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uarterly

Propel www.propelhospitality. www.propelhospitality.com com

ISSUE 20 • AUTUMN 2017


uarterly The essential information resource for pub, restaurant & foodservice operators

Ten priorities at JD Wetherspoon Tim Martin on the pub giant’s strategy and challenges

Inside: Rise of the micro-pub The relentless treadmill of change Mettle – leadership’s defining factor Population – it counts and it matters The importance of segmentation North Bar co-founder Christian Townsley talks Laurence Bowes of Hush Heath interviewed Nisha Katona talks about Mowgli expansion

www.propelhospitality.com

Propel

ISSUE 20 • AUTUMN 2017


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Contents

20

14

71

33

Contents 06

A kind of Hush

14

Leading Light

20

Top of the craft

27

Mettle – leadership’s defining factor

30

People development

33

Ten priorities at JD Wetherspoon

47

At war with the modern world

52

Population – it counts and it matters

57

The relentless treadmill of change

63

Be prepared to battle slowing growth

66

The importance of segmentation

71

Rise of the micro-pub

78

Head for the cloud

81

Pull versus push

84

Propel Multi Club

86

Bulldog bites back

Laurence Bowes of Hush Heath interviewed by John Porter

Nisha Katona talks about the expansion of Mowgli

Glynn Davis interviews North Bar co-founder Christian Townsley

by Chris Edger and Nollaig Heffernan

by Chris Muller and Lee Sheldon

Paul Charity talks to Tim Martin

by Paul Chase

by David Martin

by Ian Dunstall

by Cyril Lavenant

by Ann Elliott

John Porter talks to pioneers of the movement

by Gareth Powell

by Ann Elliott

in pictures

by Glynn Davis

Published by Propel Hospitality Unit 26, Graylands Estate Langhurstwood Road Horsham, West Sussex RH12 4QD

Director Jo Charity T: 01444 810304 E: jo.charity@propelinfo.com Commercial Director Sharon Dickinson T: 01444 810305 E: sharon.dickinson@propelinfo.com

Contributors Paul Chase, Glynn Davis, Ian Dunstall, Chris Edger, Ann Elliott, Nollaig Heffernan, Nisha Katona, Cyril Lavenant, David Martin, Chris Muller, John Porter, Gareth Powell, Lee Sheldon

Managing Director Paul Charity T: 07899 984814 E: paul.charity@propelinfo.com

Partnerships Director Jill Harrington T: 01444 810306 E: jill.harrington@propelinfo.com

Printing and Distribution Bishops Printers, Walton Road Farlington, Portsmouth PO6 1TR

Managing Editor Paul Bishop T: 01444 817690 E: paul.bishop@propelinfo.com

Events Co-ordinator Anne Steele T: 01444 817691 E: anne.steele@propelinfo.com

Deputy Editor Martin Cooper T: 01444 817689 E: martin.cooper@propelinfo.com

Design & Production Jonathan Taylor T: 01403 892685 E: jonathan.taylor@propelinfo.com

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uarterly ©Propel Hospitality Ltd. 2017

www.propelhospitality.com ¡ AUTUMN 2017 ¡ PROPEL QUARTERLY

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Feature Balfour-Lynn’s hospitality credentials are impeccable. In the 1990s he set up property and leisure group MWB, which included the Malmaison and Hotel du Vin boutique hotel chains as well as the Pub du Vin brand extension and London department store Liberty. In 2002, Balfour-Lynn planted vineyards on his Hush Heath estate at Staplehurst, near Tonbridge in Kent, initially as a hobby. The estate’s first wine, the premium Balfour Brut Rosé, went on to be served in British Airways’ first class cabins and on the Orient Express, and was part of the hospitality offering at the London Olympics in 2012. Today, Hush Heath has a core range of four sparkling and three still wines, as well as a premium cider brand, Jake’s Orchard. Before the liquidation of MWB in 2015 and Balfour-Lynn’s ostensible retirement, the Fox & Anchor Pub du Vin in London’s Smithfield Market was spotlighting the Hush Heath range within its drinks offer.

Cunning plan

Laurence Bowes, operations director of Hush Heath Estate Group

A kind of Hush B

eer remains – for now – the national drink of Britain. However, the domestic wine industry is throwing down the gauntlet. The United Kingdom Vineyards Association forecasts the number of hectares devoted to vines will have increased by 50% between 2015 and 2020, with the number of bottles produced doubling to more than ten million in the same period. This also creates new opportunities for operators. Fuller’s has replaced imported champagne with an English sparkling wine at the £30-a-bottle price point in its managed pubs, seeing an upturn in sales as a result. The brewery-owned pub model is well established, and when the history of the winery-owned pub comes to be written, Richard Balfour-Lynn and Hush Heath will be up there as pioneers.

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Hush Heath operations director Laurence Bowes talks to John Porter about the Kentbased company’s pioneering role as a wineryowned pub group and outlines its plans to grow the estate to a dozen sites

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Under the Hush Heath standalone umbrella – initially branded as the Cunning Plan Pub Company but now all trading as part of Hush Heath Estate Group – the business now consists of two London sites, The Bull And The Hide in Devonshire Road and St Bart’s Brewery in Smithfield, and two in Kent within striking distance of the estate, The Goudhurst Inn and The Tickled Trout. Laurence Bowes joined Hush Heath in early 2016 as operations director, with his CV including stints with Jamie Oliver’s restaurant arm in its early days, general manager for Mitchells & Butlers Premium Country Dining gastro-pubs, and with London pub operator Young’s, where he was operations manager for a group of food-led managed pubs. Bowes says: “The Fox & Anchor formed the platform from which the Hush Heath pubs were born, and many of our senior pub staff started there. Richard is an enthusiastic entrepreneur, and he was never going to sit still for too long just making wine. “I started with the company soon after it opened its fourth pub, probably because the firm didn’t have anyone in its arsenal who understood how to manage a group of hospitality businesses. I prefer having a big impact on small businesses. As an ops manager with Young’s I looked after 14 or so businesses around Surrey and the south east, so for me a role as operations director of four pubs is a step up in autonomy, even if it’s a step down in size. “The pubs tap into the popularity of the wine. It’s a selling point compared with our competitors that we’re a winery-owned pub group. In London, where there is so much choice, it’s a USP and in Kent the pubs and winery can play off each other’s strengths.” With plans for Hush Heath to add two pubs a year and grow to an estate of 12, the appeal of being part of a growing business is also clear. Bowes recognises the parallel with Young’s in terms of a business that produces drinks as ▲


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Feature well as selling them in its outlets. He says: “It’s for exactly the same reason. As well as selling wine for £10 to £12 a bottle in our shop, we’re selling it for £30 in our pubs so our mark-up is happening on two different levels, and Richard owns both those routes to market. In essence, it makes the whole thing more profitable for the winery so there are a lot parallels with a brewery-owned pub business.” The high operational and product standards that marked out Hotel du Vin and Pub du Vin from competitors have carried over to the Hush Heath business, which has three strands to it – food, drink and accommodation – with 17 boutique hotel rooms across three of its four sites. The hospitality side of Hush Heath turned over £5m in its last financial year, with each London site turning over about £1.5m and the remainder split between the two pubs in Kent.

Richard Balfour-Lynn

Sales mix In terms of sales mix, the split between food, drink and accommodation changes from venue to venue. St Bart’s, with no rooms, is the most drinks-led. Bowes says: “In general, the City is all about the after-work drink, socialising with customers and colleagues over a pint. Food is a smaller part of that but as you come down to the country the food part of our business is massive, so it flips the other way. “Again, in London we see trade escalate through the week, with Friday evening the zenith. At the weekend, punters at The Bull And The Hide flip from the usual white-collar workers to tourists looking for traditional fish and chips and a pint. St Bart’s is a successful wedding venue because it’s a beautiful building and, of course, St Bart’s Church is next door so it has a roaring wedding trade on Saturdays and we’re closed on Sundays. Nobody ventures around Smithfield on a Sunday but when Crossrail comes in next year and the Museum Of London moves, it will suddenly change. We need to be prepared.”

Demographics In Kent, the food trade is from local customers, with a strong presence for the grey pound and ladies-who-lunch demographics. There are also

“As well as selling wine for £10 to £12 a bottle in our shop, we’re selling it for £30 in our pubs so our mark-up is happening on two different levels, and Richard (Balfour-Lynn) owns both those routes to market”

Premium Balfour Brut Rosé at St Bart’s Brewery in Smithfield

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referrals from the winery supplemented by the accommodation income, which is driven by business travel through the week and tourists at weekends. In the country pubs, local customers and accommodation trade, including breakfast, account for about 50% of trade. “The other 50% is destination, coming for the views, the pub gardens and the menus,” Bowes adds. The drinks mix is spearheaded by Hush Heath wine and Jake’s Orchard cider with the pubs also serving keg beer Jake’s IPA, brewed for Hush Heath by Brighton’s Pin Up brewery. Bowes says: “Our brand values are important so it needs to be reflected in everything else we do, especially in our drinks range. People who trust our brand standards with the wine need to trust we also reflect that with the quality of products behind the bar. “All the wines have to be high quality and, in fact, tend to be slightly more expensive than our competitors’ because we won’t settle for anything that has been mass produced or made from concentrate. You won’t find Gordon’s or Smirnoff behind the bar because they are what we consider entry level, but you will find Ketel One and Grey Goose or Anno Gin, which is distilled locally in Marden. Even our cocktails are Kentish inspired, they might use our apple juice from the winery. “This year I’ve implemented a new beer policy for all our pubs – real ale must be from Kent breweries only. I don’t understand why, even in London, you would sell beer from up north in a London pub owned by a Kent winery?” The same approach extends to food. He says: “Our food policy states what we can put on a menu and how we go about it, and ▲


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Feature

“On the first Saturday we thought we’d take £200 but it ended up being £1,500… and they were 95% non-beer geeks just dropping by”

The Tickled Trout

provenance is one of those values. Provenance starts in Kent and gets wider depending on what you are buying. We get our day-boat fish from the Hastings fleet.”

Climate change With an eye to the booming English wine trade and the impact of climate change on the nation’s ability to grow more exotic produce, Bowes jokes: “It’s difficult to find a Kent lemon, for example, but give us another five years and I’m sure there’ll be lemons and oranges all over the Kent countryside!” Menus are individual, with Bowes working with the chef at each pub. In London, while The Bull And The Hide has an extensive menu built around food from London’s historic food markets, St Bart’s has recently switched from a full menu to an upmarket bar snack and barbecue offer. “People go to the pub for food far more in the country and may have a pint with their dinner, whereas in London they might have three pints and a sausage roll,” says Bowes. “At St Bart’s our customers were telling us the menu didn’t suit a busy bar environment. A barbecue menu suits that louder party vibe. It’s all about sharing and grazing and we’ve seen that benefit the business.”

“People go to the pub for food far more in the country and may have a pint with their dinner, whereas in London they might have three pints and a sausage roll”

keep that relationship open and they’ll actually send me a spreadsheet telling me what I can buy and how much I’ll need to sell it for to make the margin. “On food, we’re making 71% GP. It would be great to make 72% but prices have increased and I can’t pass those on to my customers because they’d go elsewhere. Food prices have effectively gone beyond what is, in essence, controllable. However, 71% GP makes the business viable and at Christmas, for example, when the parties are out and there is less discounting going in we can make a little more.” ▲

Margins The need to maintain gross profit (GP) in an inflationary food market means Bowles works closely with a range of local suppliers across the group’s menus. He says: “My suppliers know exactly what kind of margin I need to make and they know they won’t be able to sell us anything that doesn’t make that margin. I

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The Goudhurst Inn


Feature The Tickled Trout

The operation is labour-intensive both in the kitchen and front-of-house, with a training programme that includes industrystandard qualifications as well as a focus on what makes the business unique. Bowes says: “You’ll get your licence and cellar management training with us, up to Level 2 WSET. We need to make sure our people are the very best. As part of a detailed induction programme, every member of staff has to do the winery tour within the first month because it’s a vital part of what we do. “Probably 50% of our management workforce has been developed internally, from senior managers down to supervisors. I love developing from within and it’s also vitally important we attract new blood from outside, otherwise we’ll think we’re right all the time. We need people to come in and tell us the new ideas. We look for a good mix of internal promotions and external applicants.”

Business model

in London. But that doesn’t mean if the right business comes up in Kent we wouldn’t snap it up. We would, but there would also be three or four other people looking at every site. It’s about the right property at the right time.”

Point of difference

“We’re a business that wants to grow and invest. Our plan is ten to 12 pubs would be a nice number to get to in three years and then re-evaluate where we are”

As for those expansion plans, he says: “We’re a business that wants to grow and invest. Our plan is ten to 12 pubs would be a nice number to get to in three years, and then re-evaluate where we are. The profitability of the business model is built around a pub with eight to ten rooms, maybe a little fewer, with good-quality food and beverage. “London is a melting pot for all different types of hospitality business. There is money and there will always be money so sensibly it would be more intelligent for us to grow

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Bowes emphasises Hush Heath pubs has a key point of difference thanks to its relationship with the winery, and this is reflected by the range of events held across its portfolio. He says: “There is always competition from the latest pub, and there are people who seek them out. We have core customers and we want to expand that circle of influence. “You’ve got to be marketing all the time and, with social media so important, every day you have to have something new to talk about. Our bespoke events – such as beer launches, winetasting dinners and cider-versus-wine foodpairing evenings – are important. “We need to be innovative, creative and better than the competition. If you’ve got a choice of going to a bar that is launching an American IPA or one next door that isn’t, you’ll be drawn to the one creating more of an event. “A secondary fermented Normandystyle cider served in a champagne flute isn’t what you go to the pub for. That’s the kind of impulse purchase we have to sell in our business, because it’s a unique experience. I hope we can steer the on-trade market a little bit. Being owned by a winery means we can be innovators.”


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What really sets Melitta apart is the level of support we offer, which is never tied to pricing. Keeping standards high is essential, especially with the clamour for competition from the high street and non-traditional players like pubs getting ever more savvy to the profitability of speciality coffee. We never train and go, but continually monitor in the pursuit of excellence. Support such as our audit programme – a free of charge, quarterly review that helps us to identify any skills or knowledge gaps and tailor a training plan accordingly, is one of the innovative ways in which we can help customers keep the bar set high. Allied to this, our flexible approach means we can offer training on or offsite, at a time to suit staff, ensuring maximum impact. Put simply, Melitta can offer as much or as little support as is required. Our flexibility is our strength. Operators simply need to tell us how they like their coffee, and we can take it from there. Melitta has over 100 years’ experience in the coffee industry. In that time we’ve seen UK coffee elevate itself to new highs, and have fostered a true understanding of the market and what it takes to stand apart from the crowd. Search www.melitta-professional.co.uk/en/Coffee-250.html today to find out more and begin a journey into profitability with the coffee experts.

TO LEARN MORE, PLEASE CONTACT: LAURA SHERWOOD: coffee@melitta.co.uk PHONE: 01628 829888 Ext #212 www.propelhospitality.com ¡ AUTUMN 2017 ¡ PROPEL QUARTERLY

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Feature Nisha Katona, founder of Mowgli

Leading light Former barrister Nisha Katona tells Propel Multi-Club Conference delegates how she started her rapidly expanding Mowgli brand, why she still monitors all its social media, and what her mission entails as a ‘curry evangelist’

N

isha Katona founded Indian street food restaurant Mowgli in 2014, which has rapidly expanded to three sites. However, she started her career as a barrister with no connections to the hospitality industry before going on to become a food writer for The Daily Telegraph, The Sunday Times and The Independent, among others, as well as penning two cook books. So how did the restaurant journey begin? Katona says: “One of the reasons is because I am a woman, and there are so few of us in this industry. There are so few role models and I would have given my right arm for a female role model who said: ‘You can do it. You can build restaurants without screwing up your family life.’ “I’m not ashamed to say I built Mowgli on the strength of social media. When I was a barrister I had no friends who were restaurateurs. I didn’t know how to open a restaurant, I didn’t know what to call it. I started a restaurant Facebook page and said: ‘This is what I am thinking of doing, these are the dishes I want to serve, would you be interested?’ My following began from there.

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“I put all my savings and inheritance into a 70-cover site in Bold Street, Liverpool. It was terrifying but the ultimate test. I took a two-year break clause because I thought we would fail – but a miracle happened. After three weeks we had three-hour queues and they haven’t died down. After about a month we got our first offer of investment, which we turned down.” Mowgli’s menu is built around the idea of “chat”, small plates with big flavours that don’t leave lunchtime diners waddling back to the office. Katona says: “I am addicted to the food in Mowgli – these are my ancestral dishes. I live on them. I eat there twice a day and haven’t tired of them. There is a whole section on the Mowgli menu called The Hindu Kitchen, which is pretty much vegan, the majority of the menu is. That wasn’t contrived, it’s just how it worked out because I chose the dishes I love. “The Hindu Kitchen doesn’t feature onion or garlic and we’ve got queues of business people at lunchtimes who know they can eat in Mowgli and go back to the office and not smell. They haven’t got tainted palates. We have people who

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come in for lunch and come back for dinner because they don’t feel too full. “This lightness and healthiness has enabled Mowgli to conquer that area of the market. I know Dishoom (the Bombay-style cafe that has four sites in London) is doing very well and has got a phenomenal breakfast offer, which is so encouraging, but we opened in Liverpool and it’s a different food environment. Yet Liverpool got it – and really ran with it.”

Tiffin ‘roulette’ There are other menu items that make Mowgli stand out from the myriad number of Indian restaurants. Katona says: “We offer ‘tiffin roulette’, which no other restaurant does. Diners order an office worker’s tiffin, which is a meat dish in a tiffin can, or a school dinner tiffin (a vegetarian or vegan option) and they don’t know what’s in it. It’s our biggest seller and great for waste – we don’t have any. “The whole concept is based on what happens in India, when the chaps go off to the office in the morning and the chefs at home, that is the women, put his lunch in a tiffin tin. There is a billionpound ‘dabbawala’ industry that delivers ▲


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these tiffin tins via ox, scooter or taxi to the workplace, which also leads to a major moment in the working day, with the big reveal when the man opens it. He then knows whether it is a jam or a spam day. That is, whether his wife is cross or not! It’s the same for schoolchildren. It’s the charm Mowgli is about, and tiffin roulette has helped build our relationship with our clients. It has led to them trusting our chefs. Our busiest time is 6pm, when people come in tired from work. They don’t have to choose from a complicated menu, they go for an office worker’s tiffin or a vegan tiffin and they trust us.”

Social media gold Katona is very much the face of Mowgli and her activity on social media platforms has helped her drive the business. Her YouTube cooking channel has garnered an international following, leading to appearances on the BBC, ITV, Channel 4 and the Food Network. She says: “I am a food obsessive and that gives me an infinite amount of social media gold. I do all Mowgli’s social media. I don’t know at what stage of the business I am supposed to give that up, but I can’t imagine letting go of the reins. “What I get from social media is instant feedback. It is brutal and I am straight on it. It is my ear in the business and I can feel what is going on across all sites. Social media is at the heart of my job. Those are all my consumers. They are parting with their cash for me to cook my lentils, it’s an honourable relationship. I have got to hear what they have to say.

“I am a food obsessive and that gives me an infinite amount of social media gold. I do all Mowgli’s social media. I don’t know at what stage of the business I am supposed to give that up, but I can’t imagine letting go of the reins” “Facebook, Instagram and Twitter are very different but all of them are critical. Facebook followers tend to be women of my age, in a way they are living the journey with me so they are invested in the narrative – the peaks and the troughs – they want to know the story and are ferociously passionate about Mowgli. “Twitter on the other hand is about men who want a recipe in 140 characters. We have accumulated more than 70,000 followers over three forums, but they are not just followers, they interact and help guide the business for me. “Instagram is really important, but a tricky one. Mowgli’s food is naturally photogenic which, again, is just a coincidence. We don’t use any food colouring, while Indian spices are pretty. Instagram is important because it taps into the youth culture and, for Mowgli to go national and not die a death, I need to capture the imagination and passion of children, from toddlers to teenagers. Indian restaurants need to get rid of the ‘uncool’ tag. However, it’s so important to capture the broader demographic, for instance the grey pound. A lot of our clients are food intelligentsia, people who are worldwise, have travelled.” Moving on to her television appearances, Katona adds: “I’m doing a lot more media now. ▲

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Feature I did bunny chow on Sunday Brunch and by 3pm all our sites had sold out of it. TV is incredible when it comes to sales but is a double-edged sword because you become known for your food and then all the focus, wrath and judgment is on that last mouthful – and there is nowhere to hide. When you are known for your food, you can’t hide behind branding or the story behind the restaurant. All the charm is down to that last morsel. You are only as good as your last curry.”

Democratic decor Katona reveals her other artistic talents through her involvement in the decor at Mowgli’s three restaurants – in Bold Street and Water Street in Liverpool and the Corn Exchange in Manchester. She says: “When I took my first site I hired a ‘designer’ and sacked him after a week. He looked at me and thought: ‘She’s brown so she’ll want an ethnic fit-out, jewel colours.’ It was the absolute opposite of what I wanted. Because what I’m doing with the food is so different, I wanted a neutral environment so all expectations and preconceptions diners had in relation to Indian food would dissolve and we could concentrate on the food. “If there is anything in our fit-out that says you’re in an Indian restaurant, I’m getting it wrong. I want to get away from all those expectations – you’re not going to get a naan, poppadums, a bhuna, a dhansak or any of those words that mean nothing to me. I was skint when I built the first Mowgli so it was cheap to build and being skint meant we created a kind of canteen, which is exactly what I want. It’s democratic, a bit socialist. “My 15-year-old said to me the other day: ‘It is really amazing mum, the coolest lad in the school is having his 15th birthday in Mowgli.’ I nearly cried. When I asked why, my daughter replied: ‘Because it’s so un-Indian.’ One of the reasons cool teenagers choose Mowgli is we’ve made the menu easy to read and made it easier to order. Kids want to point, grunt and avoid eye contact – we need to help them out. On the menu we’ve got Mother Butter Chicken, just because it sounds

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“All the charm is down to that last morsel. You are only as good as your last curry”

a bit cheeky, and an Indian chip butty, words that are accessible. That’s helping youths overcome the fear of going to an Indian restaurant.” So what is the reasoning behind Mowgli’s monkey logo, which appears on all its branding? Katona says: “My only focus group in the beginning were my teenage daughters and their friends. They wanted an animal as a logo, specifically a monkey. They have an independent sass that’s really charming. We own the logo now and have had printed on T-shirts and bags that schoolchildren are using.”

Expansion plans Looking ahead to expansion of the brand, Katona says: “I have signed my fifth lease, in Birmingham, and the intention is to build more Mowglis and go national. Of course, we must look at consistency so that when you go into any Mowgli be it Bristol, Brighton or Bath, it’s going to be the same house chicken. The staff we have are way cooler than I could ever be and bring their own charm – we have a good HR team that knows how to pick talent. “I take people who don’t know how to cook curry but have a passion for flavour

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and food and train them in the Mowgli philosophy. We are not employing chefs for their ego or virtuosity with micro-herbs, these are chefs who are going to come in and do a 40-hour week, get a really good salary and a brilliant management trajectory. That’s what growth does to a business. It is a very nice place to be when you can motivate staff in that way. “That philosophy is ensuring consistency of dishes and also means we can be scaleable at a pace. It means we can go into a city and train any local chefs within 24 hours. We are very collaborative in the way they cook and everything is freshly made daily – and they take real pride. I want breed from within if I can. It will come to the point where we externally recruit but we do a really good job of moving staff from service to general manager within nine months to a year. “The big question is whether we go to London? Many people think it would be a mistake. If you go to London it depletes the very pot that’s going to let you go national. But can you call yourself national if you are not in the capital? It’s an interesting debate. The truth is, I want Mowgli to go national not just for commerce – if I wanted an easy life I would have stayed a barrister. But I’m a curry evangelist at heart and when you are Asian you leave a very light footprint in the nation. My girls won’t be left with much of my culture but what I can do is leave them the food of their ancestors. It’s something I want to share.” In July, Mowgli secured £3.45m in expansion funding from Foresight Group, an independent infrastructure, private equity and investment manager. Katona says: “There is nothing more exhilarating than watching a brand grow – to create hundreds of jobs and feel the joyous hemorrhaging of tax flowing out of your business is such an addictive feeling. We will step it up a gear in the next few years – if I don’t have a nervous breakdown!”


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Feature

Christian Townsley, co-founder of North Bar

Top of the craft

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erious beer drinkers will know the North Bar in Leeds, which pioneered what we would now describe as a craft beer bar and recently celebrated its 20th year of flying the flag for interesting, high-quality beers. So much has happened in the intervening years it is hard to believe that in the first few months of its launch in 1997, North Bar co-founders Christian Townsley and John Gyngell felt the need to sit in the front window pretending to be customers to avoid the place looking empty. One of them would then fly to the bar to serve when anyone ventured through the door.

Beer journey Equally surprising to comprehend now is the fact the bar was stocking the likes of John Smith’s, Kronenbourg, Guinness, Foster’s and Beamish Red. This was partly because Townsley and Gyngell had taken a loan from John Smith’s to set up the bar. Townsley says: “It was not meant to be an out-and-out beer bar. The aim was to create an independent venue, which was lacking in Leeds at the time, that had great service and made people feel welcome.” However, the journey into specialist beers began soon after with the introduction of Belgian classics Orval, Chimay and Duval. ▲

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Christian Townsley, co-founder of Yorkshire-based North Bar, talks to Glynn Davis about the pioneering company’s humble beginnings, its move into brewing, and increasing competition in the craft beer industry

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John Gyngell, co-founder of North Bar


B or n in th e 70s . Sti l l a n or i gi na l .

When we star ted Butcombe Brewing Co. in 1978, we didn’ t set out to be in fashion, but we still made a statement. By making per fectly balanced, great tasting beer we’ve stood the test of time. Today, unlike cer tain 70s fads, we’re still on trend.

B U TC O M B E .C O M


Feature pair and with well-trained eyes for a bargain, they took on the Cross Keys in 2005. The pub had plenty of history, being built in 1802 to serve local factory workers, but had been boarded up for 30 years and was being used as a space to store tyres. Townsley says: “We got a good deal with the landlord, who contributed to the fit-out.” Townsley and Gyngell took on the pub because it also fitted with their desire to operate a venue that offered food, including Sunday lunches. Creating outlets that suit their personal needs at the time has remained a theme regarding all additions to the North Bar portfolio.

Neighbourhood haunt The company has also maintained an appetite for taking on non-traditional properties, often former retail units. This was the case in 2007 when Townsley and Gyngell opened Further North in Chapel Allerton through a desire to create a “neighbourhood haunt”. Townsley tells Propel: “It was a tiny bar with capacity for only 30 people and run by a guy who had got bored with it. He ran it as a hobby but realised it was hard work and took up too much of his time. He approached us and we got it for a snip.” A flurry of openings in former retail units followed between 2011 and 2013, with a “dodgy takeaway” in Meanwood Leeds becoming Alfred, a pram shop in Otley opening as North Bar Social, and an estate agents in Oakwood transformed into Preston. Townsley says: “They are all small places with low rents operating as neighbourhood locals that have chimed with our lifestyles. They each have an individual identity with only hints they are part of a group. We want to do something different as our customers are not into chains.”

Brews from the Netherlands and the US were then added, followed by British beers. Townsley adds: “We got super excited by the overseas beers. It was a whole new world. We’d have on Timothy Taylor and Spitfire but our passion was not in that area.”

International flavour The range really took off when the pair met importer and distributor James Clay and Steve Holt, of Vertical Drinks, who supplied them with a lot of exclusives such as Sierra Nevada, Brooklyn Lager and Erdinger. Townsley says: “We were dabbling with a few bits and bobs beer-wise and then, with the 1998 World Cup, we decided to find a beer for every team so we had 30-plus international beers that had not necessarily been seen before.” However, the co-founders’ own passion for beer was not always reciprocated by the North Bar customer base, recalls Townsley, who says questions would be asked about the cloudiness of the likes of Erdinger and the odd-shaped glass it was served in. As well as serving unusual beers, the location of North Bar was also a challenge as it “felt like a million miles away” from the city centre. The roof also leaked when it rained but the lease was cheap, while the fitout cost a modest £40,000. The challenges did not detract the eager

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Family man

“With the 1998 World Cup, we decided to find a beer for every team so we had 30-plus international beers that had not necessarily been seen before”

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The company’s latest venue, which opened in Harrogate in February 2016 as North Bar, very much fits in with Townsley’s way of life now he has become a father of three young children. He says: “It opens at 8am serving coffee and pastries. It’s a case, again, of what do I want now? It’s not a raucous pub. It’s in a genteel location with a different clientele to the North Bar. While North Bar is open until 3am with people partying on, Harrogate is much more muted. I can’t remember the last time I was in a bar at 1am.” However, don’t let this “coffee and pastries” offer lead you to think the company has shifted from its beer-focused heritage. The fact is wet sales account for 70% of sales leading to the major strategic move to open a brewery in 2015. Townsley and Gyngell had considered such a move in 2004 but a potential site had fallen through and Townsley admits they had their hands full with bar openings, especially when adding the second unit. To ease the move into brewing they brought in a third partner, Steven Ballard, as they set up North Brewing Co. Townsley says: “We’d grown organically with bank loans here and there and used cash flow to grow. It was ▲


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Feature just John and me and we had no capacity – financially or logistically – to do the brewery without some help.” The move also extended into recruiting a brewer, Seb Brink, who had previously been selling his Golden Owl beers into North Bar pubs. He helped set up the brew kit at North Brewing and now heads the brewing activity. Although Townsley felt the 15-barrel brew kit would be “over-reaching”, full capacity was reached fairly rapidly, with 2,500HL produced in the past year. New vessels are being brought in that will ramp this up to 4,000HL for this next year, which will result in 75% of output going to other free trade pubs compared with the current 50%.

75% of North Brewing Co beer will go to other free trade pubs once capacity is ramped up, compared with current 50%

Capacity ramp-up The increase in capacity highlights a strong appetite for North Bar beers in the wider market and the fact its own bars offer only two lines for house-brewed beers, which include Prototype that is exclusive to the group’s bars. At North Bar this means only two from a long row of taps dispense home-produced beer. Townsley says: “The real beauty of having the brewery is we can sell beer through our own venues but they need to have competitive products on the bar.” Across the full range of beers stocked, Townsley aims to have consistent margins –

Best-selling beers (cost per pint) North Bar Brewing Co Sputnik 5% (£4.80) Magic Rock Cannonball IPA 7.4% (£5.80) Veltins Pilsener 4.8% (£4.20) North Bar Brewing Co Prototype 3.8% ((£3.10))

“The real beauty of having the brewery is we can sell beer through our own venues but they need to have competitive products on the bar”

gross profit (GP) of more than 65% – which can make some products highly priced. However, Townsley adds the high level of service justifies a consistent pricing policy and he scoffs at places that stock the likes of Amstel, which “knocks the GP out of the park” and who use this to offset prices charged for some of the more obscure beers. “They have GP winners and then knock the prices down on the others,” adds Townsley, who says such questionable policies have been adopted by “many newer bars” that have emerged on the back of the craft beer revolution. “We believe the integrity of the whole product range is vitally important.” Increased competition is certainly one of the effects of a growing interest in beer but, overall, Townsley says the pros definitely outweigh the cons. Proof of how things have moved on can be seen in the weekly revenues at the original North Bar, which are five-times what they were in the early days.

Beer nerds The other big impact has been customers’ knowledge. Townsley says: “Fifteen years ago you were teaching people about beer. In 99% of the case our employees knew more than the customers but, with the advent of the internet and increased interest in beer, this is not the case any more. Access to knowledge has changed. It’s hard for staff to have the same amount of knowledge as beer nerds, especially as many of them will be part-time. The challenge is to keep up with our customers.” Complicating things further is this access to beer information has led to a demand for a wider and continually changing range of beers. One indication of this change is the fact the original North Bar only had six lines, now it has 20. Things might be a tad more complicated for Townsley but at least he no longer has to resort to sitting in the front window of North Bar – or any of his growing number of other outlets for that matter.

Glynn Davis is a leading commentator on retail trends www.propelhospitality.com ¡ AUTUMN 2017 ¡ PROPEL QUARTERLY

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Insight

Mettle – leadership’s defining factor

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e all know people in business who have been written-off in their career but have bounced back. They may have experienced humiliating setbacks but tenaciously remained on the field of play, eventually achieving success. We also know highly talented people who – having shown promise – have disappeared without trace. The question is this. What do fighters have that quitters don’t? Answer: mettle! We will thoroughly explore this concept in our forthcoming book to be published in 2018 but, for now, what is mettle and how do leaders develop it?

Mettle – bravery, courage, determination, guts, nerve, pluck, resolve, spirit, valour, vigour Mettle describes a leader’s ability to cope with difficulties, showing spirit and resilience in the face of adversity. It is also a useful metaphor suggesting – because of its root word “metal” – high levels of steeliness, strength, resolve and moral fibre. Based on our research we have identified ten key personal characteristics leaders with mettle generally possess, all of which can be strengthened and developed:

Chris Edger and Nollaig Heffernan identify ten key personal characteristics that make leaders fighters, not quitters

Self-awareness – the greatest predictor of leader mettle, self-awareness equips leaders with insight into their strengths and limitations. It enables them to exert superior emotional self-control, minimising wasteful feelings of frustration, anxiety and anger. How can this be developed? Through quality feedback, honest reflection and measurement through psychometric testing such as the MTQ48 (mental toughness test), which we apply to all students on our university leadership courses. Purpose – the second characteristic leaders with mettle have is a clearly defined purpose or calling. A passion, heartfelt desire and – sometimes unreasonable – focus on something good and meaningful to them, the pursuance of which sustains them through the ups and downs. Leaders lacking mettle lose sight of their primary purpose. How do they get it back? Targeted coaching and mentoring, which brings them “back into balance”, reducing ambiguity and a lack of clarity about why they are there and what they are really trying to achieve. ▲

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Insight Energy – having great self-awareness and sense of purpose will come to nought unless it is allied to high levels of installed capacity to work. Leaders with mettle are able to exert high levels of effort over sustained periods. They do not give up. When one avenue is blocked, they have the energy and will to seek alternative routes. How do you develop energy? It is partly driven by giving people tangible, meaningful goals but it can also be honed through conditioning. Placing people in demanding circumstances where they become used to operating at a high pace.

Resource management – Peter Drucker once said: “There is nothing so useless as doing efficiently that which should not be done at all!” Deploying resources, setting KPIs and kickstarting initiatives in the name of managerialism rather than excellence, saps organisational morale and immobilises collective effort. Leaders with mettle will carefully deploy resources correctly and efficiently or – if it isn’t their bag – employ good people to do it for them. Leaders who require development in this area should be asked one simple question: what should you stop, start or continue doing with your resources to ensure success? Humility – the point we made about leaders with mettle recognising their blind spots and covering them appropriately is important. Bob Sutton said: “Wise bosses have the confidence to act on what they know and the humility to doubt their knowledge.” Leaders with mettle should not let up on their end goals; but should be humble enough to critically self-evaluate the means by which they get there. Developing listening skills, networking techniques and forging two-way communication channels can assist progress in this area.

Situational understanding – leaders with mettle are also – due to their highly developed tacit knowledge – able to figure out their context. They understand the ambiguity and complexity of their business predicament. They are able to see the world as it is, rather than as they want it to be. This is important, enabling them to focus on the controllables rather than wasting effort on the uncontrollables. This can be developed through encouraging objective observation and market knowledge through higher education, extended reading or external conferences such as Propel’s Multi-Site events. Perspective – greater situational understanding leads to accurate perspective; an absolutely critical requirement of leaders with mettle. As Alphonse Kerr said: “We can complain because rose bushes have thorns or rejoice because thorns have roses!” Leaders lacking mettle will derive negatives from negatives. Leaders with mettle will derive positives from negatives! Developing perspective is enhanced through coaching that “reframes” the way in which people process issues, altering negative perceptions and behaviours, unleashing positive action.

“With our industry facing challenges and corrections after eight years of unfettered growth, the requirement for leaders with mettle is greater than ever. The organisations that win will have unconsciously grown or consciously hired leaders with mettle”

Emotional intelligence – we have both written extensively about emotional intelligence (EI) and its importance to successful leadership; but what is it within the context of leader mettle? We like Peter Stark’s definition: “EI is when you finally realise it is not all about you!” Leaders with mettle are able to build tribes and motivate people through intuitively understanding how they are feeling. They sustain positive (rather than toxic) relationships and minimise conflict through manufacturing “win-win” situations. How is this developed? Certainly 360-degree feedback helps leaders understand the effect they have on others, helping them to develop their levels of empathy and engagement.

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Challenging – sometimes leaders with mettle seem unreasonable; especially if they are intent on challenging established orthodoxies and disrupting the (sclerotic) way in which things have been done in the past. Striving for excellence, they will probe and question, demonstrating innate curiosity about how they can do things better, quicker and faster for customers. Sometimes this approach can seem threatening and rude, but leaders with mettle will have developed constructive questioning techniques that enable them to challenge and nudge, without seeming offensive or nasty. Continuous development – the final element of leader mettle relates to a thirst for knowledge, betterment and self-improvement. Leaders with mettle not only have high levels of EI they also display what we call high levels of LI (learning intelligence). What is this? They are agile, adapting to new situations and realities by possessing the willpower and mental capacity to continuously learn. Striving for mastery they revel in self-directed learning, listening and observation. They are at the leading – rather than trailing – edge in their outlook and mindset. In summary, it is our belief that mettle is critical to leader success. Is it innate or can it be instilled? We have argued many of the components that underpin it can be developed – but the reality is this. With our industry facing challenges and corrections after eight years of unfettered growth, the requirement for leaders with mettle is greater than ever. The organisations that win will have unconsciously grown or consciously hired leaders with mettle.

Professor Chris Edger is a leadership author, speaker and coach and recently published Inspirational Leadership with Tony Hughes. Dr Nollaig Heffernan – one of the UK’s leading chartered psychologists specialising in mental toughness – is the designer of the ILM 72 psychometric test


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Insight

People development building your ‘personnel inventory’ Determining team members’ core strengths and development needs allows multi-unit managers to build a customised plan that will create lasting value for their company, say Chris Muller and Lee Sheldon

and aspirations” plan for each manager in your area. Additionally, as you develop a stronger working relationship with each management team member you will also start to create a plan for personal accountability – both for you and the members of your team. You have probably heard the saying “what you measure is what you get”, but with people it is more likely that “the strengths you develop are the strengths you use”.

very store and restaurant manager knows how to take an inventory of their food and drinks and determine a value for their storeroom. Some will take the additional step of comparing this value with their delivery invoices as a control to determine a theoretical inventory. The really good ones will use that inventory to determine a par list allowing them to quickly see the “holes” and plan ordering based on projected requirements and future customer activity. Systematically looking forward as a means to control food costs and add value to the enterprise is a sign of good management. This same practice of looking forward helps managers control their labour costs. As everyone will agree in principle, a wellplanned long-term rota saves money and creates a professional working atmosphere, again adding value to the enterprise. Therefore, as a leader of managers, it makes sense to create a “personnel inventory” of the people on your team, determining their core strengths and development needs. This inventory, not of things but of individuals, allows you to look forward and build a customised plan that will create lasting value for the team and the enterprise. Management observer Jay Conger suggests to measure a manager’s success, one needs to “track the performance of the people a manager promotes”. One measurement of your success will be how well your team performs as they receive direction from you. We suggest each leader of managers adopts the saying “their success becomes my success”.

The Rule of Seven

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Amplify strengths Marcus Buckingham believes the “best managers spend 80% of their time trying to amplify their people’s strengths”. Put another way, human resource consulting company Hewitt Associates has found the “best companies grow their talent in-house”. A significant part of your new job as a multi-unit manager is to identify the strengths, weaknesses and opportunities for advancement required by your area team. Not everyone works in the same manner. You need to customise your management style to fit your needs and the individual needs of your team members. This is where the suggestion to create a “personnel inventory” for the five, ten, 20 or 30 managers (ideally from the newest rising star supervisor to the most seasoned store or restaurant manager) in your area comes into play. Items to track and include might be an assessment of each manager’s work style (intense, playful, loose/tight); personality traits (humorous, serious, thoughtful, forceful); job history (line cook, waiter, retail floor, cashier, bar, chef); and specific completion of in-house training courses and outside programmes. It is up to you to create, design and integrate this kind of management tool into your own development plan. For example, what many senior managers find helpful when accountable for a large number of subordinates is to identify one or two “touchstones” for each direct report. These items are unique to each person and help trigger your memory about their entire personal profile. For you to create a unique and customised development programme for everyone, you need to know their particular strengths and your objectives for their development. From this inventory of attributes you can begin to craft a meaningful long-term “goals

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In the most recent Propel Multi-Site Management Masterclass, we discussed US casual theme leader Darden Restaurants, which operates Olive Garden, Long Horn and Seasons 52, and its forward-looking succession plan entitled “The Rule of Seven”. What this refers to is a programme designed to ensure that if any leader in the corporation gets promoted or leaves their position, there are two people identified who could take over immediately. Each of these people also has two individuals ready to fill in when they get promoted. The pyramid contains seven staff in total, hence the name. Take some time and build your own Rule of Seven, not only for your area but for each individual team. To begin with, consider the potential of each person you would like to feature in your succession plan during the next 12 months and assign one of the following three potential ratings to each person: ➤ Develop in role: This applies to individuals you believe simply need further training and development to fulfil their role more effectively. This doesn’t mean they shouldn’t appear in your succession plan but for the next year their focus is not on changing roles ➤ Develop for stretch in role: This applies to strong performers you wish to challenge further. You are not “promoting” them yet but you are giving them more to stretch their capabilities. An example might be a retail manager moving to a much higher-revenue store. They are still a store manager but with a larger team to lead and greater complexities to manage. You will see how they perform at this higher level ➤ Develop for promotion: This applies to those people you specifically expect to see promoted in the 12-month timeframe. With these individuals the challenge is to identify what skills, activities or behaviours they’ll need to acquire during the next year to successfully transition to a new role Highly effective multi-unit managers make sure that for each person in their Rule of Seven, there are specific development activities planned, normally on a quarterly basis. In reality, we know it can be hard to identify seven people who you would trust to be able to move up in the next 12 months, let alone at a moment’s notice. The development needs for each individual you would like to include become clear when they lack the strengths, experience or skills required for promotion, immediately or more likely in the future. We all know our restaurant is only as good as the people we lead. Just as a “hole” in the storeroom par stock requires action, so does a “hole” in the skill set of your management team. Now is the time to prepare for the future by planning to create longterm value from your most important assets.

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Professor Chris Muller teaches at Boston University’s School of Hospitality and leads Propel’s Multi Site Management Masterclass. Lee Sheldon is cofounder of multi-unit management training and advice service MMU


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Feature

Ten priorities at JD Wetherspoon Propel managing director Paul Charity talks to JD Wetherspoon chairman Tim Martin at the Multi-Club Summer Conference about his company’s ten strategic priorities and challenges PC: I have chosen ten strategic challenges at JD Wetherspoon based on the long-term requirements of the business but also the more short-term and medium-term responses to opportunities and threats.

Number one:

Bottom end of the estate

PC: I was at a conference and someone said that, with all the threats coming in the direction of the sector in terms of increased costs in all sorts of different departments, there is an urgent requirement for businesses to look at their estates and cull the bottom-end. It seems to me Wetherspoon started that quite early, about a year ago. But it turns out your bottom end is sizeable. There has been a once-in-a-generation culling of weaker Wetherspoon sites – about 100 sites have been disposed of? What’s the underlying story? TM: I think if everyone in the industry starts getting rid of 10% of their estate, someone’s going to be buying some very cheap pubs and restaurants. I think the ideal thing is not to open the wrong pubs in the first place. I think the big mistake anyone makes who has done what we have done and tried to open pubs nationwide or restaurants or shops is they have opened some in the wrong places – and there is inevitable trial and error in that. I think we made a really big mistake when we opened 100 pubs a year in 1999/2000 from a base of about 300, so we went from 300 sites to 500 – and the property market started to heat up. A rental surveyor said to me: “If you guys would just stop taking more leases, there is no-one else apart from you sustaining

rental values.” So we pulled out and went from 100 a year over about three or four years to nine sites a year. Then there was the huge recession in 2008 to 2009 and we thought: “We are really clever here, we are going to start opening pubs again”. So we started opening lots. Pubs would come up quite near where one of our existing good pubs was at two-thirds the rent and half the fit-out costs so we took quite a lot of those and made a £100m mistake – or something along those lines. It’s typical corporate strategy. My final point would be we always tried not to sell pubs because we took a view that selling it is just letting yourself off the hook. Our view was if we’ve got a difficult pub – and we’ve had quite a few – we're not gong to get rid of this pub. Often, we've kept a pub we've thought of selling and then it’s doing really well five years later. So, what do you know? PC: I think you mentioned the last time we spoke you were often tempted to open a second pub close to sites where you were trading really well thinking there was a lot of trade in that area? TM: We opened years ago in Carlisle. We had two pubs on the same road and I said, “this is going to be terrible”, but they both traded really well. One was a Wetherspoon and the other a Lloyds, which plays music. They worked really well so, in the recession, we picked up lots of pubs based on the evidence of Carlisle. But the trouble is Carlisle isn't the same as Worthing, where we opened two pubs, and a few other places. So, yes, it was the belief we could have two or three pubs trading well close together. ▲

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Feature PC: Some might be surprised you are not relying on really detailed data to tell you where is appropriate for you to open? TM: That has been pointed out to me. In the early days we were opening in north London and had a dozen pubs, something like that, and knew it quite well. We moved to north west London and opened a few pubs there and thought we were going to copy McDonald’s because wherever they are, we do very well. Our first pub outside London was in Luton. We acquired a lease on an old boozer in Dunstable Road. We sent a guy along to carry out market research to prove to the magistrates there was a need for a pub and he said: “You realise this is an entirely Muslim area?” So we never made a licence application and the landlord sued us for breach of contract. It went to the high court – it’s etched on my memory forever.

Number two:

Developing unused space into accommodation

PC: I remember going to a Wetherspoon results meeting probably ten years ago where you were very blasé about Wetherlodges and beds and accommodation. Accommodation was almost an afterthought and suddenly in the past couple or three years the company seems to have realised it makes a lot of sense to invest to develop the unused space above existing sites into bedrooms. TM: If you’ve got empty space it isn’t a great thing. It weighs on you. An empty shop next door or a couple of doors up, whatever it might be. We’ve got quite a lot of empty space above our pubs and decided to see how it went with hotels. We’ve cautiously opened a few and they can work very well. I am just slightly suspicious, after my Carlisle example, of opening a lot of hotels now. The market has been rising for ten years, with thousands of rooms being opened per annum. PC: I think it was your chief executive John Hutson who said: “Essentially the discovery at JD Wetherspoon is that running a few bedrooms above your pubs isn’t particularly hard work”? TM: He hadn’t spoken to many people who run the hotels. I would say John is understating the issue. Of course, like anything else it is hard work and difficult to do well and easy to do badly. There is a lot of competition and you can get into trouble – and it is very expensive. How come it’s so expensive to open one hotel room – £70,000, £80,000 per room? PC: The latest plan in Dublin is to open a hotel with 98 beds, Wetherspoon’s largest site ever, there is obviously confidence in opening more bedrooms? TM: It’s confidence, yes!

Number three:

Creating a “wow factor” beer garden

PC: The best example I can think of is in your home city of Exeter, where there is essentially a three-level beer garden on the roof with cathedral views. I assume it’s about more than giving you a nice place to drink when you are out in the city centre? TM: We have a successful pub in the high street and if you build a roof garden you can see Exeter cathedral, which has been there since 1080/1090. I think there are a lot of roof gardens around now and if you build them you get a better perspective than you do from the ground floor. PC: You provide such detailed slides to the investor community – the most detailed slides in the sector in terms of what’s going on. What it shows irrefutably is you are opening much larger pubs compared with 2007, although not many of them. Trading space is more than 5,000 square foot compared with about 3,600 square foot ten years ago. You are opening pubs in catchments that have much larger populations within two miles, 93,000 people within two miles compared with 45,000 in 2007. Twice as many people. Is this essentially playing safe in difficult times? TM: It’s always difficult to say with site acquisitions. I think when we were opening a tremendous number of pubs, there was a higher percentage in smaller towns. The fact is now we have got more than 900 pubs and so there are fewer locations for us to choose from. So if you open a few in big cities it can skew the statistics. But I think one of the issues for the pub trade, and I think a lot of it is to do with the price disparity or tax disparity between pubs and supermarkets, is there is perhaps a gravitational movement into bigger city centres. You particularly see it in London, you see it in Manchester. You don’t find many Pret A Mangers and Starbucks in Ashington or Tiverton or Pontypridd. So, yes, I think the statistics about population are probably random. Are we opening bigger pubs? Probably. Now we are saying because we have got so many pubs, if you open a pub it really does have to be a very good one. It should be big, there should be a beer garden, perhaps space for a hotel. So we are having to choose very carefully now because we have filled up so much of the country. ▲

34

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Launch of Polaris Pulse

Neil Westwaterb Director Polaris Elements

Making analytics more approachable: A highly visual tool which enables nontechnical users to explore and share their insight without the requirement of PhD. Data should be accessible and easy to consume allowing factbased decision making.

This is advanced analytics, not reporting: Hospitality businesses should be using forward-looking analysis to stay ahead of trends and proactively identify opportunities. Moving from descriptive analytics that simply illustrate where you are today, to using predictive analytics like forecasting and optimisation is key in today’s market. With training now available through our new Centre of Learning, partners can establish how to best exploit their data to aid decision making.

"We are launching the firstbPolaris Centre of Learning in association with The Yummy Collection" We chose to work in partnership with Neil and his team to implement Polaris Pulse. It delivers clear insight, capturing the enormity of data in my business, creating clear, results driven changes in Yummy. Everyone is talking about big data in retail. The secret is to have a tool that can churn the data to deliver results across sales, staff & costs. With Polaris Pulse we have only just begun to understand its capabilities.

polaris-elements.co.uk

Polaris Pulse is fast becoming the filter of ’noise’ in the volume of data we collect to make it a results driven insight tool, not just a reflective nice to have.

Tim Foster Co-Founder of Yummy Pubs & The Yummy Collection #PulseInsight


Feature Number four:

Larger but fewer pubs H1 2017

H1 2016

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

5,929

5,059

4,264

4,321

3,585

3,643

3,325

3,572

3,781

3,359

3,618

3,855

Number of openings

2

5

16

30

46

29

40

50

47

39

23

18

% which are freehold

50

100

63

80

67

48

45

68

32

33

57

61

Freehold average cost (£k)

1,800

994

907

843

559

589

639

825

857

765

958

750

Average development cost (£k, excluding FH)

2,449

2,576

2,459

2,070

1,643

1,552

1,420

1,207

857

851

1,498

1,520

Average development cost per sq.ft.

413

509

577

479

458

426

427

338

226

253

414

394

93,000

65,000

57,000

58,000

27,000

30,000

39,000

54,000

67,000

38,000

50,000

45,000

Average Size (sq.ft.) – Openings

Population within 2 miles

PC: Driving through south London in particular it is apparent there aren’t really many invested pubs. The Wetherspoon sites that opened there in the early years are actually quite small. TM: You are right because we started off in London and we have got 150-odd pubs there and a lot of them are quite small and do quite well. A lot of them are on long leases. You guys know it is not easy to switch from site A to site B. To switch to site B costs you £2m to £3m or whatever it might be and it knocks the trade at site A. So switching sites is, I think, a very long-term process and fraught with danger. Yes, we would probably be building bigger pubs in south London if we were building them now.

Number five:

The changing sales mix

PC: Looking at the changing sales mix at Wetherspoon in the past 17 years, the story won’t be any big surprise in the sense food sales have gone from £4,200 a week to £13,600 a week per pub on average. Food sales have gone from 18% to 35% of the sales mix. So, essentially, food sales have doubled in value in 17 years. Wet sales are down in percentage terms but surprisingly stable in actual volume terms. In other words, you are doing about the same amount of wet sales – it is just the food sales have increased during that period. TM: It’s interesting. I looked back at all the pubs we opened in 2000 recently and tracked their sales growth – sales have doubled in the pubs we operated in 2000 and most of it is food sales. 100% 90% 80%

6%

18% (£4.2k)

5%

24% (£6.6k)

4%

4%

3%

29% (£8.8k)

31% (£10.0k)

35% (£13.6k)

70%

There has been an increase in bar sales as well. Our costs have risen dramatically as they have for anyone who was trading in that time – and we’re making almost exactly the same profits in those pubs we were making way back when. So our experience, and there could be better people than us out there, is you work incredibly hard, you increase sales, you invest heavily, and you just about maintain your profits if you are very good. That’s what the experience has been. Without those food sales, which are probably a bit less profitable, the breakfasts, coffees and so on, our profits, I suspect, would have gone backwards as the trend has moved towards drinking Fosters at 75p a pint from Tesco or wherever it might be. PC: And as we all know, wet sales produce more profits than food sales so it seems to me you have worked fairly hard to increase your food sales to maintain wet sales. Essentially, what I am saying is those food sales are probably supporting your wet sales. TM: That’s undoubtedly true. We all know it depends what age you are – my habit in my lifetime has been to enjoy two, three, maybe four pints in a pub with other people. That’s how people behaved in my youth and into my middle age. My son was at Manchester University until recently and I came back from the pub and he was back with a few of his pals at our house. I came back from work at about 10pm and they were sitting in the living room with a bunch of booze from Tesco. I said: “Why don’t you guys just clear off to the pub!”

“Our costs have risen dramatically (since 2000) as they have for anyone who was trading in that time – and we’re making almost exactly the same profits in those pubs we were making way back when”

60%

PC: A counter-intuitive thing you did recently was to essentially wipe your customer email database. You told them you wouldn’t bother them any more with the monthly newsletter.

50% 40%

76% (£17.2k)

30%

71% (£19.8k)

66% (£19.8k)

64% (£20.8k)

2008

2012

61% (£24.0k)

20% 10% 0%

2000

2004

HY 2017

TM: People get bombarded far too much with emails and, in the end, it has to go over your head. It’s very intrusive. I have been a complete cynic about Facebook. About three years ago we were all over the newspapers because some guy from Ukraine hacked our website and was selling our customers’ email details – I don’t think he managed to get any buyers and there were no bank details or anything. We were sending out a newsletter to 600,000 people and I just thought I’d tell them to look on the website for news and we won’t bother. Some people assume we did it for cost-cutting. ▲

www.propelhospitality.com ¡ AUTUMN 2017 ¡ PROPEL QUARTERLY

37


Feature Number six:

People

PC: It is really important to try to engineer continuity of service from board level down to site managers and you are having some success in this department. Your average length of service for site mangers is now 11 years and two months, which means you are getting less than 10% turnover per year for pub managers. Even kitchen managers – average length of service seven years, ten months. What do you think has encouraged them to stay so long at Wetherspoon? TM: I think the pub business is a people thing. About 20 years ago, our pub managers came up with the motto: “It’s a people thing.” I thought it sounded so corny and wishy-washy, we didn’t adopt it. But about ten years later I realised they were right and I suppose what you have to try to do is create a working environment that people like as far as it is possible in the enormously stressful world of pubs.

“We pay on average about 5% bonus, 5% of salary or wages, to staff who work in our pubs. It’s not a lot per person but it does mean they have slightly more incentive than other people and are more highly motivated – and that helps. And it works out at about 40% of our profits” PC: I heard you say during the Brexit campaign that Wetherspoon shares more of its profits than any other company other than John Lewis? I presume that’s true? It’s not the sort of thing a listed company normally does – share as much profit as you do. It’s normally a recipe for a decline in share price. TM: I don’t like to give away secrets but I read a book by Sam Walton, of Walmart, called “Made In America” – it’s worth having a look. He’s a nice man and became the biggest retailer in the world. He said the best thing he ever did was to give his, what he calls associates, a 5% bonus, with the 5% bonus going into Walmart shares. In America, that money goes into a pension fund. He said by the time he had been going for 20 years, a lot of store cleaners were millionaires through having put their bonus into this. We pay on average about 5% bonus, 5% of salary or wages, to staff who work in our pubs. It’s not a lot per person but it does mean they have slightly more incentive than other people and are more highly motivated – and that helps. And it works out at about 40% of our profits. It’s a lot of money.

PC: John Hutson also tells a story from the early 1990s when he first joined the company. There were 30-odd Wetherspoon sites and he sacked a group of site managers who weren’t up to scratch, in his view. He hired some new ones and, guess what, they were just like the last lot. So was the lesson essentially you need to work with the staff you have? TM: I think there is a strong element of truth in that and, certainly, at the breweries in the old days, the culture in the 1970s and 1980s was you went in as a new area manager and fired a few people, a slightly macho approach. I suppose it is much better to work with the people you’ve got if you possibly can and try to get the best out of them. It’s easier said than done.

Number seven: Breakfast PC: This is about long-term objectives because it seems to me you set your stall out when it came to breakfast and said: “We are going to open early, 7am or 8am, and we are going to serve breakfast at all sites, forever. It may take a while but we will get there.” You are now the fourth-most popular place for breakfast among consumers. The focus on breakfast actually led to your decision last year that it was hard to do breakfast on a Sunday and then Sunday roast and the rest of the menu so something had to give – and that was the Sunday roast. But that was a manager-led choice, wasn’t it? TM: It was a lot of complaints about our Sunday roast, to be frank, and the fact we thought we couldn’t, given the big menu we were doing, realistically operate a carvery in our pubs – the quality at carveries was probably higher. That was our perception so we decided to do what we do well and sacrifice the Sunday roast. I think we were selling 70 or 80 per pub, per Sunday, so it was quite a big move and quite a big reaction. We accidentally trod on the corns of the great British public and The Sun dressed someone as a chicken to protest outside our pubs in Solihull. Why it chose Solihull, I don’t know! So yes, that was quite a big move. PC: And it led to a lot of verbal complaints. What’s the attitude in that sort of situation – withstand it because we know we are right? TM: I think we all see something in a business sometimes where you think “we have to try to do something about this”. So 15, 18, 20 years ago, I went to a Starbucks one afternoon and thought “this place is busier than our pub so we have got to start doing cappuccinos,” which is a fantastic pain, although we sell a lot of coffee and tea. I think there are some nettles you have to grasp. If you are a floated company it’s very difficult if you get in the City mentality because, above all, they don’t want the margins to go down and, if they do, your share price will go down. But sometimes, such as with breakfast, it probably took five years before we made any money from them and we probably still don’t make much but we had to suffer a drop in margins. ▲

% of breakfast users who have eaten at a brand 0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

McDonald’s Costa Greggs JD Wetherspoon Starbucks Subway Caffè Nero Pret a Manger Toby Carvery

15%

of all consumers who have eaten out at breakfast in the past six months have done so at JD Wetherspoon

Burger King Source: Peach BrandTrack, Oct 2016

38

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Show them your

TIPS TO MAXIMISE YOUR SOFT DRINK SALES Pubs, bars and restaurants can no longer simply rely on sales of the hard stuff to keep their tills ringing, they also need to keep up with the times and the growing number of adults that seek out a soft drink when dining and drinking out of home.

Frobishers have been creating and supplying the finest, premium soft drinks to the hospitality sector for the last 25 years, so they took to the bar to ask your customers what soft drinks really mean to them, why they buy them and what influences the choices they make.

From exploring the effects of occasion and time of day to examining the impact of staff recommendation and environment. Their findings revealed a variety of attitudes and triggers to purchase amongst ABC1 women, aged 25 to 45 years, when it comes to choosing a soft drink.

SO HOW CAN YOU INFLUENCE CHOICE?

1

PUB ENVIRONMENT A busy bar can lead to rushed service and panic purchasing. Make it easier for your customers to make informed choices before they reach the bar.

VISIBILITY Increasing the visibility of your premium soft drinks will encourage customers to try new products that deliver a greater GP. Display prominently and serve imaginatively.

“I always default to something like a coke or sparkling water because you know the bar will stock it.”

3

Advise, Inspire, Upsell. Ensure your staff are as well versed in upselling premium soft drinks as premium spirits and wines.

“Bar staff know what wines to recommend so why not get them up to speed on advising customers about soft drinks?”

“You feel forced to decide quickly if it’s busy because you don’t want to annoy other customers.”

2

4

STAFF

MENU & POS Adding soft drinks to your drinks menu and blackboards can raise awareness and ultimately boost profit generating premium sales.

“Chalk boards near the bar or a drinks menu on the tables would help because you could see what they have.”

5

WHO’S GETTING THE ROUND IN? Helping customers make a decision before they or whoever is buying the round reaches the bar will reduce lower profit, default purchases of mainstream brands.

“I order something easy like a lime and soda if someone else is buying because I don’t want to be a nuisance.”

6

MOOD & OCCASION Create a soft drinks list that works from morning till night. Long drinks for the day and sophisticated premium options for evenings and special occasions.

“I don’t want to feel like I’m missing out so I’m looking for a more premium quality drink.”

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Feature Number eight:

Property

PC: There has been a big change, from 2007 to 2017, in terms of the amount of property you own on a freehold basis. In 2007 it was a 41% freehold estate and it is now 54% freehold. That’s quite a big shift in ten years. What is the thinking in terms of deciding to own more freeholds? TM: Wetherspoon always had an instinct for freehold property. Our second and third pubs were freehold, our fourth pub was freehold so we have always liked to have them. If you can finance them, which is a big “if” because you’ll have the bank breathing down your neck if anything goes wrong, the interest over the long term is lower than rent. It boils down to that. So we bought a lot of freeholds where we are the tenants. We were paying £12m rent and we have substituted that for £7m of interest. It also means we owe the banks a lot more than when we started so, provided we don’t have a hiccup, it should turn out okay.

PC: It’s well-known you were the subject of a major fraud by property agents and their friends in the last decade or so. There’s one example in Edinburgh where you could have bought the freehold but instead the freehold was slipped to a friend of the agent. You were stitched up with rent, which increased the value of the freehold. Rents tend to only go in one direction and at one site you estimated a loss in value of £10m? TM: Something like that. It was a £100m fraud. I can think of one where a judge actually found for us in Canterbury over a property next to the cathedral. We could have bought the property for £950,000. Instead, we rented it and it was given to someone else to buy and they simultaneously bought it and rented it to us for £150,000 and the rent went to £200,000 over the years and the freehold value of something worth £200,000

H1 2017

H1 2016

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

926

951

951

927

886

860

823

775

731

694

671

657

hold pubs opened Freehold pubs opened

1

5

10

24

31

14

18

34

15

13

13

11

ehold pubs opened Leasehold pubs opened

1

6

6

15

15

22

16

32

26

10

7

res Closures

(22)

(2)

(41)

(6)

trading pubs Total trading pubs

906

954

926

951

2

3

7

9

48

42

46

39

5

5

5

4

1

age cost of of development (£k) Average cost development (£k)

2,449

2,576

2,459

2,070

1,643

1,552

1,420

1,207

857

851

1,498

1,520

hold average cost (£k) Freehold average cost (£k)

1,800

994

907

843

559

589

639

825

857

765

958

750

age Size (sq.ft.) – Openings Average Size (sq.ft.) – Openings

5,929

5,059

4,264

4,321

3,585

3,643

3,325

3,572

3,781

3,359

3,618

3,855

hold (%)(%) Freehold

54.4

50.0

51.4

49.2

46.6

44.2

43.8

43.4

41.3

41.7

42.1

41.6

ehold (%)(%) Leasehold

45.6

50.0

48.6

50.8

53.4

55.8

56.2

56.6

58.7

58.3

57.9

58.4

Trading ng pubs pubs at at start start of of FY FY

hotels in period New hotels in period number of of hotels Total number hotels in Republic of of Ireland Pubs in Republic Ireland

40

“The thing that massive (5) (3) (3) did(2)us a (3) (2) – favour was when we got the 927 886 860 823 775 731 694 scores on the doors from the local authorities and almost all6 our pubs 4 2 2 – 3 2 got a 5, which helped to change the 30 26 24 22 16 13 public perception of22 Wetherspoon”

PROPEL QUARTERLY ¡ AUTUMN 2017 ¡ www.propelhospitality.com

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Feature you paid last year, here is the alcohol duty.” It is all rolled up in a price you get from the brewer so it is a massive amount of money. As you know, we have been very concerned about supermarkets and pubs being taxed on a different basis. It would suit the country – and the government and Exchequer – if pubs were taxed more fairly so we simply try to illustrate the numbers. Sadly, we haven’t been able to persuade the other plcs, apart from some of the smaller ones, to join. That is something I will never understand. They have never wholeheartedly backed the industry for tax equality and it is there for the taking because people can relate to the facts over shops closing and that pubs are a key part of the DNA of the high street – and that’s what creates jobs and a community. It’s there for the taking if there is a coherent argument explaining to MPs and the government that if 10% to 20% of people come back to pubs they will still get more tax than they get from supermarkets. Ten times as much wages are paid in a pint sold in a pub than a supermarket. So a tax system that is fair to pubs is generating more jobs – and jobs generate tax. I am preaching to the converted again but it is not an argument the industry has made well because I don’t think most people have actually done these numbers and understand it.

in rent now is £4m. We could have bought it for £950,000, we paid £4m so that’s £3m extra than we could have paid. But for 20 years we paid more in rent than we would have paid in interest. So that's £5.5m to £6m in lost value just on a medium-sized pub in Canterbury and there were about 50 or 60 of those (where we were defrauded out of the freehold) – but you can’t win them all. I’m cool with that.

Number nine:

Further progress

PC: You talk about the fact you have almost 300 pubs in the CAMRA Good Beer Guide. You also talk about the average food hygiene rating now being 4.9 and 92% of your pubs achieve the maximum score of five. Essentially, it seems to me that what set you aside from the competition when you started was the range and quality of your beer – and that’s been a theme throughout the 37 years of JD Wetherspoon. Is that still important? TM: I think the quality of the beer is really important. I often thought in the early days it was so difficult to keep a pub really clean but if you can – and I’m preaching to the converted – the number of things that can go wrong are far fewer. So we have always tried to focus on that. The thing that did us a massive favour was (the introduction of) Scores on the Doors from the local authorities and almost all our pubs got a five, which helped to change the public perception of Wetherspoon as does the CAMRA Good Beer Guide and other things. Obviously, it is very important to have a good reputation and I think these are more important than internet newsletters to our customers.

Number ten:

Taxation

PC: In the DUP coaltion deal with the Conservatives, signed in late June, the Tories promised to carry out a study on the way high VAT affects tourism in Northern Ireland. Essentially, for the first time there is governmental examination of whether lower VAT applied to tourism would have a beneficial effect on jobs. So at last this issue is being taken seriously at government level and you are trying to highlight the issue on Wednesday, 20 September with a Tax Equality Day, where you will reduce prices to show your customers what reduced VAT would mean in terms of prices. TM: As we have done a couple of years before, we will reduce our prices by 7.5%, which is the level Jacques Borel, who ran a VAT campaign in the UK, suggested prices would fall if there was a VAT cut in pubs and restaurants in this country. It is funny we are relying on Ian Paisley’s party to make the case.

Taxation H1 H1 H1 20172017 20162 £m £m £m

H FY 201 2016 £ £m

153.11 156.5156.5

311.7 153

Alcohol duty*

79.3 79.383.3

83 164.4

PAYE and NIC

45.1 45.146.9

46 95.1

Business rates

25.3 25.324.7

24 50.2

Corporation tax

8.3 8.310.6

10 19.9

Machine duty

5.0 5.0 5.6

5 11.0

Climate change levies

4.8 4.8 3.1

3 8.7

Stamp duty

3.0 3.0 1.1

1 2.6

VAT

Carbon tax

1.7 1.7 1.8

1 3.6

PC: This is about how the company and yourself spot the longterm threats and set objectives to do something about it if you possibly can. You have highlighted the tax burden faced by the company, the unfairness of that and VAT, and you make sure you explain exactly how much that costs you as a company. You have a table that shows the various types of tax the company pays. It also shows the eventual percentage of sales that convert to profit (4.7%) – so that’s a pretty massive tax bill in its totality.

Landfill tax

1.2 1.2 1.3

1 2.2

Fuel duty

1.0 1.0 1.1

1 2.1

ences Premise licence and TV licences

0.4 0.4 0.4

0 0.8

333.03 331.6331.6

333 672.3

363 363350

3 705

TM: I bet most people haven’t done this calculation so you don’t actually know all the different taxes you pay because no-one sends you a bill that states: “Here is the stamp duty

AFTER TAX (PAT) PRE-EXCEPTIONAL PROFIT AFTER TAX (PAT)

37.7 37.730.3

30 56.9

PAT as % of SALES

4.7%4.7%3.8%3

3.8 3.6%

42

TOTAL TAX TAX PER PUB (£000) TAX AS % of SALES

PROPEL QUARTERLY ¡ AUTUMN 2017 ¡ www.propelhospitality.com

41.4% 42. 42.1% 41.4% 42 42.1%


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Opinion

At war with the modern world A

report entitled Anytime, Anyplace, Anywhere was published in May by two neo-temperance research and lobby groups – the UK’s Institute of Alcohol Studies (IAS) and Australia’s Foundation for Alcohol Research and Education (FARE). Anyone doubting so-called “public health” is a far-left socialist project opposed to consumer capitalism in all its forms should take a look at this report and the organisations that stand behind it. The report is a comprehensive articulation of one of the three strands of neo-temperance – antialcohol strategy – namely reducing the physical availability of beverage alcohol products, hence the title. The other two strands are affordability and advertising. IAS and FARE want to reduce all three as part of a whole-population approach to alcohol harm reduction. Based on the analysis contained within this report, which compares and contrasts alcohol control polices in the UK and Australia, ten recommendations were made. These recommendations apply a standard to which all jurisdictions should aim, the report states, with some having been achieved to varying degrees in regions already. The recommendations, broken down into five categories, are all aimed at reducing alcohol consumption:

Temporal policies R Restrict trading hours for off-licence liquor R Restrict trading hours of on-licence venues to limit the availability of alcohol after midnight

Spatial policies

Paul Chase says the neo-temperance movement is bedevilled by cranks and is part of a ‘progressive’ political bid to return us to a perfect world that never existed

R Improve regulation of off-licence liquor sales by confining alcohol to specific areas within supermarkets to discourage impulse purchases and reduce alcohol sales R Enhance community involvement by giving residents access to legal resources and advice to ensure the community is able to engage with licensing systems R Clearly define licensing policy to minimise the cumulative harm associated with higher densities of liquor outlets

Harm minimisation policies R Place the onus on applicants to prove their venue is in the public interest R Include and prioritise public health and/or harm minimisation objectives in liquor legislation R Enhance data-sharing to facilitate more targeted policy interventions

Product restrictions R Restrict the sale of high-risk products in areas of concern ▲ www.propelhospitality.com ¡ AUTUMN 2017 ¡ PROPEL QUARTERLY

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Opinion Alcohol industry partnerships R De-prioritise alcohol industry voluntary schemes Interestingly, the report extends the concept of what it terms “availability theory” to include: R Physical availability – how easy it is to obtain retail alcohol R Economic availability – how affordable alcohol is R Social availability – social norms and provision of alcohol via informal means such as parties and social gatherings R Psychological availability – the perceived availability of alcohol, including responses to alcohol marketing Actually, “availability theory” isn’t a scientific theory at all – it is a 19th century quasi-religious notion that posits the belief that making the “devil’s brew” available is tantamount to placing temptation in the path of weak and vulnerable sinners. And, as any Victorian vicar would have told you at the time, the greater the temptation, the greater the total sum of sin! Hence, reduce temptation (availability) and you reduce the sum total of sinning (consumption). The whole of this report is based on the false assumption it’s the availability of alcohol that makes people drink it; that supply begets demand. The fact such a proposition turns established economic theory on its head bothers IAS and FARE not one jot. Let’s be clear, if availability drives consumption then all we need to do to operate a successful booze retailer is to open shop and the punters will magically appear. In reality, if there is an area where there is a high density of licensed premises, that is very likely to be for the same reason certain areas have high densities of Polish shops. A high density of licensed premises suggests an area where lots of people live in or holiday at for the purpose of drinking; just as a high density of Polish shops suggests an area where a lot of Polish people live.

“Availability theory isn’t a scientific theory at all – it is a 19th century quasi-religious notion that posits the belief that making the ‘devil’s brew’ available is tantamount to placing temptation in the path of weak and vulnerable sinners” Does anyone seriously believe the 19% fall in per capita consumption of alcohol in England and Wales between 2004 and 2014 was caused by the closure of 10,000 pubs during the past ten years and the decimation of the stand-alone off-licence sector? Or might it possibly be that the fall in per capita consumption caused the closures and not the other way round? If the fall in demand for beverage alcohol products isn’t responsible for closures, why did they happen? Did all these retailers suddenly conclude they’d had enough so decided to shut-up shop and go fishing?

Temperance cranks You might think the wish-list of a bunch of temperance cranks isn’t worth the effort of rebutting, but these are the same temperance cranks that hugely influenced the chief medical officers’ revised “low-risk” drinking guidelines. The IAS is experienced at insinuating itself and its advocates into positions of influence. It always play down its temperance aspirations and its broader ideology, but IAS is owned by a charity called Alliance House, on whose board sits a variety of temperance organisations. Essentially, the IAS is the research arm of the

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International Order of Good Templars (IOGT) – their offices are at the same address in London. So it’s worth looking at what the IOGT believes if we are to understand the underlying motives of IAS. IOGT believes Big Alcohol is part of something it calls the “corporate consumption complex”, which it defines as “an intricate web of organisations including the multinational corporations manufacturing the goods of consumer capitalism, retail giants selling those products, trade associations doing the political lobbying, as well as advertising and law firms supporting PR and political campaigns of these industries”. And then this: “Together with Big Tobacco, the food, pharmaceutical, firearms and automobile industries, the alcohol industry forms the so-called corporate consumption complex – a network of corporations, financial institutions, banks, trade associations, advertising, lobbying and legal firms that together promote ‘hyper consumption’. The corporate consumption complex has become the most powerful force to impact human health and the communities in which humans live. It is the primary modifiable cause of the biggest cause of premature mortality in the 21st century, non-communicable diseases.”

“IOGT believes Big Alcohol is part of the ‘corporate consumption complex’, which it defines as an intricate web of organisations” So there you have it. IAS and IOGT aren’t simply opposed to excessive consumption of alcohol and the health harms associated with it, they are opposed to the modern world! It’s all part of the same conspiracy! When you read through IOGT’s detailed analysis of what is wrong with modern society it’s not only an enemy of alcohol but is at odds with consumer capitalism in general – run by a bunch of bad guys intent on putting profit before public health. Apparently we all believe it is in our economic self-interest for our customers to die prematurely! It analysis is the only way for us to live is to embrace a kind of woolly, agrarian communitarianism – back to the horse and cart, lots of brown rice and above all a life free of alcohol or any other intoxicant by means of which human beings might change their consciousness.

‘Progressive’ politics Try to imagine what licensed retail would look like if the ten recommendations of the IAS and FARE report were implemented: a licensed retail sector in which the number of premises would need to fall by at least 10%, with all the implications that has for employment; a sector in which supermarkets would have separate aisles and checkouts for alcohol sales – creating huge inconvenience for shoppers; severe restrictions on the number of premises able to open and sell alcohol after midnight – decimating the night-time economy; a requirement that any applicant for a new alcohol licence would have to prove a negative – their premises is “in the public interest” and wouldn’t add to alcohol-related problems. My fear is these policies chime with what passes for “progressive politics” these days – a Labour Party intent on giving us a better yesterday, taking us back to the 1970s, might want to embrace a set of policy proposals that would reinstate most of the restrictions of the 1964 Licensing Act to recreate a perfect world that never was. I think our sector and government both need to be more aware of the ideology underpinning neo-temperance, and what it means for business and our society if these crackpots are successful in propagating their influence. The determination and pernicious influence of groups such as IAS should not be underestimated.

Paul Chase is a director of CPL Training and a leading commentator on alcohol and health policy

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Advertising Feature

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4 HOW LONG DOES IT TAKE? From first meeting to final delivery is usually six weeks, but this does depend on the product, the detail of your recipes, the availability of ingredients, your logistics partner and your time to taste-test. We can expedite delivery depending on the above factors. There is no cost for development and sampling.

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Advertising Feature

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Opinion

POPULATION it counts and it matters T

o borrow an old adage from the market research world – not everything that matters can be counted, and not everything that can be counted matters. To the former point we need only look at the political world. Last year, it taught us a lesson about how data and reason can be trumped, so to speak, by emotion. It signified the power of feelings versus numbers, and reminds us that the importance of issues is not linked to their ability to be measured. There are plenty of important things businesses don’t know because they are difficult to measure, despite all that Big Data. One question, for example, which becomes increasingly pertinent in a crowded eating-out market, is if a customer stops coming to us, where have they gone, and why? However, our biggest failing perhaps is to ignore widely available numbers that have a fundamental influence on our market. They

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Market demand will be unpredictable at best during the Brexit process – but it will certainly not be helped by any slowdown in population growth, says David Martin

PROPEL QUARTERLY ¡ AUTUMN 2017 ¡ www.propelhospitality.com

somehow seem to hide in plain sight. Nothing better illustrates this point than the issue of population size. The UK population is measured consistently, exhaustively, and officially. The detailed data is publicly available, yet for all the commentary and analysis of the out-of-home markets’ performance, the effects of population change seem to be ignored. There are several contributory factors at play here. Firstly, we are in an instant, short-term age but population change moves in slow-motion, and this encourages us to overlook its powerful accumulative effects. Secondly, in recent years population size has been overshadowed by political priority given to migration numbers. Thirdly, it’s a retrospective measure, and those can seem less seductive than “visionary” forecasts of the future. Lastly, it’s a number that for many years remained largely constant – and as with any static metric, it can lead us to complacently ignore it. ▲


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Opinion

350,000

Photo: 1000 Words / Shutterstock.com

The number of extra consumers the outof-home market has gained every year for the past decade due to population increase

Extra millions In the early 1970s, the UK population was 56 million, and it remained largely unchanged for another ten years. Even by 1993, the population had only grown to 57.7 million. Just as in recent times we have become accustomed to ignoring the effects of inflation on market trends – and that’s a lazy habit we need to lose quickly. The influence of population size on national market demand had receded into the background, to the point of perceived unimportance. But consider the data for the most recent decade for which data is available. From 2005 to 2015, the UK population increased markedly and steadily, from 60.4 million to 65.1 million, with net migration accounting for more than half this increase.

“A comparison of population growth versus ONS spending data suggests at least half the eating out market’s recent value growth could be attributed to population increase” In percentage terms, population growth averaged 0.8% per annum over those ten years to 2015, a significant “assist” to all consumer markets, yet it is rarely, if ever, acknowledged when industry sales or traffic trends are discussed. Put differently, that extra 4.7 million people equates to the combined population of Lancashire, Surrey, Hertfordshire, and Tyne and Wear. Even if we just focus on the 75% of the UK population aged 18 to 80, the out-of-home market has gained 350,000 extra consumers every year for the past decade. Assuming 90% of these extra consumers will eat out and 75% will drink out, then the market benefited from more than three million extra out-ofhome diners, and more than 2.5 million out-of-home drinkers during the decade.

Fewer outlets CGA Peach data shows the net number of restaurants in Great Britain increased by 27% in the ten years to the end of last year, an increase of more than 5,700. Impressive sectoral growth but it’s been supported by population growth of more than 7%. Meanwhile, the net number of pubs and bars contracted by more than 20% – almost 15,000 fewer outlets. That’s serious enough but the decline would almost certainly have been

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greater without the compensation of unusually strong levels of population and household growth. The Office for National Statistics (ONS) issued its updates of real-term household spending data earlier this year. Amid the coverage, the Financial Times’ headline was typical: “Sociable Britons spending more on eating and drinking out.” It was not alone in falling for the line that “households spent more than £45 a week on restaurants and hotels for the first time in five years”. Observant readers would realise this meant households spent less on those categories than they were doing six years ago. Indeed, the ONS data suggests per-household real-term spending on “restaurants and hotels” is still lower than it was ten years ago before the financial crisis. What doesn’t get reported is the small matter there are 7% more households in the country now.

Net immigration A comparison of population growth versus ONS spending data suggests at least half the eating out market’s recent value growth could be attributed to population increase (and much of that has come from net immigration). That’s a potentially inconvenient truth when we think about the near-term future. The flood of investment pouring into the eating out market in the past decade will have placed much of its rationale on forecasts of continued demand growth. Those forecasts are usually (and fairly) predicated on behavioural trends – but they tend to neglect the influence of future population trends, and they are now clouded by uncertainty. The current ONS population projections forecast 7% growth in the ten years to 2024 (worth 4.5 million more people) but they include the assumption that, again, more than 50% of that growth will be driven by net migration. But what if those migration assumptions are blown by Brexit? Jonathan Portes, professor of economics at King’s College London and former head of the National Institute of Economic and Social Research, observed recently: “I think EU migration will fall significantly over the next couple of years, and migration overall will fall. Therefore the population increase may be significantly slower than the ONS states.” Market demand will be unpredictable at best as we move through the Brexit process. However, it will certainly not be helped by any slowdown in population growth – and that’s a number you can count on.

David Martin is managing director of market and customer insight resource Red Circle

PROPEL QUARTERLY ¡ AUTUMN 2017 ¡ www.propelhospitality.com


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Insight

The relentless treadmill of change The challenge for established brands in an ever-evolving market is to be bold and distinctive – and unreasonable, says Ian Dunstall

D

uring the past decade, there has been dramatic structural market change and innovation in almost all consumer markets. This has an impact on almost all key consumer expenditure categories – how, when and where they shop, how they purchase holidays, their ability to afford and finance their home, how they finance their car purchase, the impact on financial savings of student tuition fees and pension changes. And, of course, how customers use digital technology to access and select their purchases and share their purchase experiences. The eating out market has also enjoyed its proportional share of transformation – including the rise of eating on the move, the shift from evening to all-day dining, the growth of the “at work” lunch and daytime market, the growth of more specialist and international flavour cuisines, the evolution of the pub into a dining market, and the location development of transport terminals, shopping malls and the high street. And, more recently, the emergence of the fast-casual segment and the delivery market. With market transformation, it is the new entrants that typically have the clarity of vision to specialise in the new sector opportunity and disrupt the market. Consider the car manufacturing sector and the move away from traditional petrol and diesel – Tesla is emerging as a credible (and desirable) scale entrant in the electric car market. Companies start with purity of intent but it’s harder for the core market to keep up with the need to transform itself when it has the

“With market transformation, it is the new entrants that typically have the clarity of vision to specialise in the new sector opportunity and disrupt the market”

day job to manage and previous investments to pay back. However as a positive example, Volvo has taken the bold decision to phase-out production of vehicles powered solely by petrol or diesel and from 2019 all models the company introduces will be hybrids or electric – even though the market share of these fuel types is currently low. The same is true in our eating out market. Established brands have enjoyed strong scale growth in the past decade. Location growth has been achieved at high capital investment, with commitments for investment payback. Now there are abrasive inflation headwinds on most aspects of cost that require intense management to control in the short term and may potentially require restructure of the business model in the long term. And this is before we consider the need for strong evolution to retain future customer relevance.

However, difficult as it is, there are some core consumer challenges to overcome: }} The recent growth of new supply has exceeded consumer demand growth, which will inevitably squeeze existing concepts harder. This is a buyers’ market, as I am regularly reminded when I run consumer research groups, in which consumers are delighted by the continual growth in choice and innovation in the market. They enjoy the promiscuity of choice and like to visit new shiny entrants in their locality. ▲

www.propelhospitality.com ¡ AUTUMN 2017 ¡ PROPEL QUARTERLY

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Insight

“It is about creating a brand experience of the sum of the parts that the target market understands and craves”

}} Customers are becoming more specialist when choosing where to eat out and are seeking concepts that most sharply match the specific requirements of their desired dining occasion. Increasingly, consumers see through generalists that try to please everybody. The stronger space for brands is to strategically position at one end or other in the value and experience spectrum – competitively priced for speed and convenience or premiumised for a more engaging and experiential occasion. However, many brands have developed as mid-sector generalists. They can make tactical movements to try to appeal to other market segments but it’s harder to shift the totality of a brand concept – and even harder to gain credibility with new customers that the brand can meet new needs. This can create a negative cycle of over-protection and reliance on the loyalty of existing core customers rather than responding to the changing needs of the wider market. Multi-brand operations at least have the potential to switch to a more relevant brand format to maximise the potential of strong locations (as Mitchells & Butlers is with the Harvester to Miller & Carter conversion) but for single-brand formats it is difficult.

Some of the most important traits observed are:

}} There is also the harsh reality that many brands lack a desirable depth of brand differentiation – as David Page, chairman of Fulham Shore, which owns brands Franco Manca and The Real Greek, recently said there are too many “me-too offerings”, “poor concepts” and “dated menus”. As Franco Manca is a shining example of a rapidly expanding concept with a differentiated and desirable offer – a distinctive pizza in an aspirational modern setting with quick service from circa £7 – he has every right to observe the challenges of others.

Instinctively we all know:

So how do the brands that are too big to fail and too established to change navigate the evolution journey quickly? At the Propel Inspirational Leadership Masterclass hosted by Professor Chris Edger, the UK’s leading thinker and teacher on multi-site foodservice management, I spoke about the traits of brand leadership. These are the skills “above and beyond” the leadership qualities required to operate a good business. In my past 20 years working in multi-brand companies and brand strategy consultancy, I have supported more than 40 brands, giving me the opportunity to observe and learn from a broad range of brand leadership traits.

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}} They stand for something good, with a clear and differentiated brand positioning that is distinctive, relevant and credible. It’s not about being the best at everything, it’s about creating a brand experience of the sum of the parts (the ambience, product, service and personality of the brand) that the target market understands and craves. Look at McDonald’s in quick-service restaurants or Wagamama in fast-casual as prime examples. }} They create a strong brand culture and personality that resonates with guests and staff alike. Nando’s achieves this brilliantly with its legends, symbols, stories and icons and is a brand with real soul. }} They have a hunger for breakthrough differentiation. I have observed too many brands that over-react to competitor activity rather than creating their ownable white space. I am currently working on a project with TGI Friday’s in the UK and its focus and desire for strong evolution to become an experiential and unique “brand of one” is heart-warming – and positively evidenced in sales performance. }} Eating out demand will remain strong, even if short-term economic forces are shaky }} There will be a degree of market churn soon, and some brands will meet a point where they are not economically sustainable }} New entrants will continue to shake-up the market with concepts tuned to market need with high levels of differentiation The challenge for established brands is to be bold and distinctive – and unreasonable. Admiring the traits of some of the most successful brand leaders, I am reminded of George Bernard Shaw’s observation that: “The reasonable man adapts himself to the world, the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.”

Ian Dunstall is a brand consultant advising hospitality businesses on brand strategy and development. He has a strong legacy of success, including startup brands and brand revitalisation

PROPEL QUARTERLY ¡ AUTUMN 2017 ¡ www.propelhospitality.com


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Advertising Feature

Are you gearing up for Data Protection changes?

Changes to the current Data Protection regime come into force next May. Given the significant fines (up to €20 million or 4% of global turnover) for breach of the new General Data Protection Regulations (GDPR), it will pay to be fully prepared. One thing no business wants is to be the subject of front page headlines about data breaches and big fines.

Data protection law regulates the collection, storage and processing of any data which could identify a living individual. Where your business holds identifiable information relating to any individual (whether they be customers, staff or tenants) the GDPR will apply. Although getting to grips with the new regime is daunting, these key questions (though far from exhaustive) focus on key compliance areas:

1. Breaches: How secure are your IT systems and processes. If your personal data is hacked, would you know - and how quickly? Under the GDPR, all data breaches must be reported to the Information Commissioner within 72 hours, unless you can demonstrate the breach is unlikely to be a risk to the affected individuals.

2. Processors: Where you store personal data off-site, or where you pass it to other companies (e.g. a third party marketing company), do the contracts you use with them properly govern how personal data is handled? The GDPR requires that all arrangements between businesses, and those who process data for them, must be captured in a written agreement that includes a range of specific criteria. As a result, standard contracts and policies will have to be up dated. Freeths is one of the few law firms in the UK that specialises solely in advising hospitality and leisure operators. Our team of expert data protection lawyers can assist with practical advice on steps you need to take when it comes to compliance with the GDPR.

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3. Marketing consent: Crucially for hospitality businesses, who often rely on promoting offers to their customer base electronically, in order to send e-mails about your services to individuals, you will need specific and clearly-communicated opt-in consent. You must be able to prove that you have this consent, and where you got it (for example, collected from a feedback card after a visit to your site). In most cases this also means refreshing existing consents. If not, most of your carefully harvested marketing data may be unusable after 25 May 2018.

4. Knowing your Data: Do you have a clear picture of how personal data flows through your organisation, and is this captured in an easy-to-find document? The GDPR requires not only that you be compliant, but that you are able to demonstrate that compliance at every stage should the Information Commissioner’s Office come calling.

GDPR compliance takes time – if you haven’t started already, focusing on your processes now could avoid a costly surprise later on.

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PROPEL QUARTERLY ¡ AUTUMN 2017 ¡ www.propelhospitality.com


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Propel and the Association of Licensed Multiple Retailers (ALMR) have opened their study tour to New York in April 2018 for bookings. The visit takes place between Thursday, 19 April and Sunday, 22 April. After hugely successful trips to Chicago and Las Vegas over the past six years, Propel and the ALMR have decided to head to the Big Apple. The trip provides three days of study tours and insights, which will include a session with the board of Union Square Hospitality Group, tours with multi-site branded operators Aurify Brands and Craveable Hospitality and a networking evening with NYC operators at Claus Meyer’s multi-award winning Scandinavian food hall at Grand Central Station. Additional sessions will be held with a top US food critic and UK restaurant strategist James Hacon.

Costs: Operators: £2,695 ~ Suppliers: £3,495

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Itinerary THURSDAY, 19 APRIL 2018 Fly to New York (JFK) from London Heathrow Transfer to hotel Check in to Eventi Hotel, located in Chelsea, one of the most vibrant and fashionable areas of New York Talk and tour from Claus Meyer Restaurants and tour of outlets Dinner – Great Northern Food Hall with invited US operators FRIDAY, 20 APRIL 2018 Union Square Hospitality Group panel discussion and tour of venues Aurify Brands, talk and tour of brands from brand owner, branded outlet franchisee and operator Dinner and speaker SATURDAY, 21 APRIL 2018 Craveable Hospitality, concept developer and multi-site operator – talk and tour of venues Top spots with NYC food editor and critic Bar tour Dinner SUNDAY, 22 APRIL 2018

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Insight

Be prepared to battle slowing growth

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Little more than a year on from the UK’s EU referendum, there is clear evidence growth in foodservice visits has slowed. Cyril Lavenant, NPD Group’s director of foodservice UK, says operators should remain vigilant

hen it comes to predicting Britain’s future outside the EU, there are pundits aplenty. Life will be rosy. Life will be hellish. Life will be… well, any of a dozen different points on the spectrum between rosy and hellish. The pundits are painting sharply different pictures of what the future might hold. But take a look at the British out-ofhome foodservice market and one thing is clear – industry growth has slowed since the June 2016 referendum result. While visits after the referendum (ten-month period July 2016 to April 2017) were still 0.7% over the equivalent period a year earlier, this is slower than the 1.5% visit growth seen in the period before the referendum (six months January 2016 to June 2016 compared with same period a year before). Visit growth to quick-service restaurants (QSR) has slipped marginally. QSR was registering pre-referendum visit growth of 2.2% but this has now fallen to 1.9%. Full-service restaurants – the most expensive foodservice channel – have seen the most noticeable slowdown, from 3% to 2%.

Industry is resilient but slowing Let’s be clear from the start, even though the British foodservice industry remains smaller than it was in 2009, the message for 2017 is we still have growth and the industry is showing resilience. This is because operators have spent the past ten years since the downturn creating a lively and appealing foodservice environment that encourages consumers to keep eating out. But there are big challenges ahead and it is necessary to monitor the effect of the 2016 Brexit decision. The best way to minimise the risks of recession in coming years is for

foodservice operators to keep ensuring their businesses meet essential consumer needs for quality and value. Operators need to be vigilant and maintain their appeal so customers keep coming back and are willing to spend money. Operators know the challenges. The weakness of sterling means they will have to replace part or all of their global sourcing with local sourcing while ensuring they still get the quality they need. Inflation will prompt consumers to make savings and we expect it to dampen demand for eating out.

for example, the British market saw a 190 million fall in customer visits (for year ending March 2009 versus year ending March 2008). Within two years, this fell a further 480 million visits. At the time, consumers were concerned about the price of food more than the quality. When asked about their motivation for choosing an outlet in 2008, 21% of respondents said they wanted quality food. However, this dropped to 17% by 2010. Getting a good price was important to only 8% in 2008 but this jumped to 17% by 2010, a more than two-fold increase.

Concerns over staff

“Consumers have certainly started to drop the more expensive dinner occasion, which is down nearly 3% in visit terms, although breakfast and lunch appear to be taking up the slack”

There are issues around staff – the National Living Wage, the arrival of workplace pensions requiring mandatory auto-enrollment from 2018, and potentially tighter immigration rules when the UK leaves the EU in 2019. The staff question is huge in an industry where about 20% of employees are not from the UK. Even if a work-visa system operates when the UK leaves the EU, hiring foreign staff would still be more difficult because it would absorb time and create costs. Any sustained staff shortage would damage Britain’s foodservice sector.

How consumers react in a downturn While the danger posed by Brexit involves a slowdown in growth rather than the market shrinking, foodservice operators should still anticipate and address the ways in which consumers respond to a changing environment. Consumers typically adopt four tactics in a downturn – they cut back on visits, trade down, order fewer items or focus much more on promotions and meal deals. One year after the 2007/08 recession,

Customers were clearly looking for better value for money. They traded down when selecting pubs and restaurants. However, they ordered more items as they were more inclined to look out for meal deals and promotions.

Is any of this happening now? Consumers have certainly started to drop the more expensive dinner occasion, which is down almost 3% in visit terms, although breakfast and lunch appear to be taking up the slack with faster growth since the referendum than before. Children are another casualty of the post-Brexit eatingout market – there has been a drop of more than 2% in visits by adults accompanied by children aged 17 or younger. ▲

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Insight Meanwhile, less affluent consumers are showing the most caution over spending. Visits among the C2DE demographic have dropped almost 1% in the ten months from July 2016 to April 2017. Prior to the referendum, this demographic was recording growth in eating-out visits. But contrary to the trend seen in the recession that began at the end of 2007, we are not seeing a shift to deals and promotions at the moment. Visits not involving a deal or promotion are still growing faster than promoted visits. This is a clear indication consumers feel they are getting good value for money from British foodservice operators. However, the perception of value might change if operators introduce large price increases to cope with strong inflation. Operators will have to maintain an appealing experience, combining great service and high-quality food and drinks, to mitigate the negative impact of higher prices. What about trading down? There’s good news there too, with no evidence to date consumers are choosing lowerquality food and drink. In fact, the number of visits where a consumer chooses an outlet specifically for its “quality” has increased 3% since the referendum.

Loyalty is key So what should foodservice operators do in the face of these early signs of slowdown? Press the “loyalty button”. If operators can find ways to maintain their consumers’ loyalty, then visits and spending will follow. As we all know, there are two types of loyalty – rational loyalty and emotional loyalty. The first of these typically sees a foodservice operator offering low prices and frequent promotions. This is not the best way to run a business over the long term because consumers ultimately look for value beyond mere price. Then there’s emotional loyalty; creating an appealing eating out and drinking out experience will build a much greater rapport with consumers over time. This is the strongest form of loyalty you can deliver. During the past ten years, many foodservice operators have worked hard

Tactics to fight inflation

Minimise expensive ingredients

Value engineering

Sharing

Adds On

Better experience

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Inflation is increasing the average eater cheque Post Brexit referendum

YoY % change 1.7

1.7

1.8

1.3

2.4 2.0

2.1

1.2 0.7 0.3

0.1

0.4

2017 2015

Q1 16

Source: ONS CREST quarterly data

Q2 16 Inflation (CPI)

on their core offering but they are still asking: “How else can I differentiate my operation from my competitors?” There are five useful areas to look at. While the quality and taste of products is obviously a core requirement, it’s also important to think of other factors such as quality of staff, an easy-to-understand menu, ensuring customers feel valued, and creating a pleasant environment. These are essential building blocks for any consumer-facing business, but not all foodservice operators address these needs all the time. It is also difficult to get all these factors exactly right – some operators tend to focus more on the eating environment, while others will be better at bringing in quality staff. It’s a challenging ecosystem.

Fighting inflation Working on differentiation is one issue but inflation is also important. Inflation is definitely evident in foodservice and has pushed the average bill per visit up by slightly more than 2%. Higher property costs due to reevaluation of business rates will act as a further inflation catalyst. There are estimates costs could increase by as much as 25% because of inflation, although it isn’t clear how much of that 25% increase would apply to Britain’s foodservice industry. But inflation is happening now, so what’s the best way to fight it? Firstly, minimise expensive ingredients. As food imports become more expensive there is a need to strike a better balance by removing the non-sellers. It’s also possible to offer smaller portions of a successful dish or, when serving fish, to use less expensive species. Secondly, look at value engineering. This is more about structuring the pricing of a menu so you need to ensure there is an attractive entry price item so customers know affordable choices are always available. At the same time, there is often an opportunity to “premiumise” to hide inflation. Thirdly, think about add-ons. Try to ensure customers buy all three courses or

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Q3 16

Q4 16

Q1 17

Av. Eater Cheque

buy beverages. But be careful to do this in an appealing way – staff should not be encouraged to upsell in a forceful manner. Upsell, don’t upset. Can you offer a better experience? The way your staff interact with customers is a key part of the customer’s overall experience, but another aspect is how clean and modern your premises are. Alternatively, are you offering additional appeal such as free Wi-Fi? Above all, try to deliver a 360-degree customer experience. This means strengthening your appeal before a visit so consumers choose you against others, maximising the customer’s spend and experience during their visit, and findings ways to ensure people keep you top of mind following their visit. Finally, keep in mind the popularity of sharing. Dishes designed for sharing can offer a more affordable and sociable way of eating and should be incorporated into menus whenever possible. All these factors will help build rapport with customers and could result in a higher spend.

Keep improving Any business looking to build success must recognise a constant need to improve. That applies whether you are focusing on increasing loyalty or controlling the impact of inflation. And, as you deliver your improvements, always be ready for the unexpected. We are little more than a year beyond the referendum and the full effects of Brexit on Britain’s foodservice industry are still unfolding. But one thing is for sure – the industry will need strong growth rates if it is going to exceed the size it enjoyed before the 2008/09 recession. While the post-referendum slowdown will make it more difficult to get there, I very much doubt it will defeat the entrepreneurial skills of Britain’s successful and burgeoning foodservice industry.

Cyril Lavenant is director of foodservice for the UK at NPD Group


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20%

The average no-show rate in big cities

£16 billion per year The cost to the UK restaurant industry

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Opinion

The importance of segmentation

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n recent years, more and more operators have been talking about segmentation, and there has certainly been an increase in the amount of references to segmentation in briefs to Elliotts. For instance, most major pub companies segment their estate. Why? Because every site deserves an offer relevant to its locale, customers and circumstance. As providing a bespoke proposition to 500 locations would be nigh on impossible (certainly from a central support point of view), classifying them into groups of five, ten or 15 based on common shared principles means it’s only necessary to devote resource to 15 propositions at the most and the company will be significantly close to satisfying each site’s requirements. Customer segmentation is equally important, not least for those brands that, by their very nature, have to keep their offer super-consistent nationally, most pertinently casual dining brands and branded pub companies. Where businesses have less freedom to develop different types of site, they can

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The possibilities are vast, particularly in the hospitality sector, for brands to use segmentation to empower their data, says Ann Elliott

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obtain empowerment from understanding and segmenting their various customer types. A thorough customer understanding process typically unearths a handful of customer types, for example the millennial who comes in with friends and cares most about the atmosphere, and the young parents who need extraordinary value and a good children’s menu. By understanding its customer groups and nuances, an operator can tweak its overall offer to ensure there is something to appeal to each target consumer. But is this where segmentation should end? Site segmentation and customer segmentation are now almost always part of a marketer’s arsenal, but what about product segmentation? A member of our insights team recently showed me a TED Talk by Canadian author Malcolm Gladwell. It was quite an old one, filmed in 2004, but still incredibly interesting and arguably more relevant than ever. Gladwell spoke about the history of the food industry’s pursuit of the perfect spaghetti sauce, conducting research after research. ▲


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Opinion It’s often the case when conducting food testing to receive mixed feedback, with no clear winner among the trialled products. If, for instance, a food trial is looking to identity the optimum product out of nine or ten potential variants, it is highly likely the most popular product will only have been the favourite with 15% to 20% of participants. Hardly a convincing statistic and hardly likely to win over the decision-maker. With this in mind, it’s always tempting for researchers to minimise the products tested to ensure there is a clear “winner”.

Campbell’s Soup This was likely the case for legendary US researcher Howard Moskowitz throughout his early career. However, when he was approached by Campbell’s Soup to help develop its Prego pasta sauce product to rival the US-dominant Ragu, he looked at things differently. Instead of finding the optimum sauce, he intended to find the optimum sauce(s). In total, 45 sauces were created by Campbell’s food development kitchen, varied in every conceivable way. By the level of sweetness, garlic, acidity, sourness, tomato – you name it, they tried it. Consumers across the US were asked to try ten of the sauces within two hours and score each out of 100. When the results came in, rather than look for the highestscoring variant, Moskowitz clustered the variants according to what was common between them. The end result? Rather than identifying that Americans had an appetite for a specific sauce, there were three groups – those who like it plain, those who prefer spicy, and those who prefer it chunky. The latter was the most significant, as no product satisfied this need. A line of extrachunky sauce was added to Campbell’s repertoire and made the company $600m in the next ten years. Moskowitz’s methods took the food industry by storm, for decades they had known consumer perception was highly subjective and finally here was a way to take this into account and still inform decision-making. Ragu also took note, calling on Moskowitz’s services. It now stocks more than 30 variants in the US. There is no perfect pasta, only pasta to suit different preferences in the same way there is no perfect cola drink (think about the number of variances today), no perfect chocolate bar, no perfect coffee.

“If a food trial is looking to identity the optimum product out of nine or ten potential variants, it is highly likely the most popular product will only have been the favourite with 15% to 20% of participants. Hardly a convincing statistic” It’s not enough to ask consumers what they want. You have to think in-depth about the right question to ask. Effective research doesn’t necessarily have to analyse in-depth what consumers say they want, but rather analyse in-depth what that means they actually want. Consumers can’t always explain what they want and, critically, consumers often don't know what they want because it was never an option for them. Henry Ford, of course, famously said if people were asked what they wanted prior to the invention of the automobile they’d have asked for faster horses.

Horizontal segmentation Horizontal segmentation – grouping variants such as the aforementioned pasta example – is one way of identifying a hidden need. This doesn’t have to be complex. One of our researchers explained it really well recently – if you think about the last time you filled out a survey online, you were probably asked for your age and given brackets to choose from (25-34, 3544 etc). Each of these age bands is horizontally segmenting the individual ages within it.

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“If people were asked what they wanted prior to the invention of the automobile they’d have asked for faster horses” – Henry Ford But in 2017, amid the age of information, the possibilities are so much vaster, particularly for the hospitality sector. Why wouldn’t a brand do this with likes, dislikes and, of course, food preferences to empower its data? For instance, traditionally we’d look at sales data of a menu and remove anything less than a certain percentage of the mix. But does this give a full sense of what customers want? Not necessarily. All a menu’s spicy dishes (even across different sections) might account for 30% of mix when grouped together but could all be low-mix items when viewed individually. This would be a customer base saying they want spicy options but the information could get missed if only individual dish scores are examined. Moving away from product again, horizontal segmentation has uses elsewhere. Another opportunity perhaps comes via single customer view, and having countless pieces of insight on a customer base. A dissection of data to identify points of commonality beyond the obvious could throw up a surprise opportunity. Do a noteworthy proportion of a restaurant’s customer base follow parenting blogs/ tweeters? It might be time to revisit just how family-friendly the venue is. Do a significant number of a bar’s customers like some form of quiz show on Facebook? Perhaps a quiz event is in order? These are really cut and dry examples but the truth is a lot of brands probably have such insight lying dormant in spreadsheets somewhere! There are almost certainly brands out there looking at data in this way already that have even better examples, and I’d love to hear about them. For now, I’m trying to address my new-found TED Talks addiction.

Ann Elliott is chief executive of Elliotts, the leading integrated marketing agency in the hospitality and leisure sector – www.elliottsagency.com. Follow her on Twitter: @elliottsagency

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Feature

Rise of the micro-pub The Butchers Arms, Herne, Kent

John Porter talks to some of the leading lights and pioneers of the burgeoning micro-pub movement

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or those unable to raise the cash to buy a freehold pub, entry into the trade has traditionally required a deal with the devil or a fair and equitable relationship with a brewer or pub company (depending which side of the debate you’re on). However, there has been a rapid rise in an alternative, freeof-tie model with relatively low entry cost – the micro-pub. The Micropub Association now has almost 300 members and the sector is expanding at such a rate, publishers of the Micropub Handbook are struggling to keep up. At the same time, hybrid off-licence/tasting rooms have become a feature of the craft beer scene in many urban locations. As befits a trading model that typically attracts entrepreneurs and iconoclasts, there is no one-size-fits-all description of these businesses. However, many are housed in high street and town centre retail sites and leased from commercial or private landlords. Most make the beer they serve the star of the show, whether it be cask ale from local brewers or a global bottled craft beer range. Here are a few of the entrepreneurial spirits who have been behind the rise of the micro-pub.

The Butchers Arms, Herne, Kent

THE PIONEER MARTYN HILLIER the Butchers Arms in Herne, Kent Martyn Hillier didn’t set out to create the world’s first micro-pub, let alone start a movement. Having run a successful off-licence in Canterbury, where he sold ales from the cask dispensed into twolitre plastic bottles, he decamped to Herne in the early 2000s, where his then wife opened a florists. Hillier soon resumed beer sales from the back of the shop, then the Licensing Act of 2003, implemented in 2005, afforded him a new opportunity. The local licensing officer informed Hillier the new Act would enable him to convert his off-licence into a pub. He says: “My first thought was why would I want to convert my off-licence? I really didn’t like pubs. They were noisy, full of smokers and lager drinkers, with music, fruit machines, pool tables and food. I was doing takeaway beer at least 30% cheaper than the local pubs – but it was boring. I questioned all my customers and their faces lit up – quite often they’d have a half while I filled the bottles up anyway. They were all for it.” Hillier created a design that features no bar – beer is served from casks racked in the back of the shop – with seating around the edges meaning customers face into the room. He says: “I just went ahead and did it. Loads of people said you can’t, but there I was, doing it.” Named the Butcher’s Arms, in recognition of the site’s previous incarnation as a village butcher’s shop, the business built enough reputation to be named Kent Pub Of The Year by the Campaign for Real Ale (CAMRA) in 2008. Hillier was also invited to give a presentation on the newly-named micro-pub movement to a CAMRA conference in Eastbourne. However, after a letter in CAMRA’s What’s Brewing newspaper criticised his presentation and described the concept as “frivolous”, relations became more challenging. ▲

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Feature Hillier says: “There was no write up of my presentation in What’s Brewing and the letter just rubbished me.” Even so, the genie was out of the bottle and Hillier started to receive regular visits from other people interested in opening similar businesses. By 2013, with diplomatic relations back on track, an article in CAMRA’s Beer magazine celebrated the burgeoning movement, which by now had its own association. Today, the Butcher’s Arms offers four cask beers at any time, with ales from Sussex-based Dark Star and Kent’s own Old Dairy and Gadds all regularly in the mix. The pub seats 18 comfortably and Hillier says his business is 50% about the beer and 50% about the conversation.

“The pub industry is so far away from what it used to be. They started out as alehouses, now they’re trying to please everybody” He says: “Any more than 18 and people have their backs to each other. I never used to talk much really but when you’ve got a couple of pints of beer inside you we put the world to rights at least three times a night. It’s mainly regulars. I wouldn’t say they’re necessarily beer-lovers, they’re conversationalists. They want to talk to people and they know who is going to be in on certain nights. Regarding mainstream pubs, these are customers who have just stopped going. They’re fed up. The pub industry is so far away from what it used to be. They started out as alehouses, now they’re trying to please everybody.”

THE MOULD-BREAKER

Better price Hillier admits the Butcher’s Arms turnover is down from its peak but he is proud of the competition. He adds: “There are now five micro-pubs in Herne Bay alone, and most of those were opened by customers of mine. I think it’s brilliant. It has got people talking again. “I can sell beer a bit cheaper than the pubs in the area because I get a better price. I could actually sell it cheaper than I do but then I’d just get a cheaper type of customer in. I’m not paying staff. I’m not paying business rates – and all my overheads are low.”

ANDREW MORGAN founder and managing director of The Bottle Shop The Bottle Shop raised more than £400,000 – exceeding its fund-raise target of £350,000 – on crowdfunding platform Crowdcube in the summer, with investors taking an equity stake of 10.14% in the business. The Bottle Shop has bars in Canterbury, Margate and London, as well as a wholesaling arm that supplies bottled beer to operators such as better burger brand Byron and Curzon Cinemas. The money raised will fund two new Bottle Shop bars in London at about £50,000 each, with the majority going towards the creation of a chilled supply chain to maintain the quality of beer the business retails and wholesales. The Bottle Shop was valued at £3.1m pre-investment – its 2016/15 full-year turnover – forecast to rise to £4.9m in 2017/18. The Bottle Shop founder and managing director Andrew Morgan is relaxed about giving crowdfund investors such value in a market where similar exercises value businesses at multiples of turnover and part with far less equity. He says: “When it comes to valuing a business, there’s many ways to skin a cat. Some of the valuations for brewing businesses that have crowdfunded have been remarkable, using multiples of turnover that are making the industry take a deep breath. Having reported a £3.1m turnover in the previous financial year, we felt we’d use the same metric – no multiples, no funny business. I felt pretty comfortable we weren’t trying to hoodwink anybody.”

Gap in the market

The Butchers Arms, Herne, Kent

In 2015, Hillier was named CAMRA’s Campaigner Of The Year, with the award nomination recognising not only the pioneering status of the Butcher’s Arms but also Hillier’s work in helping found the Micropub Association and advising other would-be micro-pub owners. Frivolous he ain’t.

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The Bottle Shop has come quite a distance since 2010 when Morgan, who had a background in television production, changed tack by opening a hybrid beer cafe and off-licence in The Goods Shed in Canterbury, Kent, a food hub in a converted railway building. Morgan was inspired by Belgian bars, which stock hundreds of beers, and by a gap in the market created by what he sees as a flaw in the conventional pub model that sells genuine beer enthusiasts short. He says: “The British pub is an amazing thing. It does a brilliant job of taking something complicated and making it very simple, reducing hundreds of beer styles to a choice of four or five. ▲

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Feature The Bottle Shop, Canterbury

people three or four years on who had never had the same beer twice. They were on a constant, curated beer journey. “The hybrid on-trade/off-trade model also meant we had two opportunities to sell the same bottle of beer and then, when we added mail order, one bottle had three chances of being sold. That seemed like a great business idea. It reduced our stock liability.” A second Bottle Shop opened in 2013 in a former railway arch in Bermondsey, south east London, combining a retail and wholesale operation as The Bottle Shop became the supplier of choice to an ever-wider range of businesses selling craft beer. In 2016, The Bottle Shop opened a site in Margate, in a former shop close to the Turner Gallery. The venue focuses more on the on-trade, with ten beer taps alongside more than 100 bottles. It also offers draft prosecco, hand-mixed gin and tonic on tap, and cocktails that account for 30% of sales. Morgan says: “Margate is our first full-feature bar. We fitted out the cellar and you definitely recognise it as a bar. The costs still weren’t huge compared with, say, a BrewDog bar or a Draft House, their fit-out costs are phenomenally high and scare the life out of me. “Because we are using unusual spaces and these aren’t big bars, we can get away with having a slightly more industrial, rustic experience. Our fit-out cost are tens rather than hundreds of thousands.” The sales mix varies from venue to venue, with Margate seeing 90% on-trade sales compared with 50/50 in Canterbury and about 60% on-sales in Bermondsey that, like Margate, features beer taps. He says: “As soon as you put taps in you create an on-trade sales environment that is going to dominate. Beer was initially sold at a fixed margin of 100% mark-up plus VAT but we’re a little more nuanced now. On some of the bigger bottles we need to do a cash margin and on some of the beer we bring in from the States we have to put a little more on.”

Ordering in

The Bottle Shop, Bermondsey

“Publicans also need to create a level playing field, where everything they serve is just acceptable. Nothing can be too good because it’s going to sell quicker and, if it’s bad, it’s not going to sell as quickly. What you want is five or six casks that drain equally – then you’ve got a great model.”

Global range As the name suggests, the first Bottle Shop sold a global range of bottled beer, a format Morgan says was also under-served by pubs. He adds: “As soon as you walk into a pub you’re presented with your beer choices on the font badges. To look beyond that to the fridges behind the bar is not our mentality. When we started, people told me there was no value in British bottled beer, it’s supermarket territory and customers are not used to drinking bottled beers in an on-trade environment.” Morgan had no evidence this view was wrong, with nothing to go on apart from his own instinct so he was understandably nervous on the debut Bottle Shop’s opening night. However, his canny decision to employ the president of the local university’s real ale society behind the bar paid dividends and a strong student trade, bolstered by local beer enthusiasts, quickly helped to establish the business. He says: “The Goods Shed is a kind of indoor farmers’ market that had been going for about ten years. It was a low-risk entry point. On the high street, even in 2010 in Canterbury, the rates were more than the rent.” Crucially, there was no price differentiation, with customers free to buy bottles of beer to take home or drink on the premises, with or without food from the on-site restaurant. Morgan adds: “We had a small square footage but had the opportunity to use the entire building in the evening for people to drink with us as a bar. With a choice of 200 chilled beers, we essentially had a beer festival every day of the year. We still had

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Customers can order-in food at all Bottle Shop sites, with Morgan explaining: “In the age of Deliveroo, why would we want to try to compete with a service that can give you anything you want to eat, delivered to the bar?” The two new London bars will both be bottle-led, with a large share of the £50,000 fit-out budgeted for each site going on the installation of refrigeration, which is Morgan’s next crusade. As the craft beer market starts to saturate, he expects the superior beer quality of a chilled supply chain to offer a point of difference for the retail and wholesale arms of the business. To that end, the crowdfunding capital will also fund a refrigerated warehouse in London’s Canning Town and a refrigerated distribution hub in Manchester. “For too long the UK market has had iffy versions of great American or Belgian beers. No-one knows how well it has been looked after in the supply chain. Through the crowdfunding we can have an end-to-end refrigerated platform from the US and Europe into the UK, and give our business and our retail customers confidence they’re getting an uncompromised product.” ▲

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“Margate is our first full-feature bar. The costs still weren’t huge compared with, say, a BrewDog bar or a Draft House, their fit-out costs are phenomenally high and scare the life out of me”


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Feature

THE PUBCO ESCAPEE GRAHAM ‘GRUM’ NEWBURY the Bridge Street Alehouse in Newcastle-under-Lyme, Staffordshire Pubs were nothing new to Graham Newbury, universally known as Grum, when he and his partner at the time Tansy Harrison opened the Bridge Street Ale House micro-pub in 2014. They converted a 350-year-old former antiques shop just off the main town centre circuit in Newcastle-under-Lyme, Staffordshire. Newbury says: “I worked in the pub trade in my early 20s, got out of it for 15 years and then got back into it about seven years ago.” Newbury and Harrison ran the Red Lion in Stoke-on-Trent on a lease with Enterprise Inns (now Ei Group). It is fair to say the relationship was not entirely one of mutual admiration. Newbury says: “We put our heart and soul into the pub but we were taking £5,000 a week over the bar and just breaking even.” An article written by Newbury, at the time anonymously, appeared in the Morning Advertiser and starkly spotlighted what he saw as the flaws in a business model that saw tied licensees work to make a success of their pub only for the pub company to take the lion’s share of the profits.

nine-gallon cask. I bought one when I first opened Bridge Street and it was £65 for the same beer.” The pub rotates three or four ales regularly, as well as its house beer Tank Driver’s Tipple, a 5% golden ale brewed by Cheshire’s Happy Valley brewery and named in honour of Newbury’s grandfather, who drove tanks in the battle of El Alamein in the Second World War and who was a home-brewer in later years. Newbury says: “It was based on a recipe he used to brew. He died last year at 93 but was here when we launched it.” A pint of beer at the Bridge Street Alehouse costs about £3. He says: “That is dear for up here, and I’m making round about 50% to 55% margin. We also do real cider – we won cider pub of the year two years ago in the Stoke Beer Festival – and I do one or two bottles. Not many as we’re not a bottle shop by any stretch, but mainly lager. They’re British lagers, brands you wouldn’t immediately recognise as a customer or pick up in Tesco.” Food extends to crisps, pork scratchings and pork pies, with customers free to bring their own food in if they buy a drink.

Change of direction Newbury and Harrison negotiated an exit that saw them leave the Red Lion with their initial deposit but little more to show for their time at the pub. Harrison then started organising a tour of micro-pubs with what Newbury describes as “military precision”. They then identified the shop that became the Bridge Street Ale House and made an offer to the landlord. Newbury has since bought Harrison out but adds: “I don’t want people to think it was all my doing. Tansy was very dynamic in setting up the business.” The cost of converting the shop into a micro-pub was about £35,000, which included an air-cooled beer “cellar” in the shop window. The result is a pub that seats about 60 customers. Newbury says: “It is big for a micro-pub. The cost would have been closer to £50,000 but we called in some favours on the fit-out.”

“The problem, and the plus point, with a micro-pub is it’s a small environment. I pretty much hold court behind the bar. We discuss everything from politics and religion to what’s wrong with sour beers”

Graham Newbury at the Bridge Street Ale House

The benefits of the free-of-tie approach to buying beer became apparent from the outset. He says: “A good example is Lancaster Bomber from Thwaites, which was one of the beers I used to get in at the Red Lion. There, I was paying £98 for a

Newbury says: “I get people travelling to me as a destination location and I have a very good base of regulars, which I didn’t expect – being off the high street I was expecting it to change all the time. There’s been another three (beer businesses) opened within 500 metres of my place since I opened. It does create a circuit but where it affects us is in the daytime, when trade is a challenge. I think it’s the same throughout the country.”

Strengths and limitations

House beer Tank Driver’s Tipple

An attempt at expansion saw Newbury open a second micropub – the London Road Ale House in Stoke-on-Trent – but the experience highlighted that one of the strengths of the micropub model can also be a limitation. He says: “I’m the frontman, the gobby one people come in to see. I spread myself too thin between the two pubs so we sold the second boozer to a member of staff. I’m pleased to say he’s doing very well. “Trade dropped at Bridge Street by about 25% when I was doing both pubs. The problem, and the plus point, with a micropub is it’s a small environment. I pretty much hold court behind the bar. We discuss everything from politics and religion to what’s wrong with sour beers.” www.propelhospitality.com ¡ AUTUMN 2017 ¡ PROPEL QUARTERLY

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Opinion

Head for the cloud Astute multi-site operators are investing sensibly in technology to access the controls they need to compete in an increasingly tough market, says Intelligent Business Systems managing director Gareth Powell

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lthough we’re more than halfway through the year at the time of writing, 2017 has already seen two major technology stories grab the mainstream media headlines for all the wrong reasons. These stories can threaten our faith in technology yet, at the same time, we can’t really carry out effective business without fully embracing the controls that the digital revolution has supplied us with during the past five to ten years. Ransomware attacks are a truly global phenomenon, attacking vulnerable computer systems from Ukraine and the US to Austria and Australia. Unfortunately, despite the chaos they cause they will be with us for the foreseeable future until businesses and organisations ensure their software has all the necessary up-to-date protections in place. As an example, one attack – dubbed WannaCry – crippled much of the NHS with the BBC reporting about 40 departments had to cancel operations and appointments in May.

“Controlling a business through the clever deployment of IT has long-term financial benefits that far outweigh short-term considerations” Unrelated, but equally dramatic, was the grounding of more than 1,200 British Airways flights during three days in the same month. This story caught my eye not only because I am a frequent flyer but the fact many lessons learned from the debacle apply to other markets, including the hospitality sector. British Airways chief executive Alex Cruz quickly linked the computer failure to a “power-supply issue”. However, as a brilliant editorial in a June edition of The Economist pointed out, this was a £150m cost-cutting catastrophe of its own making, the fourth time in a year BA’s computer systems had crashed.

Key lessons from the BA debacle The Economist’s leader article highlighted three key lessons applicable to BA and any other business reliant on technology and IT. First, investing in IT should be seen as a cost of doing business rather than an overhead. Second, back-up systems should be tested regularly. Third, contingency plans need to be in place to counter IT faults when they happen. The article wisely concluded that slashing spending on IT systems was a false economy, both in terms of passenger compensation and the damage to BA’s reputation. These lessons have been front-of-mind when I’ve talked to a number of large multi-site hospitality operators in recent months. Fortunately, they are astute and clearly on a different road map to Cruz and understand how IT systems, and the procedures embedded around them, are the backbone of their business. As we all know, investing in IT has to be a considered decision based on a thorough examination of what’s on offer within the technology market. My biggest takeaway from the conversations I had is these operators fully understand the importance of investing sensibly in technology in order to access the business controls they need to compete in an increasingly tough market. Although price is still an important factor, it is not the key driver. Controlling a business through the clever deployment of IT has long-term financial benefits that far outweigh short-term considerations.

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Visionary operators The lessons highlighted by The Economist are very much part of our conversation to ensure these businesses have contingencies in place to avoid possible IT meltdowns. As visionary operators, they see EPOS-based hospitality management systems as a means of reducing costs, improving margins and engaging with guests as opposed to an unwelcome discretionary expense they can cut at will to temporarily improve the bottom line. That’s why they are chatting to us – we tick all the right boxes associated with a modern EPOS-based technology solutions business. They appreciate we had the foresight to invest heavily in the cloud eight years ago. As an example of the benefits of operating exclusively in the cloud, we can update and upgrade our software and systems without interrupting a client’s normal trading hours. Updates can be carried out at the client’s convenience rather than ours, usually within a matter of hours or days depending on the urgency of the situation. Many of our competitors with so-called “web-based” systems can only update front-of-house and back-of-house systems by shutting them down completely while they upload new data, a process that can take a day or so to complete. Similarly, they can only schedule and carry out time-consuming software upgrades on a quarterly or bi-annual basis. From my perspective, this reliance on out-of-date technology is a bit like trying to operate a successful business with one hand behind your back and your shoelaces tied together.

Everyday disciplines Our industry is constantly changing. We all have to forecast what’s going to happen in the future in a multi-disciplinary world that has moved way beyond the original scope of EPOS systems to not only record and track cash and stock movements and waste but also non-sale items such as crockery, cutlery, cleaning materials and staff uniforms. These and many other daily trackers now form a standard part of these everyday disciplines. The large multi-site operators I talked to feel the same way and are seeking technology systems that can seamlessly share these new data sources and give them the freedom to add popular apps and mobile-friendly website data as and when they want. Tomorrow’s apps are a still a twinkle in a young developer’s eye but in a few years time they will change the way we communicate with each other and share information. However, when they do come to market, we want to be able to link up immediately rather than make vague promises that we’ll do so in six months time. Obviously we anticipated this when we moved to the cloud and we currently link to and share data with more than 30 powerful and popular apps because of our intelligent deployment of API technology. We can quickly and easily add more apps to meet the future demands of the hospitality sector. These are the sorts of controls I like as a technology expert. More importantly, multi-site operators like them too.

Gareth Powell, is managing director of Intelligent Business Systems – www.ibs-systems.co.uk

PROPEL QUARTERLY ¡ AUTUMN 2017 ¡ www.propelhospitality.com


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Insight

Pull versus push

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s an operator in the leisure and hospitality sector, it is highly likely you have a database containing all your customers. In fact, I can’t think of a company we have worked with who hasn’t created, and isn’t using, its own database on a regular basis. That database is likely to have at least basic information on your customers who, at some point or other, have given you information about themselves along with permission to use that information – sometimes unwittingly it has to be said. At a minimum, this is likely to include gender, age and email address. Occasionally this might include postcode and/ or address. Mechanics to gather that information can include, but are not limited to, paper (customer comment cards, business cards), and websites and social media (Instagram, YouTube, LinkedIn, Facebook). Most operators are using as many points of contact with the customer as possible to collect information on them. Retailers also collect information at point of sale or point of pay and via electronic receipts – mechanics our sector are starting to adopt. Building a database of customer information is nothing new. Operators have been using email marketing for at least 30 years, in particular to build loyalty schemes around families or the over-60s for instance. During these years, however, data collection methodology and email campaign analysis have become extremely sophisticated. As an operator, you are likely to know, almost to the minute, when to send the right email to the

Social media marketing is about ‘pull’ communication versus ‘push’ communication, says Ann Elliott, which means focusing messaging on what your customers want to know rather than on what you want to tell them

right person with the right offer based on this detailed analysis. You will be able to anticipate the results and the return on investment of every campaign and build your consumer email campaign plan around past successes (and failures). Data collection at the moment, however, can sometimes be a bit basic – age, gender, email address and, potentially, postal address. Even intense analysis of email campaign results will not hide the fact your customer information is, potentially, relatively sparse and there is only so much you know about your customers. In this day and age, there is no reason for this to be the case. In fact, it cannot continue to be the case. Customers are becoming increasingly irritated by junk email and junk communication. In fact, it doesn’t just irritate them, it alienates them from the sender. They’re highly cynical – a study by Experian in 2016 revealed 60% of customers feel uncomfortable giving out any kind of personal information.

Focused messaging This is incredibly important in a world where customers decide for themselves what they want to read and see. They will positively seek you out if they want and make a conscious choice to receive communication from you if they want – or don’t want. They are no longer passive recipients of company advertising. This is about “pull” communication versus “push” communication. It’s about focusing messaging on what your customers want to know rather than on what you want to tell them. ▲

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Feature Insight SCV

78%

of consumers have unsubscribed from a company’s emails because they were receiving too many

According to Mintel’s 2017 pub visiting report, 43% of customers notice email advertising, while social media is close behind at 41%. The former is dwindling, the latter is growing, which is interesting given that social media effectively gives the “user” the power to govern how often they see communications. Frequency is key and a balancing act. According to Hubspot, 78% of consumers have unsubscribed from a company’s emails because they were receiving too many emails from them. However, online statistics company Statista states 86% of consumers are happy to receive promotional emails on a monthly basis. It’s a question of judgment at the end of the day. It means then your business needs to collect as much linked information on each customer as possible so you can make each piece of communication to each and every customer as relevant, personal and bespoke as possible. Age, gender and postal address information, needless to say, are not enough. Single customer view (SCV), as offered by Acteol for instance, where all relevant information is collected on a customer-by-customer basis, is the way forward, as many sector operators already know. It is the critical element to ensure all your cross-channel marketing efforts are connected, seamless and optimised. It’s not easy. As the old saying goes, “if you put rubbish in, you get rubbish out” so the data you collect has to be reliable and captured in the right, consistent way. It can be expensive. It can be time consuming. It needs to be led by marketing and supported by all the other functions. It has to be, by its very nature, entirely customer-focused.

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Data for SCV will be obtained from many different sources – your database, calls to action, your website, landing pages for different promotions, your social media activity, competitions, your tills, your payment app, your online booking system and your loyalty scheme. Apps are another route being explored. In 2016, Mitchells & Butlers developed five brand apps which, together, have had more than 400,000 downloads. SCV can also include information on complaints and customer service. It can also include information on social media dialogue, including TripAdvisor reviews. SCV should include every single piece of information on every single customer you can possibly think of. SCV pools all this information on each of your customers in one place. Patently, analysis of this information in a meaningful way is critical. You can do this in-house or you can use an agency, such as Elliotts, to do this for you and then use the output to determine and plan all customer communication using this analysis. In SCV, each customer on your database is allocated a pin number, with all information on that customer appended to it. Data will include gender, age, email address and postal address but can include so much more such as visit patterns, buying patterns and preferences, spend, frequency, group size, loyalty scheme information, the list goes on. Importantly, though, it can include social media profiles, in particular Facebook profiles.

Facebook profiling

“According to Mintel’s 2017 pub visiting report, 43% of customers notice email advertising, while social media is close behind at 41%. The former is dwindling, the latter is growing”

PROPEL QUARTERLY ¡ AUTUMN 2017 ¡ www.propelhospitality.com

It is Facebook profiling that is so interesting and compelling. If your customers log on to your Wi-Fi via Wireless Social, for instance, which 62% of customers will do when they log on to Wi-Fi, your business will have access to their Facebook profiles (if customers have given permission for you to have this access). On average, Facebook users tag 252 likes, with these likes providing a wealth of information on SCV. This is the holy grail for many pub, bar and restaurant businesses. SCV, particularly when it includes social media information, can be segmented and analysed in so many ways. It will help determine even more precisely what should be communicated to which customers by when and allows for personalisation almost down to individual level. This is critical given that personalised messages now improve clickthrough by an average of 14% and, according to Experian, deliver six-times-higher transaction rates. It allows for real engagement with your customers. If you communicate with them in this way, they will trust you and use you.

Ann Elliott is chief executive of Elliotts, the leading integrated marketing agency in the hospitality and leisure sector – www.elliottsagency.com. Follow her on Twitter: @elliottsagency


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Opinion

BULLDOG bites back Rather than being a cliché, modern British taverns are extremely welcome additions to a pub scene still beset by too many closures, says Glynn Davis

D

escribing a boozer as a “new modern British tavern” or a “re-imagining of a Great British pub” should fill me with dread, because it sounds like some marketing types have got together with a decent budget and developed a Frankenstein monster that is high on stereotypes and low on substance. I’m more than happy, however, to have been proved wrong on this one as I’ve come across a number of these outlets and, in my view, they are extremely welcome additions to the pub scene. They offer a bright spot in a market that continues to see too many closures of the very thing these new pubs seek to replicate. One of the latest members of the growing breed of reincarnations is The Wigmore in London’s Regent Street. The venue adjoins the plush Langham Hotel and has the added benefit of its menu being overseen by Michelin-starred chef Michael Roux Jr, who is also executive chef of the hotel’s highquality restaurant. There is no doubt this pub embraces some of the finer elements of smart hotel hospitality – particularly in terms of service levels (there is table service if you want it) – and benefits greatly from this improvement on the “regular pub”. This is mirrored by the interior design, which has been carried out by the renowned Martin Brudnizki Design Studio, which seems to have had a monopoly on the design of restaurant and bar interiors in recent years. The Chelsea-based studio has installed a richness in The Wigmore normally found only in the smarter hotel bars but sadly often lacking in many pubs. The pub’s rich red-and-green paintwork is unsubtle for sure, but then it is more than offset by the other glittering components within the room – dark carved wood, glitzy lighting, leather seating, and plenty of marble, which combine to create a traditional pub in all aspects but age itself. The Wigmore

Flitch of Bacon

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The Wigmore immediately reminded me of other new modern pubs that have cropped up of late. These include the Galvin Brothers’ Galvin HOP pub, which adjoins the renowned chefs’ high-end Galvin La Chapelle restaurant in the City of London, as well as Alan Yau’s interesting interpretation of the pub, The Duck and Rice, and The Booking Office at the St Pancras Renaissance Hotel. They each incorporate many of the attributes of the pub we typically enjoy – their approachability, relaxed atmosphere, almost clubby interior, and food in a supporting role rather than being the main focus.

“As much as I adore old-school boozers that have been around since Victorian times, I am also delighted to enjoy these new reinterpretations of the pub” As well as incorporating these elements, The Duck and Rice is also a glorious juxtaposition of traditional boozer overlaid with Chinese influences. This includes food from the upstairs restaurant that is a destination in its own right, while British cask ale combined with Chinese food in an Anglo-Chinese pub is certainly a fascinating meeting of cultures. It is this focus on beer that is particularly exciting about these new places. It is absolutely (and rightly so) placed firmly at the heart of the proposition. At The Duck and Rice there are a number of taps offering a changing mix of brews but the key element is the copper tanks housing fresh Pilsner Urquell beer, which is regularly brought in by tanker from Pilsen in the Czech Republic. The Galvin HOP also has Pilsner Urquell tanks as a key element of its proposition and this reinforces its pub-like atmosphere, although the modern structure it’s housed in means it doesn’t rely on the traditional fixtures and fittings of the other re-imagined British pubs we are seeing spring up. The Wigmore arguably stands above the others with its beer credentials – offering nine beers on draught, including a revolving couple of taps as well as a house beer brewed by respected London craft brewer Brew By Numbers. This is supported by a fine selection of cans and bottles, which provide a canter through some classic beers from the UK and the rest of the globe. As much as I adore old-school boozers that have been around since Victorian times, I am also delighted to enjoy these new reinterpretations of the pub, which do full justice, in their own individual ways, to their inspiration. Some pubs might be dead, but long live the Great British pub.

Glynn Davis is a leading commentator on retail trends

PROPEL QUARTERLY ¡ AUTUMN 2017 ¡ www.propelhospitality.com


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Propel Quarterly Autumn 2017  

Propel Quarterly Autumn 2017 - The essential information resource for pub, restaurant & food service operators