18 Apr 2019 – PREMIUM – Disruptors, Pernod Ricard , Market Hall, Abta…
Disruptors, Pernod Ricard , Market Hall, Abta…
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
So, whilst I conform to typical male behaviour in a barber’s – say yes to the mirror with which he/she shows you the back of your head unless you have actually suffered the loss of an ear, another body part or large amounts of blood – I had to put up with the indignity of being called ‘buddy’ for twenty minutes or so yesterday.
And I’m sure it was meant well but really, ‘buddy’?
Anyway, it’s for a short period of time every few months and there’s less hair on my head than there was when I went in so job done, I suppose.
Anyway, it’s almost Easter and there’s not a huge amount going on. On to the news:
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CLICKS BUYING BRICKS — IS THERE A FOOL IN THE ROOM? Do the higher (or infinite) ratings of the online majors make their purchases of bricks n mortar operators inevitable?
• Disruptors disrupt and, though there may not always be gold at the end of the rainbow, they often attract very high, even infinite if they are loss-making, ratings. At this point, does it become sensible for them to buy traditional operators? And, if they do, who is the fool in the room?
The situation in brief:
• Amazon, Airbnb, Uber, etc. have disrupted markets the world over. Deliveroo has revolutionised delivery in the UK
• Such companies have expanded whilst losing vast amounts of money. Indeed Uber has said that it may never achieve profitability
• Against this backdrop, it’s fair to ask whether shareholders will continue to support this approach
Where we are now:
• Amazon recently bought Whole Foods for $13.7bn. US supermarket chain Target and Morrison’s have also been rumoured
• Airbnb reportedly came close to buying Wyndham Worldwide’s leisure businesses (Hoseasons, Country Cottages, James Villas etc.)
• Will this continue? Will Deliveroo buy restaurants? It is entirely possible.
Does this make sense?
• The dot.com stocks would be buying cashflow and, ultimately, cashflow is what reduces reliance on a company’s shareholder to supply capital
• Indeed, acquisitive companies have always used their expensive paper to buy cheaper rivals
• It’s a win-win, right? The target gets a premium & the bidder buys a business at a ‘discount’
• But acquisitive companies may also buy businesses in order reduce risk or even ‘shed their skin’ & dilute one or other part of their existing operations
• Check out the Time Warner / AOL merger. Hailed as the deal of the (coming) century (it was January 2000), the deal didn’t end well
A few words of caution:
• Whether (and for whom) this is sensible depends on who is left holding which assets, at what price
• In a share for share swap, the vendors will end up with a smaller percentage of what they already had along with a (usually small) share of a (usually loss-making) dot.com company
Can we draw any conclusions?
• Sticking to generalities, Clicks AND Bricks make sense. Even if, ultimately, the store becomes a showroom for products rather than the main site from which they are sold
• This is less of an issue for food and drink. Delivery is a step in the process rather than the whole shooting match, as it is with Amazon, for example
• Many accept the diluted role of bricks & mortar — Next and Tesco have directories, travel agents have been going online for years & Amazon now has physical stores
• In F&B in particular, there is a major role for delivery, but there may also be a major role for Click & Collect. After all, why else by a store?
• Ultimately the consumer will be the judge of just who added the value. Was it the restaurant that sourced and cooked the food? Or was it some bloke on a bike?
GENERAL NEWS – PUBS & RESTAURANTS:
• Pernod Ricard it to acquire the premium Italian gin brand Malfy from Biggar & Leith for an undisclosed sum. Pernod has purchased a number of top-end gin brands over the last three years. Pernod says this is in line ‘with the launch of our “Transform and Accelerate” strategic plan’. The company says ‘we will continue actively managing our fantastic portfolio of brands.’
• The Britvic Soft Drinks Review for 2018 reports that sales of soft drinks in the coffee shop and café sectors rose from £3.9bn in 2017 to £4.1bn. Britvic says ‘we have seen a really stand out performance in retail, travel and leisure and this is an area that leans in well to the consumer trends and the need for convenience. This number was driven by coffee shops both branded and independent.’
• Research conducted by UKHospitality has found that the sector continues to reduce the gender pay gap, with the gap now at only 2.8% down from 4% last year. UKHospitality Chief Executive Kate Nicholls said: ‘The continued shrinking of the gender pay gap in the hospitality sector is incredibly positive news. It highlights the forward-thinking and inclusive attitude of our sector and the hard work employers have done to provide opportunities, irrespective of people’s gender’.
• The drinks giant C&C has invested in the craft brewer Jubel. The investment will see C&C acting as a strategic partner for Jubel aiding in the distribution in the UK & Ireland.
• Chilango has raised over £3.7m in Burrito Bond 2TM sales from over 800 people. The group will be using the money raised from the bonds for further expansion in London.
• Market Hall is set to open the UK’s largest food hall in the former BHS site on London’s Oxford Street. Simon Anderson, chief operating officer of Market Halls, said: ‘Market Hall West End will bring together the best of London’s wonderful and diverse food scene all under one roof. Our 12 kitchens will have something for everyone, with a roster made up from the most popular traders at Fulham and Victoria and some new, exciting concepts’.
• Patty & Bun founder Joe Grossman has launched two new brands, a chicken concept called Jefferies and a burger group called Smash Patty.
• Nielsen has found that 92% of consumers’ actual spending on alcohol in 2018 maintained or exceeded that of the previous year.
• The Inn Collection Group has hired Claire Burgess as its new CFO , as the group looks to double its portfolio by 2022.
• The Vegan cafe group, Kalifornia Kitchen is set to open its second site at the Fulham Market Hall next month.
• Caffe Nero has partnered with Fever-Tree to create a new drink ‘Espresso & Tonic’. Marcus Denison-Smith, Head of UK Marketing at Caffè Nero said: ‘We wanted to create a unique and exciting drink which maintained the premium quality of our coffee and brought a surprising delight to our customers’.
HOLIDAYS & LEISURE TRAVEL:
• Abta have predicted the decision to delay Brexit will lead to a boost in bookings for this summer. Chief executive of Abta, Mark Tanzer said the delay ‘should give people total confidence to book their holidays knowing nothing will change in the short term. It also gives travel businesses some respite from immediate no-deal planning, but with no-deal still possible in the autumn, uncertainty remains’.
• The Foreign and Commonwealth Office has warned travellers that strikes in Spain could cause delays at airports and railway stations.
• Travelodge is experimenting with hot food-to-go vending unit for guests staying in hotels with limited kitchen facilities.
• Spotify has opened a new research and development hub in London, creating 300 new jobs.
FINANCE & ECONOMICS:
• The ONS has reported that the CPI remained unchanged at 1.9% in March. Some observers had expected the rate to edge up to perhaps 2.0%. The ONS says ‘rising prices for motor fuels and clothing produced the largest upward contributions to change in the rate between February and March 2019.’
• The ONS reports that falling costs ‘across a range of recreational and cultural goods, food and motor vehicles’ helped to keep a lid on inflation.
• The NIESR reports ‘our measure of underlying inflation, which excludes extreme price movements, decreased by 0.1 percentage points.’ Observers have suggested that modest upward pressure on interest rates may now slacken off.
• The ONS has said that house price inflation is now at the slowest rate since September 2012. Prices across the country rose by 0.6% in the year to February (well below inflation), but they fell by some 3.8% in London.
START THE DAY WITH A SONG:
Yesterday’s song was Fire by Jimi Hendrix, today who sang:
RETAIL NEWS WITH NICK BUBB:
Planet ONS Watch: In the real world, as per the overall BRC-KPMG figures for March (the 5 weeks to March 30th), Retail Sales were reasonably solid last month, despite the later fall of Easter, given the weak comps driven by the very cold weather a year ago, but we will find out at 9.30am what “seasonally adjusted” life was like on the High Street on that strange parallel world, the Planet ONS (aka the Office of National Statistics), via their official Retail Sales figures…City economists (who still treat the rather dubious ONS figures as the gospel truth) generally expect a dip of 0.4% in month-on-month seasonally adjusted sales volumes, although Capital Economics have pencilled in a 1.0% fall in March (to give year-on-year volume growth of 3.8%), for what it’s worth. We will be focusing, as usual, on the year-on-year non-seasonally adjusted sales value figures and the key split between
BDO High Street Sales Tracker: We flagged yesterday that sales at John Lewis were boosted last week by the calendar shift of Easter and the BDO High Street Sales Tracker for medium-sized Non-Food chains for last week, w/e Sunday April 14th, was also better. BDO Fashion Store sales were up by 2.0% LFL (including Online), helped by soft comps and Total BDO LFL sales (including Homewares and Lifestyle sales) were up by 2.6% last week (up by 0.8% in Store sales and up by 18.8% Online).
News Flow Next Week: There is not that much company news scheduled for next week, after the long Easter weekend, but the ABF (Primark) interims, along with the Boohoo finals, are out on Wednesday morning, whilst the Carpetright pre-close update is on Thursday. And the House of Commons returns to work on Tuesday, after the Easter break, so expect the Brexit torture to continue…