Carlsberg, YUM, Pernod, CCL, interest rates, foodservice prices & other:

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A DAY IN THE LIFE:

The dog caught, despatched and ate a squirrel yesterday, more or less in that order.

A grey one, thankfully, but that proves, if proof were needed, that the downside for one of the players in her little ‘game’ with the furry vermin, is considerably greater than it is for the other party.

Still, that’s what happened.

The dog clearly sees squirrels as friends, playmates and lunch depending on the state of her digestion and did she share any of her meal with us?

Not on your Nelly, rather she padded around for a while and wouldn’t let anyone near her.

She swaggered and smirked unattractively and then disappeared only to reappear and demand to be let in some time into the warmth later replete and with her breath smelling distinctly of squirrel.

Anyway, that’s one less of the critters to raid the birdfeeders over the winter. Have a great weekend and let’s move on to the news:

PUBS & RESTAURANTS:

Interest rates:

As expected, the Bank of England’s MPC cut UK rates from 4.75% to 4.50% yesterday lunchtime. The vote was 7-2 with the dissenting members pushing for a 25bp cut…

• Inflation, the recent past. The Bank says ‘there has been substantial progress on disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations. That progress has allowed the MPC to withdraw gradually some degree of policy restraint, while maintaining Bank Rate in restrictive territory so as to continue to squeeze out persistent inflationary pressures.’

• Inflation, outlook. The Bank says ‘domestic inflationary pressures are moderating, but they remain somewhat elevated, and some indicators have eased more slowly than expected.’ The Bank forecasts CPI inflation of 3.7% in 2025 Q3. It adds that it ‘will pay close attention to any consequent signs of more lasting inflationary pressures.’

• GDP. The Bank says ‘growth has been weaker than expected at the time of the November Monetary Policy Report’ but it adds that ‘GDP growth is expected to pick up from the middle of this year.’

• Employment. The Bank of England says ‘the labour market has continued to ease and is judged to be broadly in balance. Productivity growth has been weaker than previously estimated, and the Committee judges that growth in the supply capacity of the economy has weakened. As a result, the recent slowdown in demand is judged to have led to only a small margin of slack opening up.’

• Responses: The CBI says ‘today’s cut to interest rates was in line with our expectations and reinforces our view of a gradual loosening in monetary policy over this year.’ It adds that the MPC is ‘increasingly having to balance conflicting objectives.’ It says growth is weak but inflation is picking up. The CBI concludes ‘while we still expect a few more rate cuts this year, risks to this forecast are now balanced in either direction.’

• Responses. UK Hospitality CEO Kate Nicholls says ‘cutting interest rates was the right move from the Bank of England.’ She says ‘driving growth has to be the priority and lower interest rates will play a part in achieving that goal.’ Ms Nicholls adds ‘practically for hospitality businesses, it will provide some much-needed relief for those still paying back Covid loans but we urge the Government to allow more flexibility over the repayment periods for those loans to further ease the pressure on venues.’ Ms Nicholls calls for a delay the changes to employer NICs.

Foodservice prices:

The latest Foodservice Price Index (FPI) report from Prestige Purchasing and CGA by NIQ has revealed that prices rose in December vs November although the year-on-year rate fell further, to 1.9%. The rise in December, of 1%, though less than the rise in December last year, was a break from the recent run of monthly reductions and is the largest monthly jump in six months…

• The FPI shows that some categories showed continued easing in their year-on-year inflation rates.’ Vegetables though +3.0% on a year, saw falls in December as did sugar, jam, syrups & chocolate. But ‘oils & fats (+5.7%) emerged as a category of concern. Fish (-1.2%) remained the only category with year-on-year deflation.’

• CGA and Prestige say that the index ‘highlights ongoing volatility and uncertainty in the foodservice market, and the need for operators to remain vigilant and closely monitor price trends across all categories.’

• The report suggests that ‘the current threat of an international trade war introduces further uncertainty into the market’. it says that ‘disruptions to global supply chains and fluctuations in commodity prices could exacerbate inflationary pressures and create additional challenges for the hospitality sector.’

• Shaun Allen, Prestige Purchasing CEO, says ‘this month’s figures are a reminder that the battle against inflation is far from over. While we’ve seen encouraging progress in the year-on-year trend, the month-on-month increase is a reminder we must stay vigilant. The potential impact of the Autumn Budget, combined with these latest figures, suggests that we could be facing a renewed inflationary challenge in 2025.’

• Reuben Pullan at CGA says ‘after a solid end to 2024 for hospitality sales, news of renewed foodservice inflation is a concerning start to this year. On top of other pressures including increased international economic uncertainty, National Insurance rises, and hesitant consumer confidence, an upswing in prices will squeeze operators’ margins even tighter. The inflationary threat is another reason why hospitality needs more support from government so businesses can invest, create jobs and drive growth.’

• Langton: The FPI adds to existing evidence suggesting that, whilst y-o-y prices in food are down, December prices rose and, as a result, it is less likely that food prices will fall further or move into deflation. This naturally has implications both hospitality’s cost-base and for disposable income left in the hands of consumers after they have paid for food to eat at home.

Fast food market:

Meaningful Vision comments on the fast food market in 2024 saying that it ‘proved to be a year of mixed fortunes…with some segments thriving, while others grappled with a variety of challenges. Meaningful Vision’s Foodservice market insights reveal a ‘dynamic marketplace shaped by rapidly evolving consumer preferences, an increasing range of economic pressures, and intensifying competition….’

• Meaningful Vision reports that ‘bakeries and sandwich shops emerged as the star performers, enjoying a 4.7% surge in foot traffic.’ These are not LFL numbers and Meaningful Vision says the ‘growth was fuelled by the expansion of major chains like Greggs, Gail’s, and Pret A Manger.’

• The Foodservice Report says that ‘ethnic fast-food also demonstrated robust growth, with a 2.6% increase in traffic’ but it adds that ‘the chicken segment requires a more nuanced understanding. While overall traffic in 2024 declined by 1.9%, a resurgence in Q4 marked by a 1.1% increase in customer visits offered a glimmer of hope. This recovery can be attributed, in part, to the arrival and expansion of prominent American chicken chains, reigniting consumer interest in this category.’

• Burgers ‘faced significant headwinds, experiencing a notable decline in foot traffic. This suggests that the once-dominant burger chains are facing increasing competition from other fast-food categories, emphasising the need for ongoing competitive analysis in the Foodservice industry.’

• Meaningful Vision reports that ‘consumer traffic patterns throughout the day underwent significant shifts in 2024’. It says that breakfast & morning trade was in growth but ‘the late afternoon and evening periods tell a different story, with overall traffic declining. The most significant drop occurred after 7 pm, with a substantial 12.3% decrease in footfall indicating a change in consumer dining habits during these later hours.’

• London performed more strongly than did the provinces. London had ‘nearly 4% growth in overall fast-food traffic.’ Meaningful Vision reports that ‘other major cities, including Manchester, Birmingham, and Glasgow, experienced more moderate traffic increases reflecting stable but less rapid expansion.’ Smaller cities and regional towns ‘faced declining foot traffic, suggesting that economic pressures and shifting consumer spending patterns are impacting upon demand for  fast-food more profoundly in areas beyond the major urban centres.’

• CEO Maria Vanifatova says ‘the UK fast-food market will remain highly competitive in 2025. While burger chains still hold a significant market share, they face increasing pressure from other categories, especially chicken and ethnic fast-food. Chicken chains are poised for even faster growth this year, driven by the fact that chicken consumption is currently 2.5 times higher than beef in retail, yet beef still dominates the fast-food arena due to the popularity of burgers, indicating a great potential for chicken chains to capture more market share.’

• Ms Vanifatova says ‘bakeries and coffee shops are another segment where we anticipate heightened competition and continued growth, supported by the ongoing return to office work. Ultimately, the winners in 2025 will be those operators who can effectively leverage data-driven insight into consumer behaviour, daypart dynamics, and segment trends.’

Coffee market:

Lumina Intelligence has produced an analysis of coffee spend in the UK saying that the over-65s are responsible for 27.3% of coffee occasions (up from 26.0% in 2023) with those aged 45-65 responsible for a further 37.6% of occasions (slightly down on last year’s 38.2%). Together, the relatively mature market is responsible for 64.9% or almost two thirds of all coffee-drinking occasions…

• Lumina says the desire to get ‘out and about’ remains ‘the top driver for coffee missions at 23.8%, though it has seen a decline over the past year.’ It adds that some ‘59% of coffee buyers are highly experience-driven, encouraging coffee shops to evolve into vibrant community hubs.’

Other news:

The freehold investment interest of the Royal Arcade & O2 Academy in Boscombe, Bournemouth has been brought to market by leisure property specialist Fleurets.

COMPANY NEWS:

Carlsberg yesterday reported Q4 and full year numbers saying ‘2024 was a year of major events that will shape the future of Carlsberg.’ The company both purchased Britvic and it bought in the 40% of the Carlsberg Marston’s Brewing Company that it did not already own. Carlsberg says ‘despite the challenging environment in some of our major markets, we achieved organic operating profit growth at the high end of our earnings guidance….’

• Away from the UK, Carlsberg gained full control of the businesses in India and Nepal and it announced the takeover of the Pepsi licence in Kazakhstan and Kyrgyzstan from Q1 2026. The group also disposed of its Russian business in December last year.

• Carlsberg reports organic revenue growth of 2.4%. It reports headline reported revenue growth of 1.9% to DKK 75,011m. Reported operating profit was up by some 2.8% to DKK 11,411m, impacted by currencies. Adjusted earnings per share for continuing operations was DKK 54.9 (+0.6%), supported by the share buy-back.

• CEO Jacob Aarup-Andersen says ‘2024 was a year of major events that will shape the future of Carlsberg.’ He adds ‘given the challenging environment in some of our major markets, which impacted the volume development, we’re satisfied with our solid 2024 results.’ The CEO adds that we will ‘continue to develop the Carlsberg Group in the years to come, delivering on our growth ambitions.’

Yum! Brands yesterday reported Q4 and FY numbers saying that pre-exceptional Q4 EPS was up 6% at $5.48. UK KFC sales were up 5% in Q4 but down 1% on the year as a whole…

• The company CEO, David Gibbs, says ‘2024 was marked with exceptional core operating profit growth given the complex consumer environment.’ He says the year ‘demonstrates the resilience of our business model and the agility of our world-class teams.’ CFO Chris Turner says ‘in 2024, we opened 4,535 new stores across more than 100 countries.

Ahead of its scheduled H1 results, Pernod has brought forward its numbers, which disappointed the market. The company reported an organic sales decline of 4% to €61,8 billion against 12 months earlier….

• Numbers were 6% lower in absolute terms. Referring to White House posturing, the company says ‘amid extraordinary trade tensions, we are focused on defending organic operating margin to the fullest extent possible.’

• For the longer term, Pernod is forecasting organic net sales growth of between 3 and 6 per cent between 2027 to 2029, a cut from its former aim of 4 to 7 per cent. Diageo earlier in the week dropped its medium-term sales targets in light of the uncertainty over President Trump’s proposed tariffs. Pernod has been suffering as a result of China’s tariffs on European brandy imports.

Compass Group shares fell 2% yesterday on what looked to be generally good results.

Loungers has reported that Glazer Capital has taken its stake in the company up from 6.2% to 12.5%. This puts Glazer in a powerful position should it decide to remain on the share register post the current take-private.

HOLIDAYS & LEISURE TRAVEL:

Carnival-owned P&O Cruises has reported its strongest ever January ‘with record-breaking sales volume across the board during the month.’ It says ‘the two most popular destinations were Norwegian fjords and Caribbean.’

Hilton has reported Q4 and FY numbers beating estimates and saying that revenue came in at $2.78 billion. Adjusted Q4 EPS was $1.76 per share compared with analysts’ average estimate of $1.68.

OTHER LEISURE:

Spotify reported FY numbers yesterday confirming that it had moved into profit. The company posted net income of €1.138 billion (versus a loss of €505 million in 2023) on revenue of €15.673 billion, up 18.3%. The group’s shares rose around 10% on the news.

Peloton yesterday reported FY numbers saying ‘we are delivering on key initiatives.’ The company is raising its FY25 adjusted EBITDA guidance by $60m to a range between $300m and $350m.

FINANCE & MARKETS:

For the Bank of England’s rate cut, see Pubs & Restaurants above.

Chinese producer BYD has overtaken Tesla in the UK in terms of electric cars sold. BYD sold 1,614 passenger cars in January whilst Tesla sold just 1,458. BYD is up by 500% and Tesla is down by 8%.

Sterling down at $1.2419 and €1.1976. Oil lower at $74.68. UK 10 year gilt yield up 2 basis points at 4.46%. World markets better yesterday but mixed in the US and Far East & London set to open down around 29 points as at 6.30am.

RETAIL WITH NICK BUBB:

• Today’s News: There is no Retail news out today, but there was plenty that came out during the day yesterday for us to chew over: from M&S and Vertu Motors, as well as mighty Amazon.

• Marks & Spencer Watch: The hard-working M&S PR team released two press releases yesterday. The first, early in the morning, about M&S Food, was sent to analysts, trumpeting “M&S Food’s Brainiest January Ever” and flagging that the launch of the M&S ‘Brain Food’ brand has ‘surpassed expectations’, with ‘some stand out results’ for the Brain Food Super Seeded Nut Butter, the Brain Food Super Seeded Granola, the Brain Food Super Smoothie and the Brain Food Brain Ball. The second press release, at around lunchtime, about M&S Non-Food, was not sent to analysts, oddly enough, even though it contained some big news about the management of the business, with John Lyttle (the  former CEO of Boohoo and COO of Primark) to join M&S as the MD of Clothing, Home & Beauty in “a planned succession”, replacing Richard Price, who, after 5 years in charge, will be
leaving M&S “to pursue a portfolio career”. M&S CEO Stuart Machin said in the statement that “Richard leaves the business as a long-standing friend of M&S and we wish him the very best…John’s down-to-earth leadership style fits with our sleeves rolled up, ‘tell it as it is’ culture, and I know he will be a brilliant colleague to work with”.

• Yesterday’s Other News: At 2.34pm yesterday afternoon Vertu Motors (the automotive retailer with 198 sales and aftersales outlets across the UK, including the Bristol Street Motors chain) issued a surprise trading update, to flag that the Board anticipates that the group’s adjusted profit before tax for y/e February will be “significantly below current market expectations”, primarily due to dislocation in the new car market caused by the ZEV mandate on electric cars. However, Vertu offset the bad news by announcing that it was allocating an extra £12m to its share buyback programme and it soon put its money where its mouth is by buying back c88,000 shares at c54.5p yesterday, helping to stem the slump in its share price to only c7.5% on the day. And, over on the West Coast of the US, the Amazon Q4 earnings were announced at 9pm our time yesterday evening, but although the results were
good, with EPS of $1.86 beating by $0.38 and revenue of $187.9bn (up by 11% in constant currency) beating by $560m, Wall Street was disappointed by the relatively cautious Q1 guidance and the shares sold off in after-hours trading, ending the session down by over 4%.

• Deloitte UK Retail Watch: Yesterday’s Deloitte webinar in London on Retail Trends 2025 had the obligatory plugs for the rise of Generation Alpha (born after 2010) and AI systems, but the centrepiece was ‘a fireside chat’ with Paul Marchant, the impressive CEO of Primark, who made no apologies for the belief of the business in the power of ‘bricks and mortar’, noting that early in December Primark opened 4 new stores in one day (in Glasgow, New York, Madrid and Tours, in France) and that they have high hopes of the small store concepts opened in Lisbon and Bolton.

• Today’s Press: The invaluable press summary email from the Guardian about today’s front-page headlines notes that the Guardian itself leads with “Fears over stagflation as Reeves growth plan suffers double blow”, while the Financial Times has “Bank of England halves forecast for growth as rate cut powers FTSE100” and the Times says “Bank’s alert on growth gives Reeves new setback”. The i fits a lot in: “New growth and inflation warning piles pressure on Reeves to boost flagging economy”. The Daily Mail wails that there is a “New era of stagflation” as it blames “Reeves’s ruinous Budget”. “Bloated state is harming economy” is the headline in the Telegraph, while the Daily Express uses some non-standard economic jargon with “Reeves ‘wake up call’ on ‘putrid’ figures”.

• News Flow Next Week: There’s not much happening next week, although Tuesday brings the BRC-KPMG Retail sales figures for January, the Dunelm interims and the Retail Week/Grocer ‘Live’ Conference.