A Day in the Life:

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We’ve been hearing sugar this and sugar that for weeks now.

And that’s finally sunk in a little such that, much as I like to deny that I’m influenced by all of this background bleating, I did find myself checking the labels on some foods yesterday and, do you know, there’s more sugar in a packet of crisps than there is salt?

Yes, really.

There’s 0.70g of sugar in a 30g pack of McCoy’s Flame Grilled Steak crisps compared with 0.45g of salt. And then there’s 0.90g of sugar in a 25g packet of Walker’s Beef (but somehow ‘suitable for vegetarians’) crisps compared with 0.36g of salt.

So what’s going on here? There’s sugar but little salt, a bit of fat but no actual meat in my beef crisps, are my taste buds on strike or has some fiendishly clever, pointy-headed scientist somewhere in the dim and distant past worked out how to hoodwink us into thinking that sugar is salt, that a scrape of marmite is somehow meaty?

Well, probably and I could go on but I won’t; it’s time for the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Greene King’s Jan Tracker show ‘a strong start to 2016 for sector, with rises in spending in both Other Leisure and Drinking Out’. Eating out, not so much.

• GNK Tracker: Says ‘many British households are optimistic ahead of next month’s Budget as the UK economy continues to show signs of improvement.’ The Tracker says ‘this year-on-year increase is particularly promising given the renewed competition presented by retail. January is fast becoming the time for big purchases with the British Retail Consortium reporting a 3% increase in spending year-on-year, with big-ticket items such as furniture and appliances selling well.’

• GNK Tracker: Goes on to say ‘while there is an expectation of lower taxes and higher wages, it remains to be seen whether the measures translate into increased spending on leisure.’ Adds Jan is always week. Says ‘this month’s edition brings the inevitable hangover. This hangover, like any other, looks to be short-lived, and while leisure spending has fallen in the aftermath of Christmas, UK consumers are better able to spend on leisure than they were twelve months ago. This is evidence not only of the continued economic recovery but also the priority consumers give to their leisure spending. They will no doubt be hoping that next month’s budget gives them cause to continue this positive outlook into the spring.’

• GNK Tracker: Suggests that Dry January did little to dampen spend on drinking out as it was +6% y-o-y

• GNK Tracker: Says spend on eating out down 2% y-o-y in Jan. Total leisure spend was +1% at £182.34.

• GNK Tracker: Eating out held up in London in Jan but was down 4% in the rest of the UK. New capacity must be hitting LfL sales

• Tracker: Says ‘consumer confidence remains high as shown by GFK’s Consumer Confidence Index.’ It adds ‘the 6% increase in spend on Drinking Out is particularly notable given the prominence of Dry January in recent years.’

• A new YouGov poll for the BBPA has found that 72% are for either a cut or freeze in beer duty to support pubs, compared to just 18% supporting a tax. UK beer duty rates are on average three times higher than EU rates, and some 13 times higher than in the largest beer market, Germany.

• A new study by NPD Group suggests UK diners could spend an estimated £54.7bn on eating out by 2017, up from 2015 levels of £52.2bn and an expected £53.3bn this year. Cyril Lavenant, NPD’s Director of Foodservice for the UK, said: ‘It’s good to see that there was a bigger improvement in 2015 than anticipated, with the actual performance of 1.3% visit growth against our prediction of 1.1%. However, while 2017 will also see growth, it is likely that the pace will slow down. We do not see consumers increasing their spending in the foodservice sector any faster than this.’

• C&B Bars (formerly Corney & Barrow) is to launch an all-day food offer across its 10 bars reports the PMA

• The 2016 Organic Market Report from the Soil Association says demand for organic products rose by 4.9% last year. This represents the third successive year of growth and speaks to the importance of provenance in eating out. The Soil Association says ‘this is a hugely exciting time for the organic sector, with the market set to break through the £2 billion mark in 2016 and reach levels seen before the recession. Thanks to the growth of online, it is now possible for retailers to connect consumers with the broadest choice of organic products.’

• M&B is to offer its own coffee, Brood, in a number of Ember Inn & Sizzling Pub sites over the next few months.

• Cracker Barrel Q2 & H1 numbers, says has seen ‘positive comparable store restaurant sales and retail sales in the quarter’.

• CBRL H1: Has seen Q2 LfL sales +0.6% with operating income margin 9.2% vs 9.4% in Q2 last year. CEO Sandra Cochran reports ‘we continued to deliver positive comparable store sales in the second quarter, continued to outperform our casual dining industry peers, and delivered earnings at the high end of our expectations. During the second half of the fiscal year, our focus will be on providing honest everyday value to our guests, increasing brand awareness, and bringing new and unique menu items to market. We believe that the strength of our brand, as well as our marketing, menu, and cost reduction initiatives, position us to compete effectively in this challenging environment.’

• CBRL on outlook: Traffic down 2.6% in Jan but spend +2.9% to drive a positive 0.3% LfL spend. Group raises guidance for 15/16. Expects to see a ‘moderation in food commodity prices’. Not that they have been very immoderate in the period to date.

• Iced Tea co Harry Brompton has cut its price and hit its £300k target fund raise on Crowdcube. A £191k investor saw it over the line. The operator says ‘Harry Brompton’s has increased its equity offering from 10.7% to 13.3%. That’s 24% extra over and above what had originally intended to release for the same £300,000 target raise. The pre money valuation is now £1.95m.’ the investment is in Tudor Drinks. Crowdcube says that ‘Harry Brompton’s is the first product of Tudor Drinks Ltd the company set up by founders Ian and Martin O’Donohue’ in 2013.

• Coffee-by-mail co Pact Coffee is looking to raise £1m via the sale of 3.85% of its business on the Crowdcube platform. The company, which has featured as a Bloomberg 2016 Business Innovator, is pencilled in to lose a cumulative £23m over the next three years. In addition to the £1m that it is seeking via Crowdcube, the company models raising a further £27m in financing in the period to December 2018.

• Burger King has introduced its home delivery trial to an additional 34 locations across the UK to locations including Manchester, Liverpool, and Leicester.

• A woman who fractured her wrist after tripping over a rope in the beer garden of The Westbourne in Notting Hill in 2009 is suing for £4.2m. Carmen Mazo was awarded £156,871 in 2013 after the pub operators admitted liability, but Mazo claims that this is a ‘fraction’ of what she deserves.

• The average disposable income in the UK rose to £25,700 in 2014-15, up by £1,500 since its recent 2012-13 low, according to the ONS.

• The Keep Sunday Special campaign is urging retailers to help persuade MPs to vote against changes to Sunday trading legislation.

Leisure Travel:

• The number of major global incidents has tripled in the last two years, with more than 24,000 reported from May 2014 to May 2015, according to security specialist Anvil. The most common requests for assistance from clients came after terrorist attacks, violent protests and disorder, natural disasters, and fatal air crashes.

• Chief executives of some of the UK’s biggest businesses, including Heathrow, Gatwick, and Easyjet, have signed a letter backing the UK to stay in the EU. The letter says: ‘Business needs unrestricted access to the European market of 500 million people in order to continue to grow, invest and create jobs. We believe that leaving the EU would deter investment and threaten jobs. It would put the economy at risk.’

• Heathrow CEO John Holland-Kaye also commented: ‘Heathrow believes that the UK will be better off remaining in a reformed EU. We are the UK’s only hub airport, connecting Britain to over 80 long haul destinations, and handling over a quarter of UK exports – but we recognise that for business to thrive we also need to be part of the single European market.’

• Profits at Norwegian Cruise Line Holdings rose by more than $180m to $662.7m in 2015 as revenues jumped by 39% to $4.3bn. The company said it is seeing this trend continue into next year, with the current booked position for H1 2017 c30% higher YoY.

• Regent Cruises will see its first newbuild join the fleet in more than 13 years in Q3 2016.

• Heathrow airport has seen its profits rise by 22% to £223m as passenger numbers rose by 2.2% to 75 million

Other Leisure:

• Oxygen Freejumping has secured £10m of funding and is aiming to reach 30 locations across the UK by 2018. The trampolining business recently signed a deal with Lucozade Powerleague to open five more sites this summer.

Finance & Markets:

• B of England’s Mark Carney has refused to confirm to Treasury Select Committee that next move in UK rates would necessarily be upwards. He insisted that the Bank has a number of options at its disposal should it see UK economic growth slow further. Carney did caution that ‘we do all need to be prepared this economy could be hit by bigger shocks particularly from abroad’.

• German business confidence fell from 107.3 to 105.7 in January, the third fall in a row and the steepest monthly drop since 2008. The survey, by the Ifo Institute, is based on monthly responses from around 7,000 firms in Germany. The fall is being blamed on a drop in demand for German goods in emerging markets and leaves business morale at its lowest level in more than a year, with companies concerned about the economic outlook for the next six months

• Greek Finance Minister insists IMF is making too many demands of Greece on pension reform & cutting spending

• World markets: UK down yesterday, Europe also lower. US down in later trade and Far East down in Weds trading

• Oil price lower at around $32.85 per barrel.

Retail Roundup from Nick Bubb:

Sainsbury/Home Retail/Steinhoff:
We were musing yesterday that Sainsbury has made several tactical mistakes so far in the game of M&A poker about Argos, so it’s worth looking at whether Steinhoff have made any mistakes yet. Well, they might not have expected sterling to fall on fears of “Brexit”, but otherwise they seem to have quietly prepared the ground. At the end of last year they moved their main stockmarket listing to Frankfurt and made clear that they wanted to expand their interests in UK furniture. Back in 2005/2006 Steinhoff took over the old Homestyle furniture retail group and since then the Harveys and Bensons businesses have not exactly thrived or expanded much in terms of store numbers, but the Steinhoff UK Retail operations have about £500m of annual turnover and some respectable furniture market shares compared to Argos. A combined Harveys/Bensons/Argos business would
therefore be able to achieve some useful buying synergies in furniture, particularly once the important Manufacturing and Logistics operations of Steinhoff UK are taken into account. On the other hand, Steinhoff wouldn’t have the same scope as Sainsbury to “implant” Argos units as their leases come up for renewal. The odds now look stacked a bit against Sainsbury, but there may yet, on a worst case scenario, be scope to salvage something from the situation, by offering to help Steinhoff to help in transferring Argos implants from nearby Homebase stores to Sainsbury supermarkets and developing a commercial relationship as a concession partner for Argos.

London Property Watch: Given its focus on London, via Covent Garden and Earls Court, the property group Capital & Counties (CapCo) probably has views on Boris Johnson and the “Brexit” campaign, but it wisely keeps them to itself today in its final results statement, although it does say that “Whilst we expect increasing uncertainty reflecting global and political challenges, our strategy at Capco remains clear and focused. London’s economic prospects remain strong and its population continues to grow”. In the meantime, CapCo’s ownership of Covent Garden has served it very well in recent years: the estate was valued at a hefty £2.0bn as at 31 December 2015, a like-for-like increase of 16%.

John Lewis Partnership Sales Watch:
We flagged yesterday that the official John Lewis Partnership sales figures for last week (w/e Feb 20th) would probably show that trading was again good for John Lewis and a bit weak for Waitrose. But Waitrose was saved by late Valentine’s Day trade on Sunday 14th (!) and the week as a whole was up by 3.6% gross (c1% up LFL), to leave cumulative sales over the last 3 weeks up by 1.8% gross (a bit over 0.5% down LFL). At John Lewis, “the half-term holidays across the majority of the country provided the backdrop to a strong week’s trade, with sales for the week up 6.9% at £75.2m”. Fashion sales were a bit sluggish, up 1.9% gross, but good “big ticket” trade saw Home sales lifted by 7.8% and it was another strong week for Electricals, with sales up 11.1% “driven by Microsoft products and television soundbars”. Cumulative sales at John
Lewis over the last 3 weeks are up by 5.5% gross (c4.5% up LFL), with Electricals running 10.6% up. Nick Bubb – nicholas_bubb@hotmail.com

Tuesday Wrap:

This was produced for distribution yesterday afternoon: So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following:

Menu innovation (a.k.a. fancy food:

• We wrote a piece on two-word food descriptions a while ago.

• You know, sun-dried peppers, vine-ripened tomatoes etc. We commented that it was playing to provenance & seemed to be what consumers wanted to hear

• And there’s a place for fancy food and even fancier food and that’s arguably near the top of the cycle

• Because the air is a bit more rarefied up there and it was interesting to hear from EAT yesterday to the effect that it is to introduce a number of new products

• These include Quinoa & Buckwheat Porridge, Breakfast Egg & Avocado, vegan Avocado Sourdough Toast (at £3.49), a Mango & Coconut Chia Pot (£2.09, vegan + dairy-free) and Coconut Water & Fruit Jelly (£2.49, made without gluten).

• There is presumably demand for such products but how much demand, when and in which geographies remains to be seen.

Sterling slides:

• Sterling down to a 7yr low against the US$ yesterday.

• Down a little against the Euro though not so much. It’s being taken as read by currency dealers that the Euro would be weaker if the UK was no longer in the EU. I feel that if somebody did the differential equations on that three way pull, it wouldn’t quit stack up.

• Nonetheless, the pound is where it is.

• A weaker currency will mean that import prices rise in Sterling terms. That’s not too big a deal with commodity prices as weak as they are but, should it continue – and if commodity prices rose in dollar terms – it could lead to inflation.

• In the short-term, it could cause some problems for manufacturers, for example the brewers, if they seek to pass on price rises to a consumer not now used to paying any more for anything

• A weaker pound will also impact the holiday companies. True, near seasons will be hedged but, ultimately, beds, flights and insurance would all cost more in Sterling terms.

• And to the holidaymaker, the impact of a weaker pound will be immediate. It will be felt as soon as they land at their destination airport and may make them a little less likely to re-book as soon as they land home in the UK

US hotel market past its peak. UK likewise?

• More data from STR suggesting that the US hotel market is past its peak.

• Certainly REVPAR is still rising (a little) – but this is more than 100% courtesy of higher rates.

• Put another way, operators are charging customers more for the same product. This can also be termed ‘gouging’ and, particularly with corporate customers and their buying departments, it can lead to payback further down the line.

• London is the same. See earlier comments for our take on how the hotel market will progress from here.

Random information, hopefully not all of it useless:

• Intercon. Bigger special dividend than expected, shares +4%

• Risk on day yesterday (OIGs, MINSs, FINs outperforming, housebuilders down) and the exact opposite in early trade today.

• Some talk of further ECB stimulus when it meets to discuss policy in March. That won’t help the Euro (except against Sterling) in the short term