beyond uncertainty breakfast briefing barber surgeons’ hall 23 september 2011
TRANSCRIPT
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Beyond Uncertainty
Breakfast BriefingBarber Surgeons’ Hall23 September 2011
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Philip ShawThe UK recovery – perceptions, facts and fears
23 Sept 2011
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Certainty, Uncertainty – and Beyond
Peter BackmanManaging Director
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What I’ll be covering
• Fundamentals of the market today
• Looking forward
• What this means for tomorrow
Source: Horizons
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Background
• Times are tough• The economy• The High Street• Foodservice
• But it’s not all bleak
• Lessons to be learned
Source: Horizons
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Food and Beverage Sales in Recession
Source: Horizons Market Dynamics Toolbox
20032004200520062007200820092010£20
£30
£40
£50
Current/Nominal PricesConstant/Real Prices
£ B
illio
n
• Nominal prices: Growth plateauing• Real prices: Market below pre-recession levels• Foodservice losing out to Retail
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YoY Quarterly changes are small
Source: Horizons Market Dynamics Toolbox
Q1 08
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Q2 11
0.0
2.0
4.0
6.0
8.0
10.0
12.0
£ B
illio
n
• Q1 and Q2 2011 in growth
+3.7%
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So what’s going on?
• Overall• Stable/ declining market• Small quarterly changes• Recent real growth• Unpredictable
• Why?• Costs/prices
• VAT• Input prices• Selling prices
• Special factors
Source: Horizons
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The Margin Squeeze
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Selling pricesFood pricesMargin Squeeze
2008 2009 2010 2011
Source: Horizons
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Vouchers – Getting off the Drug?
0
10
20
30
40
50
60
Other offer%/£ OffMeal Deals2 For 1
No.
of
vouch
ers
2009 2010 2011
Source: Horizons
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Divergence – a check list
• Restaurants – Quick Service• Chains – Independents
• Pubs• Managed – Tenanted
• Hotels• Budget – Big brands
• Contract caterers• “Owner-driven” – Large companies
• Driven by• Concentration on core abilities• Creating gaps• Flexibility – grabbing opportunities• Restructuring• Innovation
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Pricing strategies – opposing views
Source: Horizons Menurama
• QSR• Converging
prices
• Restaurants• Covering all
the bases
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Similar outcomes
• Emergence of distinct Fast Casual• Spend £5-10 per head• Sales in 2010 £6.8 Billion
• Consolidation of Casual Dining• Spend £10-20 • Sales in 2010 £3.7 Billion
• Restaurants £2.1 Billion• Pubs £1.6 Billion• Growth 2008-2010 +2.2% pa
• Ones To Watch
Source: Horizons
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Geographical divergence
London• Food and Beverage sales £12.1 billion
• Share of UK 29%
• Growth 2008 - 2010 pa• Total +0.5% (-1.5%)• Restaurants +1.0% (-0.2%)• Quick Service +0.6% (-0.2%)• Pubs -2.6% (-4.5%)
Source: Horizons Market Dynamics Toolbox
Share of F&B Sales 2010
London S EastRest of England
Other countries
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Special factors
• “Wedding holiday” in April• Fine for outside seating
• May• Return of the Ash Cloud• E Coli in Germany
• Riots in July• Geographically - and time - limited but …
• But there are always “special factors”
Source: Horizons
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Things to look out for
• Companies/sectors able to benefit from:• Strong overseas economies• Weak £• Corporate spending
• B&I – Government-funded• Being hit hard• And worse to come
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For the future
• We have been “here” for a couple of years• Maybe we’ll be “here” for a couple more years
• Next year:• Royal Jubilee• Olympics
• Beyond• Economy• Election
Source: Horizons
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What does this mean for you?
• Times are tough• And won’t get much better soon
• However, we’ve now had almost 3 years to get used to things• Real YoY decline• Cost pressures• Pricing pressures• Continuing competition
• The outlook is more of the same
• So how can we unlock Divergent Opportunities?
Source: Horizons
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News From The High Street
Paul BackmanDirector of Services
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News From The High Street
• Operator Trends
• Technology
• Beyond Uncertainty
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Operator Trends
• Quick Service• Healthy - Bill’s, Chop’d, Pod, Tossed• Japanese - Itsu, Wasabi, Samurai• Mexican - Chilango, Tortilla Mexican Grill, Barburrito• Food To Go / Convenience - Wrapid, Little Chef’s “Good To Go”
deli Sainsbury’s “Fresh Kitchen”
• Restaurants• Casual Dining - Byron, Ego, Pho, Union Jack’s• Oriental - Banana Tree, Busaba Eathai, Ping Pong
• Pubs• Pub restaurants - Drake & Morgan, Peach Pub Company,
Brunning & PriceSource: Horizons Ones To Watch
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Technology
• Mobile smartphone payments and loyalty cards
• Touchscreen ordering
• Mobile and fixed online ordering
• Location based advertising and discounting
• Recommendations
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Beyond Uncertainty
• More of the same – 2012 will be tough• Consumers
• cautious spending and splurging• focus on value• expectation of something for free
• Operators• focus on cost per meal / per occasion / per consumer• brand rationalisation / consolidation• increasing private equity role• focus on the dining experience – ‘dinner and a show’
• Focus on reducing food waste?
• Importance of listening to changing consumer demands
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An Insight Into Consumer Behaviour
Emma ReadDirector of Marketing and Business Development
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Insights
• How consumers are behaving now
• What’s changed
• What it means
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Findings from QuickBite
• Horizons consumer survey
• Now 2,000 adults, 18yrs+
• Twice a year
• Tracking:• Behaviour• Spend• Motivators for eating out
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Penetration of people eating out
Source: Horizons QuickBite July 2011
Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-1165
70
75
80
70.3
75.2
70.6
74.1
70.269.1
71
Month
Perc
enta
ge
• Year on year trend continues• Christmas 2010 – no peak
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Frequency of eating out
Source: Horizons QuickBite July 2011
Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-110
1
2
3
4
2.872.68
3.093.28
2.73
3.32
2.02
Month
Eati
ng o
ut
occ
asi
ons
in last
2 w
eeks
• Consumers choosing to eat out less often
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Average meal spend per head
Source: Horizons QuickBite July 2011
Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-110
4
8
12
16
10.42
12.64
10.7611.69 11.53
10.29
12.69
Month
Ave
rage s
pend,
incl
dri
nk,
per
head (
£)
• Spending at a high:• More of a treat• Inflation• VAT
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Why eat out?
Source: Horizons QuickBite July 2011
0%
20%
40% 32% 28% 25% 23% 19% 17%12% 11%
4%
Perc
enta
ge
• Convenience• Conviviality
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And where?
Source: Horizons QuickBite July 2011
0%
20%
40% 31%22%
18% 16% 14% 13% 11%
Percenta
ge
• Habit is a strong driver• But so is spontaneity...
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Who are you most likely to find eating out?By Frequency
Most likely to be:• Male• 18-24 years old• AB• Living in London• Full-time student• Never married• With 0-1 children
By Spend
Most likely to be:• Male• 25-34 years old• C1• Living in London• Working full time• Married• With 2 children
By Penetration
Equally likely to be:• Male or female
Most likely to be:• 18-24 years old • ABC1• Living in London• Full-time student• Never married• With 1 child
Source: Horizons QuickBite July 2011
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Beyond Uncertainty
• Consumers still eating out• Industry positioned for recovery
• Managing stable menu prices• Cost reductions and menu adaptations • Inflation and VAT
• Developing appropriate strategies• Maintaining customers – “Habit”• Attracting new customers – “Spontaneity”
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Retrospect and Prospects
Peter BackmanManaging Director
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Beyond Uncertainty
• Things are uncertain
• They’re not going to improve soon
• But• Many are doing successful things• You can be one of them with insight and ambition
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Q&A
Peter BackmanManaging Director, Horizons
Mike GottliebManaging Director, Christopher’s GroupNon-exec Director, 3Sixty Restaurants
Noel MahonyChief Executive, BaxterStorey
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Download the presentations at www.hrzns.com/breakfastbriefing
Thank You