Food prices, trading, SBUX, Tim’s, TUI, YUM & other:

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A DAY IN THE LIFE:

Having done OK for most of the week in avoiding getting ripped off, we managed to pay £16 for a beer in the centre of Rome on Wednesday, indeed £40 for two and a half drinks.

OK, so it was Euros rather than pounds and we did seem to get one litre steins – an understandable mistake when a ‘large’ beer is usually only 400ml – but nonetheless, it’s the most I’ve paid for a beer by some considerable distance.

But, to channel Steve Coogan’s swimming pool manager, it’s best to keep one’s outrage in proportion because, as a result of that transaction, nobody died.

Anyway, we’re coming home later today. Burnt and tired, yes. Poorer, yes. Well rested, maybe not so much. Have a great weekend and let’s move on to the news:

PUBS & RESTAURANTS:

Food price caps:

The Institute of Economic Affairs has commented on the proposal for food price caps to be implemented by the government, saying there are at least three ways in which this scheme could backfire….

• The first being that supermarkets may attempt to offset the impact on their revenues elsewhere. Secondly, it is not even certain that the prices of capped goods would end up lower than if there were no cap. And thirdly, this could be the thin end of the wedge, prompting more calls for government intervention in different sectors.

• The IEA states that instead the government’s main focus should be on ‘tackling the reasons why food prices are so high to begin with, such as the UK’s relatively high energy costs.’ It also said that the government should use the tax and benefit system to top up incomes of families that spend a large proportion of their budgets on essentials like food and incentivise work, rather than ‘clumsy attempts to fix prices’.

Trading:

Barclays has reported that ‘pub and bar transactions were up 27.3 per cent [last weekend] as Brits headed out to socialise and make the most of the warm weather…’

• It says that ‘restaurants, pubs and bars, camping and caravan sites and sport centres benefitted from a significant increase in the total number of sales – compared to the equivalent dates in May* last year.’ Pubs & bars were up 27.3% with camping and caravan sites up by 18.1%.

• Marc Pettican, Head of Barclaycard Payments, comments ‘consumer spending surged over the weekend, especially in the Hospitality and Leisure sectors, as the arrival of the warmer weather kicked-off more sports and socialising.’ He adds that ‘outdoor activities – such as camping, football and golf – saw a spike in transactions, while pubs, bars and restaurants received a significant boost from Brits getting together with friends and family.’

• Barclays says ‘this uplift in trade will be some welcome news for the Hospitality sector, amidst the ongoing strain of rising energy bills and the impact of the cost of living. Businesses will no doubt remain hopeful that customers continue to offer their support and keep venues busy as we head into the summer season.’

Other news:

C&C has written to the first minister of Scotland, Humza Yousaf, expressing “serious concerns” about the UK government’s decision to exclude glass….

• A large proportion of the group’s Tennent’s lager is typically sold in cans, and would be put at a significant competitive disadvantage. C&C writes ‘this announcement increases the already huge uncertainty around the scheme for the drinks industry, customers, and consumers and, if implemented, would be a fundamental change to the scheme.’

• It adds ‘by removing glass from a Scottish DRS [deposit return scheme], Tennent’s – as a product sold in can in the Scottish off-trade – would be at a significant competitive disadvantage, undermining our business and therefore placing jobs and investment in Scotland at risk.’

SOME CLARITY ON COVID:

This is an expanded version of a note that was sent to clients earlier in the year. The theme being that, as time was now passing, the impact of Covid – social, financial, cultural etc – was becoming a little clearer and the ‘new normal’ likewise.

On the other hand, other events, such as the war in Ukraine and the attempt to reverse QE have impacted trade, disaggregating the various factors has become difficult. Nonetheless…

introduction:

• The pandemic caused significant and rapid change in the hospitality industry.

• Some of these impacts disappeared almost as soon as lockdowns were lifted whilst other impacts are linger.

• Still other changes could be permanent.

Today, something of a summary:

• With the start of the pandemic almost three and a half years ago – and even Omicron now some 18mths old – some of its impacts on hospitality are clear whilst the jury is still out in other areas.

• Short term emergency measures were always going to be short term. State aid and shutdowns have gone.

An accelerant rather than a revolution?

• To an extent, Covid either accelerated trends that were already in place or it provided a catalyst for changes that, arguably, would have happened anyway.

• An accelerant:

o The move to plastic was perhaps already underway. But Covid did accelerate the trend with many vendors now accepting plastic – and in some cases only plastic – who did not do so before the pandemic.

o Technology, where it helped avoid face to face contact during Covid, was likewise accelerated.

o Delivery was given a huge boost.

• A catalyst:

o At the micro level, Covid provided cover for companies to IPO (Deliveroo and some online retailers) or for them to enact changes that may have normally taken a decade or more (restructuring at RTN, for example).

o The pandemic also provided both the imperative to and the cover in which to repair balance sheets via share placings and passed dividends.

• Just aware that we are rather banging on a bit we’ll leave it there. Comments welcome.

COMPANY NEWS:

Starbucks has reaffirmed its goal of reaching 9,000 stores in China by 2025 during CEO Laxman Narasimhan’s visit to the country..

• Starbucks achieved 10% outlet growth in China during Q2 2023 to reach 6,243 stores, with Starbucks China CEO Belinda Wong saying the company will ‘accelerate even faster on new store growth in the second half of the year’.

Tim’s China reports revenues up 50% YoY to RMB 336.5m ($47.5m) during the three months ended 31 March 2023. Net losses, however, widened to RMB 174.5m ($24.6m) compared to RMB 151.3m ($21.3m) for the same quarter of 2022. Tims China opened 31 net new stores in the quarter to reach 648 outlets nationwide, 551 of which are company-owned and operated.

Joe & The Juice has opened its 350th store with a new outlet at Copenhagen Airport, with the Danish chain now operating across 17 markets worldwide. The company opened 10 net new outlets in the UK last year to reach 63 across the country.

Yum Brands CEO David Gibbs has presented at Bernstein’s 39th annual Strategic Decisions Conference saying that the group is still “in its infancy.” He says further expansion and potentially acquisitions are likely.

Rémy Cointreau reports operating profit up 16.2% for its 2022/23 fiscal year, beating expectations but with the company maintaining its cautious outlook for this year.

Oak View Group has acquired Rhubarb Hospitality Collection from LGT Private Debt…

• In the UK, Oak View Group, with the support of RHC, will operate Co-op Live, the UK’s largest arena which is currently being developed in Manchester by OVG in partnership with City Football Group.

HOLIDAYS & LEISURE TRAVEL:

TUI-owned Marella Cruises reports that sales for the next 8 months have surpassed 2019 levels as demand for all-inclusive holidays remains high….

• Managing director Chris Hackney said ‘Demand in the Mediterranean and the Caribbean is strong and although we always have concerns about the cost-of-living crisis impacting bookings, our all-inclusive product is such good value for money and customers are seeing that.’

Dalata Hotel Group plc has announced that it have ‘exchanged contracts to acquire the long leasehold interest of the Apex Hotel London Wall, for consideration and a gross asset value of £53.4 million (€62.2 million) from Apex Hotels Limited, subject to standard contractual conditions and approvals.

FINANCE & MARKETS:

The S&P Global/CIPS UK manufacturing purchasing managers index (PMI)  reports ‘lacklustre’ overseas demand for products made in the UK and a shift in spending away from goods to services in the country led to the 10th consecutive month of decline in activity in the sector.

Nationwide reports that house prices fell by 3.4% in the year to May…

• …warning that further interest rate rises by the Bank of England could still yet hit the housing market. House prices edged down by 0.1% in May itself, the Nationwide said, and the average property price now stands at £260,736.

Eurozone inflation fell much faster than expected to +6.1% last month, lower than the +6.3% expected by analysts. Core inflation dropped to 5.3%, down from 5.5%, again, lower than analysts’ forecasts.

Sterling up at $1.2532 and €1.1638. Oil higher at $74.65. UK 10yr gilt yield down 5bps at 4.13%. World markets better yesterday & London set to open some 17pts higher.

RETAIL WITH NICK BUBB:

Travelling today.