Supply, consumer spending, inflation & shrinkflation, delivery etc.:

A DAY IN THE LIFE:

Down in London again this week and, though I’ve been traveling to the smoke since un-lockdown without a coat, that’s becoming rather an optimistic stance to take on a five day view when made so early in the week.

However, I’m hoping to get away with it this time without either the heavens opening for real or it dipping below freezing of a morning – or both.

Anyway, I was thinking about time as a dimension over the weekend. That because, in one half hour period, I saw our dog, bless him the idiot, a fox and one of the neighbourhood cats pass in front of my home office window and sniff a suspicious brown lump on the grass.

Little doubt that one of them both smelled it and dealt it but, it did occur to me that, though the three animals were not separated by any one of the three dimensions that we normally credit with the title dimensions, they were separated by time.

If they hadn’t been, of course, there would have been a bit of a kerfuffle and rather a mess and the same could be said when you or I cross a busy road four or five seconds before the same space is occupied by a speeding bus.

Not really going anywhere with this so let’s move on to the news:

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PUBS & RESTAURANTS:

Accountant BDO has reported that the UK’s supply problems are hitting business and consumer confidence. It says that output growth across UK businesses slowed for the fifth month running in September and is not at levels last seen during lockdown in March.

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More on Supply. The Times reports that Felixstowe ‘is so congested that its management is considering turning vessels away.’ This won’t help with the supply of product.

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Consumer spending (i.e. spending power and spending inclination). The ability to spend is impacted by movements in income whilst the propensity to spend is anchored in confidence.

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More on consumer spending. Barclaycard has updated on consumer spending (at least that undertaken by plastic rather than cash) saying that it grew by 13.3% in September. Some of this was hardly discretionary as Barclaycard says ‘spending on essential items recorded its highest growth in over two years, as fuel prices climbed and demand at the pumps soared.’ Essential spend was up 14.4%. The card company says ‘non-essential items had a smaller uplift than in August, yet pubs, bars & clubs and entertainment saw significant boosts as office workers enjoyed evenings out.’

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Barclaycard has also commented on consumer confidence, saying ‘the number of Brits who felt confident in their ability to buy non-essential items fell four percentage points in September (59 per cent, compared to 63 per cent in August) – the lowest this figure has been since February 2021, during the third national lockdown.’ More on this and on inflation expectations below.

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The card company says ‘many sectors also saw considerable growth in September, owing in part to workers returning to offices, the onset of a new school term and preparations for the winter months with home improvements and purchases of warmer clothing.’ It singles out ‘pubs, bars & clubs [which] benefited from a 43.5 per cent boost as colleagues reunited at post-work gatherings, while entertainment saw its strongest growth in more than two years (+28.0 per cent), with new film releases, gigs and theatre shows encouraging Brits back to venues.’

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Inflation. The press has picked up that the government is swerving an even larger cost hit than the one the taxpayer has sustained already by allowing business and consumers to cover additional costs caused by the spike in gas prices. It says ‘Britain’s main carbon dioxide producer is to hike its prices under a government-brokered deal to keep supplies to key industries going without taxpayer subsidies.’ This works for taxpayers but will lead to higher prices for a number of industries including many packaged food and drink sub-sectors.

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Shrinkflation. Although there are declining economies in terms of packaging costs, The Telegraph warns that customers should get used to the idea that there could be more ‘shrinkflation’ out there – that is, where producers reduce the amount of product they are selling but they charge the same for it.

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Company insolvencies predicted to rise. Euler Hermes has suggested that 37,000 businesses could fail before 2023 as Covid support is reduced.

Foodservice analyst Peter Backman questions what might happen to demand as operators pass on price rises made necessary by rising wage and other costs as well as by the hike (the first of two) in VAT. He asks will customers pay the increase and concludes ‘some will, some won’t; a recent UKH survey shows that half of those surveyed would eat out less frequently if prices went up. Maybe they’ll chose to go to a restaurant offering more competitive prices or maybe they’ll switch to buying lower priced items off the menu. Whatever happens, a likely outcome for restaurants is a mix of reduced turnover and reduced profits.’

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Delivery. Foodservice analyst Peter Backman considers how seated restaurants can keep diners happy and at the same time service delivery. This may not be possible. Backman points out that not only may there by a ‘clash of priorities in the kitchen’ but helmeted riders may end up jostling with customers, they may leave the door open and the like with the result that ‘dine-customers become exasperated over the drop in the quality of service, especially noticeable in the time taken to be served.’

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UKHospitality’s #VATsEnough campaign (aiming to make the 12.5% VAT rate permanent) has seen CEO Kate Nicholls reiterate that businesses are ‘ facing such an intense squeeze on margin or having to pass on the VAT increase to customers in the form of higher prices’.

COMPANY & OTHER NEWS:

Mission Mars, which runs a number of leisure and bar operations via its subsidiaries Zecol, Zecol Thomas and Rudy’s Pizza, has reported results for the year to 27 September 2020 saying that the group has ‘continued to deliver strong financial performance with growth in key areas of the business resulting in record site revenues and Group EBITDA.’ The group has reported revenues of £21.6m, down from £33.3m in the prior year with adjusted EBITDA of £1.1m vs £3.7m in the prior year. Given the group’s year end, the slowdown occurred in the second half and will persist into the next financial year (which has just ended). Mission Mars has reported a loss before tax for the year of £1.7m against a loss in the prior year of £1.1m.

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Lumina Intelligence reports that the number of consumers choosing to eat and drink out rose 5% up the four weeks to 5 September 2021 to 56%, with average spend at £12.58.

The Night Time Industries Association (NTIA) reports that an estimated 393,000 jobs were lost in the night time economy while around 86,000 jobs in the nighttime cultural economy. Michael Kill, chief executive of the NTIA, said it was critical Covid restrictions were not imposed on the sector in the run up to Christmas.

The MCA reports that serial food entrepreneur Richard Caring’s Troia Limited has secured a new £168m revolving credit facility from HSBC. The group said that trading during the times that its restaurants were allowed to open during the accounting period were ‘extremely strong’.

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Gordon Ramsay Restaurants has partnered with Jin Kyoung C. Ltd  to open numerous dining outlets across South Korea in the next 10 years.

Coca-Cola HBC has acquired a minority stake in Casa del Caffè Vergnano for an undisclosed sum. The deal also includes an exclusive distribution agreement for Caffè Vergnano’s products in Coca-Cola HBC’s territories outside of Italy.

GigRealm, an online music booking platform, has partnered with Greene King to use live music to drive footfall, increase wet sales and create memorable experiences.  28% of customers now state they would be encouraged into visiting a pub or bar if live music was on offer.

China has banned British beef imports of cattle under 30 months of age after a case of ‘mad cow’ disease in the UK last month.

LEISURE TRAVEL & HOTELS:

Barclaycard has commented on travel spend during September, saying that ‘although still in decline, travel agents (-45.4 per cent) and airlines (-49.5 per cent) had month-on-month improvements (compared to -53.3 per cent and -53.0 per cent in August), as holidaymakers booked overseas trips to enjoy the end of summer.’

The Bank of England has released data suggesting that seven travel companies owe some £2bn in Covid loans. Travel Weekly points out that ‘Ryanair, easyJet and Wizz Air owe a combined £1.2 billion.’ It adds that ‘Jet2 has £200 million outstanding, Flight Centre £115 million, Gatwick £275 million and Stagecoach £300 million.’

Heathrow reports passenger numbers remained at just under 40% of pre-pandemic levels in September despite EU rivals having a stronger resurgence. North American traffic is only 25% of 2019 levels.   

OTHER LEISURE:

Entain has updated on trading for the quarter to end-September saying that it has seen a ‘strong Q3 performance with Group net gaming revenue up 4% against a period of high growth in the prior year.’ It says online NGR was +10%. CEO Jette Nygaard-Andersen says ‘these results demonstrate Entain’s continuing ability to deliver sustainable, consistent and diversified growth.’ He says ‘we continue to lead our industry in the all-important area of player protection, and I am excited by the early results of our innovative ARC programme, which we firmly believe has the potential to transform player protection across the industry’ and adds ‘we remain very confident in Entain’s future prospects.’

Nintendo has released the new model of the Nintendo Switch, named the Switch OLED. Since 2017, sales of the Switch have totalled nearly 90 million units. 

FINANCE & MARKETS:

The IFS reports that higher inflation and rising interest rates will increase the cost of servicing Britain’s £2.2 trillion debt by £15 billion a year.

Sterling weaker at $1.3593 and €1.1762. Oil price up at $83.87. UK 10yr gilt yield up 3bps at 1.19%. World markets heading lower yesterday and London set to open down 44pts as at 6.45am.

RETAIL WITH NICK BUBB:

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