Langton Capital – 2021-08-27 – PREMIUM – Sales, labour, food supply, delivery, Pernod, green list etc.:
Sales, labour, food supply, delivery, Pernod, green list etc.:
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A DAY IN THE LIFE:
Bit busy ahead of the Bank Holiday, would you believe. On to the news:
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PUBS & RESTAURANTS:
• The British Beer & Pub Association has estimated that 60 million pints of beer will be sold in Britain’s pubs over the August bank holiday weekend – 6 million fewer than the same period in 2019. The forecast is ‘based on a survey of its members, who own 20,000 of the UK’s pubs and brew 90% of the beer in the UK.’ The BBPA says that this ‘means that this bank holiday weekend alone, pubs will lose out on £25 million in revenue from pint sales – down 10% on revenue for the same bank holiday in 2019 before COVID – a very significant decrease in revenue for pubs.’
• The BBPA says ‘as the brewing and pub sector in the UK gears up for recovery now the majority of restrictions have been lifted, the BBPA is urging the Government to invest in the sector to help it bridge the gap in revenues and enable pubs to play a leading role in building back better.’ It says rates, VAT and the beer duty are all to high and adds ‘a pub adds significant value to the local economy, creates jobs, acts as a social hub, and is a sought after amenity when house hunting. 85% of pubs are based in community and rural areas, bringing jobs to parts of the UK that need them most. They employ over 600,000 people, of which 43% are under 25.’
• Further comment: Well, it never hurts to ask but, if pubs want to charge more and pay less tax, less duty and lower business rates, somebody, somewhere is going to have to pick up the slack. Either that or the Exchequer is going to have to insist on cuts to services and PM Johnson has said there will be no return to austerity. The government has also said yes to high speed rail links, green energy and the levelling up of the north, all of which will cost money.
Labour and product shortages:
• Recruitment company Hays says it has seen a dramatic recovery in the UK jobs market – but it also sees material skills shortages. Hays says ‘overall, the strength of the recovery has been dramatic. We now see a clear route back to, and then exceeding, pre-pandemic levels of profit, faster than we envisaged even six months ago.’
• The government is under pressure to relax post-Brexit migration rules to provide industry with labour and UK consumers with the goods and services that they want. Immigration, however, is a red line. Tesco has called for more drivers. It is paying hiring bonuses. The UK’s largest grocer, as well as Iceland, has said that Christmas supplies are under threat.
• The Guardian comments that farmers are concerned they will not be able to harvest crops unless more labour is forthcoming. There are various stories about root crops remaining stuck in the mud and it says ‘unpicked blueberries are rotting on the bushes’. At least the birds will be happy (unless the bushes are netted and then it’s just a lose-lose).
• Further comment. Some anecdotal stories can paint a misleading picture but, as empty shelves suggest, this may not be one of them. The blueberry farmer says ‘we used to have a good rate of returnees, from Romania and Bulgaria. But there are other opportunities out there now. We are hearing some of them are in France or are going to other places.’ People will move on.
• Job site Indeed reports that wages for lorry drivers are rising by more than 10x that of average wages. Lorry driver pay is up 10.7% between Feb and July this year whereas average wages (as measured by Indeed) are up by only 0.8%. The Telegraph interprets this as ‘pay for HGV drivers jumped by more than a tenth in just five months as the industry struggles with severe worker shortages that are straining Britain’s supply chains.’ Website Indeed says ‘the surge suggests more and more employers are using such incentives to get ahead in the competition for staff.’
• Further comment. Lorry driver pay is a fairly effective means of injecting inflation into the system (perhaps up there with oil) as virtually everything that is bought and sold (other than, say a FYO strawberry or honesty box farmyard eggs) has been delivered by somebody. Indeed says the sharp increase has been driven by logistics companies bidding up wages in order to secure capacity. The solution for delivery may be to push wages above the threshold where immigration will be allowed.
• This will a) further drive inflation and b) it is not a solution across the economy as a whole. Indeed spells it out when it says ‘hiring bottlenecks are driving up wages in some sectors of the economy as employers use pay as an incentive to attract candidates and beat their competition to the best people.’ It says ‘historically, low interest in jobs has always translated into increased salaries, but what is unusual about the 2021 recovery is that demand for workers increased suddenly, coinciding with the re-opening of the economy – and employers appear to have responded swiftly.’
• Meanwhile, County Range, which delivers food to care homes, is taking “drastic action” to try to get round the shortage of UK lorry drivers in that it is buying smaller vans that can be driven on a normal driving license.
• Further comment. This is a good idea short term but the question has to be asked ‘why did you need HGVs in the first place?’ The answer, presumably, is that they were more efficient and hence prices are likely to have to rise if less efficient delivery is the result.
• The Caterer reports that ‘hospitality businesses in London’s Soho are continuing to fight the winding down of the area’s popular alfresco scheme, warning bars and restaurant will struggle to survive without it.’ Westminster City Council banned the use of some outdoor furniture such umbrellas, gazebos and heaters in some areas of Soho from 19 July, though chairs and tables are still allowed. This will be an issue in very sunny weather but, as we move into September next week, it will be more of a general issue in the autumn and winter.
• Further comment. The industry has been asking for some time when a return to ‘normal’ can be expected and this (along with, say the reimposition of business rates, the ending of furlough and the return of VAT to 20%) is an example of ‘normal’ being a little less favourable than the situation at the moment. The Caterer quotes Soho Estates as saying ‘history tells us that hospitality can be a leading force in driving economic recovery. Soho needs alfresco to survive, and we simply wouldn’t be here without it.’ It says ‘we all saw what Soho was like in lockdown; the knock-on effect of closing alfresco will be pretty much the same, make no mistake. There is a lack of accountability for this decision on Westminster City Council’s part, and we’re asking: who said no to the gazebo?’
• Westminster Council maintains that ‘we always said interventions such as road closures and barriers were temporary and would end on 30 September. The end of temporary measures does not mean that all alfresco dining cannot continue; businesses can still apply for pavement licenses where there is space on the footway.’ It is to be hoped that some sort of accommodation can be made.
• In the US, where the Delta variant is currently causing something of a relapse, there is evidence that consumers are changing their habits, for example, when it comes to visiting restaurants.
• Further comment. Restaurant Dive says a survey by the National Restaurant Association Research Group has suggested that 6 in 10 US adults have changed their restaurant habits as a result of Covid infection numbers swinging the wrong way. Dive says ‘nineteen percent of consumers said they have completely stopped going to restaurants, while 9% said they have cancelled existing plans to go out to a restaurant in the last few weeks.’
• Dive adds that ‘thirty-seven percent said they have ordered takeout or delivery instead of going out, and 19% said they prefer to eat outside than inside.’ The UK seems a little more sanguine. Numbers here are also rising but deaths are running at around 9% of those in the US whilst the UK population is around a fifth of the size. Dive says that feelings of safety are diminishing. The NRA data shows that, whilst 64% of Americans feel comfortable going to their workplace, only 36% say the same about a visit to the restaurant. Perhaps unsurprisingly, Dive says ‘baby boomers and Republicans were most likely not to change their restaurant behaviour due to rising COVID-19 cases.’
• In the US, Bento Box, which is a hospitality platform that ‘disrupts third-party services that come between the restaurant and the guest’ and which has a vested interest in the conclusions it has drawn, says that ‘as the world reopens and restaurant owners attempt to plan a path forward, the future of takeout and delivery becomes a key strategic question. Will it return to the complementary role it served pre-pandemic? Or did the pandemic inspire a permanent change in how diners interact with restaurants, much like it did with office workers and their office spaces?’ It concludes that takeout will remain a big deal, saying ‘80% of diners plan to maintain their current delivery/takeout volume as indoor dining reopens, up from 79% in March.’
• Further comment: Delivery and takeout customers are younger than the customer base as a whole, reports Bento Box. It says that 15% of 25-34 year olds order takeout or delivery four or more times a week compared to only 4% of those over 65. In support of operator / delivery options rather than third party apps, Bento Box says ‘fewer than 1-in-4 diners (23%) agreed with the statement, “I prefer the ease and convenience of online ordering with a third-party delivery app’. It says ‘diners aged 25-34 were most likely to agree with that statement, but even then only 30% agreed’ and adds that ‘despite their perception as low-friction ordering solutions, third-party apps aren’t viewed as especially easy or convenient by customers. Setting up a third-party presence is easy for restaurants, but new technologies have made it easy for them to develop an optimised restaurant website as well.’
• Technomic’s TIndex, which reports on the size of the foodservice industry, has found that the foodservice industry was 1.1% larger in July 2021 compared to 2019 and 31% larger compared to 2020. It says ‘softening in some noncommercial segments is the reason for the drop in the TIndex, but restaurant sales remain strong.’ It adds ‘as of the end of July, there has been no indication of industry sales being impacted by the COVID-19 delta variant. We will keep a close eye on these factors as new developments continue.’
• Property information company CoStar Group has reported that the UK has lost 83% of its main department stores in the 5yrs since the BHS chain collapsed.
• Trade body the National Pig Association has said that labour shortages at meat processing plants are behind a surplus of 70,000 pigs on farms. The surplus is reported to be growing by 15,000 a week. The association says ‘we have got weeks before we get to a critical situation.’
• The Global Business Travel Association’s monthly Covid barometer, reports that travel buyers increased company travel spend in July compared with the previous month.
• Merlin Entertainments has begun construction of a Legoland theme park and resort in China. It says it will be the world’s largest.
• The BBC reports that contactless payments have boomed since the end of lockdown. It points out the number of purchases made in May via contactless technology doubled compared with the same month a year earlier, and was up 50% on May 2019. It says that 65% of purchases on debit cards were made in this way.
• Sales of non-alcoholic beer are reported to be rising in the Netherlands, while lager sales are falling sharply. Overall beer consumption in the country has fallen 8% in summer this year compared with last, whilst the consumption of alcohol-free beer increased by 3%.
• Pernod Ricard has said that it will report an additional $163 million in income before tax in its 2021 earnings as a result of a ruling in the U.S. Appeals Court. The court ruled in favour of the National Association of Manufacturers on tax refunding on exported goods.
• Pizza Pilgrims is to open a third Slice restaurant. The unit, in Finsbury Park, will be on the site of the former Quality Fish Bar.
• A former pub in Peckham is to reopen as a South African-themed braai cuisine restaurant.
• Hot Dinners points out that today is National Burger Day Party Day. Time to put aside calorie counts and get stuck in.
HOTELS & LEISURE TRAVEL NEWS:
• Holiday comparison site Icelolly says that consumers searches are now tending to swing in favour of summer 2022 and away from late summer 2021 and winter 2021/22 deals. It says ‘summer 21 still accounts for more than half of all searches, but summer 22 is up to close to a third.’ It adds the ‘destination mix hasn’t changed much, though if Turkey moves to amber in the latest announcement this week expect those searching for some late summer sun to jump on that destination.’
• Manchester Airports Group has sought leave to appeal against a High Court ruling that the government acted lawfully in imposing its traffic light system for international travel.
• Membership Collective Group, which owns Soho House, has said that revenues more than doubled in the latest quarter as it recovered from Covid-19 closures. Total sales were up by 118 per cent to $124 million in Q2.
• Changes to the traffic lights. ABTA says the latest changes ‘provided some stability and reassurance for holidaymakers’. It says ‘the latest travel update provides some stability to international travel as well as reassurance for holidaymakers heading off to popular holiday destinations over the coming weeks.’ It says ‘the government now needs to focus its attention on sorting out some of the structural issues that are stopping people travelling and delaying the industry’s recovery’ and adds ‘the UK may be leading the way on the vaccine rollout but it is lagging behind other countries when it comes to opening up international travel and making it easy for people to travel.’
• Manchester Airports Group says the changes will make “little difference” to the recovery of the travel industry. It says ‘in reality, these changes will make little difference to the overall recovery of the UK travel industry, which is already recovering at less than half the pace of the rest of Europe.’ It adds ‘Europe’s stronger recovery has been driven by the removal of testing requirements on vaccinated travellers.’ It adds ‘we must arrive at a simpler, more affordable and sustainable travel framework to enable the best possible winter season and give customers the confidence to book ahead for 2022.’
• Along with Canada and Denmark, Finland, the Azores, Switzerland, Liechtenstein and Lithuania are also moving to the green list. Thailand and Montenegro have been added to the red list. EasyJet says ‘we cannot understand the continued double standard that is applied to travel when the domestic economy is operating restriction free.’ BA says ‘our green list is much smaller than that of the US and EU, despite no new variants being transported into the UK.’ Turkey remains on the red list.
• STR reports that US hotel demand has continued to soften ‘reflecting seasonal demand patterns and concerns around the pandemic’. It says that occupancy is 63.7%, down 9.1% on 2019 and average rate is up 5.1%. This leaves REVPAR down some 4.5%.
FINANCE & MARKETS:
• Packaging firm McFarlane Group has said ‘we anticipate further inflationary pressure on input prices, continuing supply constraints on most raw materials and operating costs increasing due to staffing pressures.’ Packaging costs have an impact on most other industries.
• German consumer confidence dipped in August per GfK. It says higher Covid incidence numbers and ‘a slowdown in vaccination momentum, and discussions about how to deal with unvaccinated individuals in the future have caused noticeable uncertainty among consumers in Germany.’
• Sterling weaker at $1.3701 and €1.1647. Oil price up at $71.98. UK 10yr gilt yield unchanged at 0.60%. World markets broadly lower yesterday but London set to open up around 9pts as at 7.15am.
RETAIL WITH NICK BUBB:
• Nick is on a well-earned break. Back after the Bank Holiday.