and creativity play a more prominent role. But it’s time to consider data as an essential complement to these strengths. Retail’s data-led decision-making culture could support hospitality leaders looking to make more informed choices in an increasingly competitive and cost-sensitive market.

In retail, data provides a reliable performance measure, allowing businesses to benchmark against competitors and track behavioural changes over time. In hospitality, this capability has been far less accessible, leaving operators, for example, to assess underperforming sites without clarity on localised market trends. At Hospitality Data Insights (HDI), we’ve pioneered card spending data in the UK hospitality sector, capturing the day-by-day, site-by-site spending of more than ten million people across in excess of 140,000 venues. This brings retail-level data depth into hospitality, helping operators and suppliers understand market dynamics from individual sites to broader market performance.

In both sectors, everyone is ultimately competing for the same customers, yet traditional divisions between retail and hospitality often miss this point. A customer might just as easily grab a supermarket meal deal as dine in a coffee shop, fast casual restaurant or pub. Brands are increasingly recognising this overlap, with KFC launching meal deals to compete directly with supermarkets, and M&S coffee shops providing competition for well-established coffee brands through formats that focus on shared shopper missions. Retailers are actively blurring these lines, bringing operational standards honed in retail into the hospitality space. Ikea’s recent opening of its first stand-alone restaurant is a notable recent example of this.

Another key area of overlap is in decision making around range, pricing and promotions. A client recently captured this well, saying that “a menu full of items people don’t want to eat is like a shelf full of items no one wants to buy”. As in retail, hospitality operators need to ensure that they have the right offer for each of their venues, supported by appropriate pricing and promotions. With the recent Budget announcements, the importance of getting these decisions right is arguably more important than ever, and it’s an area where data and insight can help. For suppliers, card spending data allows for a more customer-led approach to identifying the best distribution opportunities for their brands while making it easier to pinpoint the best sites for brand activation and sales efforts. HDI’s insights help remove the subjectivity and make these decisions based on actual customer behaviour, which is particularly valuable in today’s challenging market.

At HDI, we’re on a mission to bring a retail level of data and insight into the hospitality sector, helping businesses make decisions with the same clarity and confidence available to the retail world. Embracing a data-led approach is about more than just adopting new tools – it’s about unlocking the full potential of creativity, intuition and understanding to build a deeper connection with customers. By leveraging data, hospitality operators and suppliers can identify the best locations, optimise pricing, fine-tune their ranges and ultimately, create experiences that deliver value for experience. There’s no better time than now for the industry to harness this potential and take a major step forward.