Craft products, RTN, JDW, Richoux, Uber Eats etc.:

A DAY IN THE LIFE:

I didn’t really know that dad-jokes were a thing until I was told three or four times in one day that I was guilty of trotting a few out.

I was told that they’re old, tired and pointless, perhaps a bit like the purveyor of them and that they can be identified because the only one laughing at them is the one that told them.

So perhaps guilty as charged but, on a different subject, don’t you find it annouing when you’re asked to fill your email address in on a form and the space given is only about two centimetres long?

Because we can’t all have the address a@b.com. Most of us will be first name dot last name at wherever you work and, if your first name is, say, Christopher or Elizabeth, your surname has three or four syllables and the place you work is acmefabricationsnortheastern or some such, then you’re in trouble.

Anyway, I’ve got 32 characters including punctuation in my email address – but how about you? On to the news:

60 SECONDS – CRAFT AND PREMIUMISATION: GIN AND RUM TO FOLLOW BEER?

How did we get here?

• The number of UK breweries has grown by 64% over the past five years, according to HMRC data analysed by Hacker Young

• Much of this growth has come from a boom in ‘craft’ microbreweries offering more premium products, as has been the case with the US

• The UK spirits market is undergoing a similar craft revolution. A new distillery opens every week, meaning much more choice for the discerning consumer

Where are we now?

• Per WSTA, UK rum sales are expected to have beaten the £1bn mark for the first time in 2017

• Gin sales totalled £1.4bn in 2017, up 27% in volume yoy, with 2018 exports forecast to be worth £600m.

• Big brands are going premium. Diageo hit the headlines in June of last year for its £1bn purchase of premium tequila brand Casamigos

• Similar acquisitions might be expected in the coming months as drinks giants look to gain market share in this fast-growing part of the market

What does it mean?

• The craft and premium segments of the UK spirits market are poised for another year of sales growth and M&A

• Consumers are willing to drink less but spend more when they do – meaning high margin, aspirational brands are well-placed

PUBS & RESTAURANTS:

• Restaurant Group H1 numbers tomorrow. Betting on minus 4% LfLs, some talk of green shoots, bad July, better August & held dividend.

• JD Wetherspoon boss Tim Martin tells Brightbart News he is working towards a no-deal Brexit, which would be good for the country. Food prices would come down as tariffs were removed, though this would leave government with a hole in its finances where the tariff income used to be.

• Further to its trading update yesterday, Richoux has announced that it has completed a subscription to raise approximately £1.09 million. The fund raise was undertaken at 6p per share.

• Evolution continues as Uber & others expand, High Street continues to discount prices & face declining LfL sales.

• Uber Eats plans to have 400 virtual restaurant brands on its UK platform by the end of the year and is working with restaurants across the country to identify ‘selection gaps’, per MCA. These virtual restaurants, of which Uber Eats currently has around 60 on its platform, more often than not operate out of existing restaurant kitchens or use other kitchen space providers.

• Purity Brewing Co. has received £7.5m of funding from the British Growth Fund, which it intends to put towards UK expansion, export sales growth, and product development. Purity was founded in 2005 in Warwickshire and brews a selection of well known beers including Mad Goose, Lawless Lager and Longhorn IPA.

• Stonegate Pub Company is ready to accelerate the expansion of its Popworld concept and has six new sites lined up to open before the end of the year, including its first in London.

• Drinks giant Pernod Ricard has forecast underlying profit growth from recurring operations of 5-7% for the full year ending 30 June 2019, with strong sales in India and China expected to drive performance. Pernod’s sales for the 2018 financial year totalled €8,987m. However, shares in the company fell by 2.1% as European markets opened this morning.

• The Executive Director in Scotland for UKHospitality, Willie Macleod has reacted to the Scottish government’s decision to introduce a fee for personal licence renewal, stating: ‘The Scottish Government’s decision to introduce fees for renewal will mean an additional headache for councils and an extra financial burden that employers in Scotland could do without. This sort of approach to business, treating them as cash-cows or burdens to be managed, rather than assets to be supported and encouraged, does little to boost vital businesses’.

• The Coca-Cola Company is set to acquire Moxie, the US-based soft drinks brand from its bottling partner Coca-Cola of Northern New England.

• Jack Daniels maker Brown-Forman has reduced its earnings guidance for the 2019 fiscal year due to the Trump administration’s trade war. Other brands that have cut guidance as a result of tariffs imposed on their finished goods or raw materials include Ford, General Motors, Fiat Chrysler and Harley-Davidson. Brown-Forman’s reduction in forecast earnings to a range of $1.65 to $1.75 a share compares with a median forecast of $1.78 a share among analysts polled by Thomson Reuters.

• LDC research on the status of the BHS estate has found that over half of its stores (52%) still lie empty two years after final closure. Other units have been demolished, split or, more commonly, merged into existing stores to expand floorspace. Primark has been the main re-occupier, with 7 of the former BHS stores becoming Primark units. B&M Bargains has been the largest re-occupier of ex-BHS stores outside the fashion sector, with a new unit opening last week in part of the former BHS store in Blackpool.

• The FT has reported that, were YUM China to be purchased by private equity, it would be the largest such deal undertaken in China to date. The company has thus far rejected approaches. The FT points out that YUM and McDonald’s have both now been in China for around 30yrs.

• The Food and Drink Federation has indicated that food and drink exports have increased 5.1% to £10.68bn in H1 2018. The FDF has called on the  Government to provide greater support for UK food and drink manufacturers to compete with European rivals.

HOLIDAYS & LEISURE TRAVEL

• HotStats reports UK hotel RevPAR up 7.9% to £114.34 in August with occupancy up 1.7% to 87.1% and ADR up 5.7% to £131.21. Hotels in the UK successfully recorded a 0.6-percentage-point saving in payroll, which fell to 24.8% of total revenue.

• Dalata Hotels has acquired a 300-year leasehold in Aldgate for its first central London hotel for £91m. The Clayton Hotel Aldgate London will contain 212 rooms and is due to be operational by the end of the year.

• Jet2.com achieved 82.4% on-time performance in May, 82.6% in June and 85.4% in July, outperforming all other UK airlines, according to OAG statistics. Jet2 is the UK’s third largest airline with a fleet of 91 aircraft in operation flying more than 350 flights daily.

• US hotel deal volume grew 11.3% in the first half of 2018 and transaction price per room was up 12.2%, according to STR’s midyear update of the Hotel Transaction Almanac. ‘Transaction volume and pricing are up, while cap rates have decreased from last year,’ said Joseph Rael, STR’s director of consulting & analytics. ‘There seems to be more optimism around the industry right now, and that of course pushes more transactions activity. There are also several high-priced assets likely to be sold in the next few months, which will significantly boost average pricing for the remainder of the year.’

OTHER LEISURE:

• Facebook rolls out its on-demand video service worldwide to compete with YouTube, Netflix and Amazon Prime by offering a range of shows to viewers. Facebook has said it expects to spend up to $2bn to produce content for Facebook Watch compared to Netflix’s $8bn and Amazon’s $4.5bn.

• Activist hedge fund Elliott believes Walt Disney’s deal to buy assets from Twenty-First Century Fox has valued Sky at more than $34bn higher than any current offers for the British broadcaster. Disney has also agreed a separate deal to buy TV and film assets from Fox, including its Sky shareholding, for about $71bn.

FINANCE & ECONOMICS:

• The SMMT reports that the number of cars manufactured in the UK fell by 11% in July compared with July 2017. Production of cars for export was down 4.2% with the domestic market somewhat weaker. The SMMT reports ‘while the industry is undoubtedly feeling the effects of recent uncertainty in the domestic market, drawing long-term conclusions from monthly snapshots requires a health warning.’

• The SMMT has called for seamless borders to be maintained post Brexit.

• Reuters poll suggests that house prices will fall in London both this year and next by 1.6% and 0.1% respectively.

• Oil up at $77.27.

• Sterling up sharply on suggestion that EU may cut the UK a special deal. Pound at $1.3026 and €1.1132.

• UK 10yr gilt yield holding its gains & up a further 2bps at 1.47%.

• World markets: UK down on strong pound, Europe & US up and Asia mixed in Thursday trade.

• Brexit etc.:

o Dominic Raab says he is confident of getting a deal. Bookies still agree but EU is talking about a ‘bespoke’ relationship.

PRIOR DAYS LATER TWEETS:

• Later tweets: Langton & the coffee market. Edging towards saturation? Possibly. But certainly more risk for incumbents than for some new entrants

• CGA Prestige says ‘weather issues & exchange rates’ etc. mean food prices up 3.2% in last year. CEBR says will rise 5% more shortly

• Food price squeeze & interest rates up. Where will consumers not spend their money? Betting still on big-ticket items…

• Smaller operators. Richoux likely disposal & fund raise. Tasty, Comptoir, Fulham Shore & others near historic lows

• Discounts still prevalent with Prezzo and Bella Italia offering 40% and 30% off mains respectively

• UK 10yr gilt yield up sharply at 1.45% (was 1.27% yesterday). Signalling what, exactly…?

• Mrs May says Chancellor using ‘out of date figures’. Says no-deal Brexit would ‘not be the end of the world’. Just a negotiating position??

START THE DAY WITH A SONG:

Yesterday’s song was Heart of Glass by Blondie. Today, who sang:

And when the money, comes in for the work I do,

I’ll pass almost every penny on to you

RETAIL NEWS WITH NICK BUBB:

WH Smith: Ahead of today’s pre-close trading update for y/e August, we flagged yesterday that all the indications were that WH Smith had yet again delivered the goods over the key summer period for the WH Smith Travel business, eg with the Heathrow passenger traffic figures for July up 3.7%. The company says that “the Travel business continues to perform strongly with good sales across all of our channels” and notes that after opening eight stores in Madrid Terminal 4 in mid-August and the first of six stores in Rio de Janeiro it now has as many as 286 stores open internationally. As for the much maligned High Street business, that continues to perform in line with expectations and, needless to say, “cost savings and margin improvements have been delivered in line with our profit focused strategy”. And, as we confidently predicted, the overall statement is almost exactly the same as the
one at this time last year: “WH Smith expects the outcome for the year to 31 August 2018 to be in line with expectations”. 

John Lewis Watch: Despite helpfully autumnal weather and a weak comp last week, w/e Aug 25th saw trading remain a bit subdued at John Lewis, with gross sales only 1.7% up (just about flat on a LFL basis, on our calculations). Home sales were still down, by 2.1% gross, and Electricals were 0.9% down gross, but Fashion sales were up by 8.0% gross. After the weak start to the second half of the financial year, gross sales are now running up by just 0.5% gross over the last 4 weeks combined (very similar to the disappointing first half outcome, as in the previous 26 weeks, John Lewis was up cumulatively by 0.3% gross or c1.5% down LFL).

Waitrose Watch: The cooler weather was again unhelpful last week to sales of picnic and barbecue fare at Waitrose and yesterday’s weekly sales overview from JLP flagged that gross sales at Waitrose were 2.2% down, ex-petrol, in w/e Aug 25th (c2% down LFL), “with a cold and wet weekend for most of the country contrasting with a very hot Bank Holiday weekend last year”.  The last 4 weeks overall have been up by only 0.4% gross. After a strong end to the first half, the cumulative sales picture for the previous 26 weeks was +2.3% gross for Waitrose (c2.2% up LFL).

News Flow This Week: The Homebase CVA creditors vote is being held tomorrow, whilst the monthly GFK Consumer Confidence index will be published overnight.