Deliveroo, inflation, the consumer, supply, Tortilla, Oakman etc.:

A DAY IN THE LIFE:

I was reading the other day about the idea of placebos and their less well known opposite, the nocebo and both, apparently, work to some degree.

A person in a white coat who gives you a sugar pill and tells you it will make you feel better can really have an impact and so too, for rather darker reasons, can a person who puts a chicken’s head in your pocket, circles you in goat’s blood or sticks pins in a little effigy whilst chanting something odd.

Even for post-operative pain, apparently, just over a half of placebos have an impact – although it’s not clear why any recovering patients would put their hands up for that particular gig as this isn’t to do with the sugar, of course, but is rather down to a change in attitude with the patients pursing their lips and telling themselves that it doesn’t really hurt any more.

Maybe not advisable in a large number of cases but a nocebo is even worse as it can lower the victim’s blood pressure, lead to fits and convulsions and, in some cases, even death.

Although again, it’s hard to see the above being proven under lab conditions. It might all be nonsense but, as it suits the narrative, we’ll just go with it. On to the news:

LANGTON EMAIL:

The Free Email is now written in short form. Full stories are in the Premium Email. Reply to this email if you would like to upgrade.

See Twitter for in-day comment. Let us know if you would like an example of the Premium Email or to comment on the new format.

Prices for the Premium, unchanged for 2yrs, are £295 for one subscription, £495 for multiple, both plus VAT. Reply to this email to order & request invoice.

Or sign up for easy in, easy out monthly option HERE

PUBS & RESTAURANTS:

Inflation:

The latest CGA Prestige Foodservice Price Index has pointed to supply problems and increased demand from the hospitality as the reasons behind an increase in prices of 1.2% in the month of August. A shortage of goods & services is pushing up their prices. The index suggests that the price of soft drinks is up by 8.0% with breads & cereals up 6.1%.

• See premium. Reply to this email to upgrade.

The idea that the price of a pint may rise by 30p is all over the press. There are a couple of points worth making here.

• See premium. Reply to this email to upgrade.

Energy prices will rise for both consumers and hospitality firms as price caps are reviewed (never, it would seem, downwards). There is a ratchet at play here with customers protected to some extent from what is going on in world markets. Customers, people or pubs, using oil fired heating, may find the price has risen from an admittedly low 18p a litre to over 70p a litre in recent weeks.

• See premium. Reply to this email to upgrade.

The Food and Drink Federation CEO Ian Wright has told MPs inflation is running between 14%-18% for hospitality firms. The CPI for September, which could be down a little before further rises, is out tomorrow morning. Wright told the Business, Energy and Industrial Strategy select committee that ‘inflation is a bigger scourge than anything else because it discriminates against the poor.’ Andrew Bailey at the Bank of England has said inflation is transitory. Make UK boss Stephen Phipson told the select committee ‘this is not a transitory inflationary demand we are seeing really serious issues now in terms of price increases.’

The consumer

Demand has, in recent months, not been a problem. But it wouldn’t pay to ignore it (or rather the potential softening of it) as an issue over the longer term. To the extent that all of the above impacts the consumer, there may be less money around in the near term. Interest rates may rise by 50bps before the year end (per the short end of the gilts market) and the Resolution Foundation says that UK households will be £1,000 worse off next year due to a cost of living squeeze caused by higher energy prices and inflation caused by a shortage of workers. More below on the impact of inflation & tax increases.

• See premium. Reply to this email to upgrade.

Supply:

The Road Haulage Association has told a committee of MPs that the shortage of lorry drivers and crisis in the supply chain is not improving. It says ‘things are very challenged at the moment’ and adds ‘things are not visibly getting better at this stage, and I know there are a number of measures that have been put in place, stepping up training, stepping tests, but on the ground that isn’t having much of an effect.’

• See premium. Reply to this email to upgrade.

Fourth lockdown?

We tweeted yesterday ‘until recently, a 4th lockdown was unthinkable, unnecessary and undesirable. The needle, no pun intended, is shifting on that one.’ This was in response to various articles suggesting infections were approaching all-time high levels (though deaths, thankfully, were not) and that the upcoming winter could be a tough one.

• See premium. Reply to this email to upgrade.

DELIVEROO – Q3 NUMBERS.

Deliveroo has reported Q3 numbers saying that it has turned in a ‘continued strong performance’ in the quarter. It reports it has delivered a ‘strong performance in Q3 2021 with gross transaction value (GTV) up 58% YoY in constant currency; orders were resilient despite reopening, with a modest reduction in average order value.’ The company says it has seen ‘excellent initial traction from Deliveroo Plus partnership with Amazon Prime; number of Plus subscribers in UKI has more than doubled since the partnership launched in mid-September’ and adds that it has driven a ‘further expansion of on-demand grocery offering including launch of ‘Hop’, Deliveroo’s new rapid grocery service from delivery-only stores launched in partnership with Morrisons.’

Regarding the full year, Deliveroo says it has increased this to 60-70% growth (vs prior guidance of 50-60%) and sees a full year gross profit margin (as % of GTV) unchanged from earlier guidance in the range of 7.50-7.75%. Will Shu says ‘we have continued to make good progress executing against our strategy, resulting in strong performance in Q3. This quarter we have partnered with Amazon to offer their Prime customers in the UK and Ireland access to our Deliveroo Plus subscription programme. We have also successfully launched a new rapid grocery service, Deliveroo Hop, in partnership with Morrisons. These are just two examples of innovations introduced this quarter that are consistently improving our consumer value proposition.’

Mr Shu continues ‘while we are mindful of current and potential macroeconomic disruptions and uncertainties, we expect further strong performance in the remainder of the year and we are increasing our full year GTV growth guidance. We remain excited about the opportunity ahead and our plans to deliver better value to our consumers, help our restaurant and grocery partners to grow, and provide further opportunities for riders.’ There is no detail on costs or profits / losses in the Q3 update.

• See premium. Reply to this email to upgrade.

COMPANY & OTHER NEWS:

Tortilla CEO Richard Morris hosted a company presentation in which he says that the company’s new-site pipeline is ‘strong as it’s ever been’. Mr Morris says the operator is looking at 121 locations and says ‘we’re already looking at 2023 and beyond.’

Oakman Group is to open in Wokingham in what will be its 36th site. CEO Dermot King says ‘since fully re-opening in July 2021, the business has delivered sales growth of 36% versus the same period in 2019 compared with an average of 5% among similar businesses.’ He adds ‘we have started work on our site in Buckingham which will open next Spring and a further 10 sites in our pipeline could all be trading by the end of 2023.’

Giggling Squid has told the MCA that it still considers an IPO as a potential development for next year. CEO Andy Laurillard says ‘I think we will look at options after Christmas.’ He adds ‘we are not rushing into anything now. There is a lot of uncertainty.’

Rosa’s Thai Café is to open on Coney Street in York.

Various Eateries brand Coppa Club is to open in Putney, London, on 2nd November.

UK plant-based meal delivery company Allplants has announced that it has raised £38 million in a Series B funding round.

Starbucks has written to employees in some parts of the US asking them not to join a union and saying ‘the operational challenges like staffing, training, callouts or repairing equipment can only be solved by us, from within Starbucks.’

Darwin & Wallace is to open a new site next month in Battersea Rise reports Propel.

Germany-based Delivery Hero has invested $235 million in Berlin-based grocery delivery company Gorillas. The start-up operates out of 180 warehouses in nine countries.

Leeds-based brewery Northern Monk is to expand capacity after securing funding from HSBC. Founder Russell Bisset says ‘this expansion will help us service the increase in demand for our products that we have been experiencing solidly over the past few years. The new brew kit will give us the opportunity to create lots of new beer and service larger contracts, whilst maintaining our commitment to high quality brewing.’

Neat Burger, which is backed by F1 driver Lewis Hamilton, has confirmed it will launch 30 new sites across London.

LEISURE TRAVEL & HOTELS:

Travel Weekly reports that Spain is the top October half-term destination from the UK in volume terms. The destination is still 35% below 2019 levels whilst Greece is ahead of pre-covid levels.

The government says fully vaccinated travellers arriving in England will need to take only a lateral flow test from 24 October.

Heathrow is consulting with the aviation regulator about raising landing fees per passenger. Proposals could see the charges per passenger rise by more than £10 from 2020 levels, from £24.50 to £34.40, a rise of 40%. The share price of IAG, which is a heavy user of Heathrow, fell yesterday by 5.8%.

STR reports that the US hotel industry slipped back in September. It reports occupancy in the month was 8.2pps below 2019 with room rates up 1% and REVPAR down some 7.3%.

OTHER LEISURE:

DraftKings has been given another month to agree a deal with Entain as the two companies have so far failed to agree on the way the £16.4 billion takeover should be structured. The Takeover Panel has extended the “put up or shut up” deadline to November 16.

Netflix has reported that subscriptions picked up in Q3, driven in part by the success of the platform’s South Korean export, Squid Game. The firm added 4.4 million users in the quarter, over twice the number added in Q2. Bloomberg reports that Squid Game, which cost $21.4m to make, is worth perhaps $900m to the company.

The Competition and Markets Authority is to launch a market study into music streaming.

UK Music reports that a third of workers in the music industry, some 69,000 people, lost their jobs in 2020 as a result of venues closing and festivals being scrapped.

FINANCE & MARKETS:

The ONS has updated on UK CPI saying that it fell slightly to 2.9% in the year to September.

Short gilts in the UK continued their march yesterday. Traders are betting on a rise, perhaps by as much as 50bps, in base rates this calendar year.

The Guardian reports that Bank of England governor Andrew Bailey, blind to inflation as recently as last month, ‘appears to have changed his tune’ regarding the potential for interest rate rises. Former MPC member Andrew Sentence says of Bailey ‘I don’t think he comes across as managing communications very well. The message he sends often seems to come out by accident rather than by design,’

City AM reports that smaller companies have ‘increasingly shunned’ exporting to the EU because of Brexit red tape.

Sterling up at $1.3806 and €1.1848. Oil price little changed at $84.56. UK 10yr gilt yield up 3bps at 1.16% (with the 2yr bond up more, showing the likelihood of a rate rise in the near term). Global markets better yesterday with London set to open down around 5pts as at 7am.

RETAIL WITH NICK BUBB:

• See premium. Reply to this email to upgrade.