Peter Backman's Weekly Briefing report - Week ending 25 October 2020

Peter Backman's insight 

Perhaps the last thing operators have on their minds right now is their 2021 menu. But there are still some potential issues that they, and especially their suppliers, can be thinking about this far ahead as they fill up their NPD pipeline.  

Google Trends showed a huge spike in searches for “loss of taste” and “loss of smell” in March. In some cases, early indicators of a covid infection were loss of taste and smell, which caused people to begin searching for more information on these topics.  

Roll forward to autumn and we find that, in addition to being an indicator, in many cases loss of these senses also outlasted the infection. There are already many instances of people who, having contracted covid, lost their sense of taste totally. Suddenly,  that gin and tonic tastes like tap water. Others recovered only a bit of the lost senses, perhaps only 10%, perhaps more. And in other instances, quoted in The Sunday Times, taste and smell had been grotesquely malformed so that for some, chocolate tastes like chicken while the noses of others are constantly filled with the smell of a rubbish bin. 

These conditions are already known to science and have names, anosmia (the absence of the sense of smell) and parosmia (a distorted perception of smell). But reasons for the link with covid are not yet known with any certainty. And it is certainly not yet known whether sensory changes such as these are permanent. Further, there is no indication yet of how many people will be afflicted. 

But, if the changes are severe and long lasting, and if large numbers of people are affected, there will be significant implications for the foodservice sector (and the food industry in general). Recipes and menus will have to be amended to cope with people who have little sense of taste or whose noses are constantly filled with woody odours or who can’t tell the difference between a margarita mix and fish. Restaurants might find a fall in their customer numbers as a result of people finding that eating is no longer a pleasant experience. 

I am not suggesting that changes such as these will definitely feature across the market, nor that they will be severe and affect a significant number of people. But they might. And if they do, they will form an additional platform for change that we can lay at the door of covid. 

The numbers 

Last week I pointed out a dichotomy between two views of the eating out and hospitality market. On the one hand there are examples of frightening losses and closures, while on the other hand there are stories of expansion and innovation for the future. 

The last few weeks have seen a slew of announcements about corporate failures, administration and the rest – only last week Polpo was put into administration as was Natural Kitchen, while Camino announced it had appointed advisors to explore ways to keep the company going. And at a wider, industry wide level, the British Beer and Pub Association has drawn attention to the 43,000 jobs (and 2,000 pubs) at serious risk of closure in South Yorkshire as a result of the Tier 3 lockdown in the county; UKHospitality noted 750,000 hospitality jobs at risk across the UK. These frighteningly large figures will have abated since the chancellor’s reinvention of the Job Security Scheme at the end of last week. But the scale of businesses and jobs at risk is still clearly very large and unimaginable at the start of the year. 

On the other side of the coin, Domino’s has recently reported LfL sales growth of over 17% in the UK in the quarter to the end of September and KFC announced plans to hire an additional 5,400 people, bringing the total new jobs for the year to almost 10,000.  

Clearly the foodservice world is not totally devoid of positive developments. But there are differences. For instance, delivery has helped Domino’s advance during covid. And although collection of orders at Domino’s was down over 40% in the most recent quarter for Gregg’s, collection meant that sales rose from almost nothing in the April to June quarter, to 76% of last year’s level in September. 

But while business was growing for companies such as Gregg’s, KFC, and Domino’s, who were clearly well placed to benefit from the swing to delivery, others had bad news to tell. Pret recently announced 400 job cuts, and Abokado was placed into administration. Tying these two conflicting stories together is a tale of the importance of geographical location. Central London locations, having driven massive growth over the last five years, are now a liability, while suburban London locations, and cities outside London, have provided growth (and although even that growth might be constrained during under current lockdown restrictions, I am sure growth will reappear when the restrictions are removed). 

So, within the depressing news of losses and closures, actual and potential, there are also reasons for believing in a brighter future built on having the right offer in the right place. That is hardly news but maybe it is of some comfort to see that it applies even now.  

Meanwhile the Huq Index has been improved to provide a more accurate representation of foodservice footfall – contact me if you want more information about these changes. The latest readings from the Huq Index shows stable – but very low – footfall in the past week. Here are the latest numbers plus those from OpenTable: 

The remainder of this Weekly Briefing Report contains a summary of financial, legal, and corporate activity in the past week.  

News in the week 

Financial & Legal 

• UK Hospitality claims that 750,000 hospitality jobs were at risk under the former structure of the Job Support Scheme arrangements 
• Wales ‘fire break’ lockdown shut down hospitality; some firms to receive payment of up to £5,000 plus additional discretionary grants  
• Lancashire enters Tier 3 lockdown 
• Met Police no longer to urge pubs and restaurants to collect customers’ ID 
• South Yorkshire goes into Tier 3 lockdown 
• One in 8 in England in Tier 3 lockdown 
• Scotland extends covid restrictions in the Central belt for another week 
• Gyms in Liverpool to reopen • Chancellor increases further support from Job Support Scheme – now allows eligible workers to work only 1 day, cuts employers’ contribution, increases government contribution 
• ECIU think tank suggest NOx emissions may increase by 12% in big cities as a result of increased home working 
• Scotland hospitality industry launches legal action against restrictions imposed by the Scottish government 
• FCA figures show 31% of adults experienced reduced income since March 
• Chancellor reveals increases in grants to self-employed   
• Stoke-on-Trent, Coventry, Slough enter Tier 2 lockdown

Landlords 

• Intu sold 4 retail centres at Lakeside, Watford, Nottingham Victoria Centre, Glasgow Braehead 

Foodservice 

• The HospDemo protest in London, in favour of more government help for the sector, involved several hundred hospitality workers  
• ONS figures show catering services inflation rose 4.1% in September after EOtHO helped keep inflation down in August 
• City of London Corporation allows more space for al fresco dining by reducing space required for pedestrians to pass  

Restaurants 

• Camino – operator of 4 Spanish tapas restaurants in central London - appoints RSM to advise on strategic options 
• Quaglino’s and 100 Wardour Street restaurants (owned by D&D) sales fell 50% weekend 17/18 October versus prior week 
• The Natural Kitchen placed into administration 
• Polpo was placed into administration 
• Langan’s Brasserie files notice of intention to appoint administrators  

QSR 

• Abokado was sold in a pre-pack administration to Montway Holdings 
• KFC announced plans to create 5,400 jobs in the UK and Ireland on top of 4,300 jobs previously announced 
• ASDA opened initial dine-in Greggs café  

 Pubs 

•  Camerons Brewery sales fell  -60% recently compared with last year at those of its 80 pubs in Tier 2 locations 
• Bierschenke has been trading at 20% above last year’s figures since mid-September 
• Revolution Bars Group saw sales fall -60% last Saturday versus the week before  
• BBP says about 1,000 pubs and 18,000 jobs at risk without government help in South Yorkshire under Tier 3 restrictions 

Hotels 

• Whitbread hotels saw RevPAR down -40.9% yoy in September in UK regions; London 74.9% yoy  

Education 

• Attendance at secondary schools nationally is currently -14% below normal 
• Footballer Marcus Rashford spearheads campaign to provide vulnerable children with free meals in the school holidays 

Delivery 

• Home-X at-home food and drink platform launched and creates 50 jobs 
• Gusto launched a campaign to fund 10,000 free meals for NHS staff prior to Christmas
• Sketch launches at-home meal kit 

 Suppliers 

• Reckitt Benckiser (brands include: Dettol, Lysol, Harpic) had 13% sales increase in the last quarter 
• Britvic extends 33 year old agreement with Pepsico for another 20 years
• Collins King have merged with Evolve Group, now operating under three brands: Collins King, Evolve Hospitality, Enhance Catering Recruitment 
• Unilever sales of hygiene products lead to increased company turnover in the latest quarter 

 Around the World 

• Poland restaurants, cafes, bars (except takeaways) to close for two weeks 
• Ireland imposes 6-week lockdown. Non-essential shops to close; schools and childcare facilities to remain open 
• Intercontinental Hotels Group revpar fell -53% in the latest quarter