New Figures Point to Resilience of Leading Restaurant, Pub and Bar Groups

June 22, 2009

Encouraging figures from Britain’s leading restaurant and pub operators show that sales are generally holding up against last year despite the squeeze on consumer spending and increased competition from supermarkets.

Aggregated figures from 12 major groups show that like-for-like sales in May were ahead 0.6%, with month-on-month out-of-home sales ahead 3.7% compared to April.

The data comes from the Coffer Peach Business Tracker, run by Peach Factory in partnership with KPMG, UBS bank and Coffer Group. The Business Tracker collects and collates sales data on a monthly basis to provide a unique picture of the health of the UK eating and drinking out-of-home market.

Peter Martin, founder of the Peach Factory consultancy, said: “Other research might suggest that there is contraction in overall eating and drinking out, but these figures demonstrate that managed, and largely branded, groups are in general bucking the trend and continuing to attract customers through their doors. If anyone is being squeezed, it seems to be the independent sector.

”There are undoubtedly variations from group to group, but the underlying trend in like-for-likes for most of 2009 has been steady against 2008, and that is some performance. The May +0.6% figure is in-line with that pattern.

”It is hard to say if this is down to increased promotional activity, more sophisticated marketing, better value, consistent quality and service, the reassuring strength of brands or even an increase in consumer confidence about going out. The bottom-line is that these established restaurant and pub groups are working harder and continuing to maintain custom.”

Jonathan Leinster, head of European leisure and tobacco research, at UBS Investment Bank, added: “The increase in total sales of 3.7% suggests a sustained improvement in trading even after Easter. This is in line with recent comments from other operators (eg Marston’s) which have suggested that consumer expenditure has been holding up better than expected.

“It suggests that managed and branded groups have continued to grow despite what appears to be a contraction in the overall out-of-home market place and despite strong retail competition. The performance of the branded operators varies but the key to success appears to be a consistent value offering of which promotional activity is certainly a point. However, increased discounting and promotions have been at the expense of margins and we would expect promotional activity to continue going into the summer season.”

Trevor Watson, Director of Davis Coffer Lyons, part of The Coffer Group, a specialist in the valuation of restaurants and bars, said: “Whilst these positive like for like figures are very encouraging, no one should be under any illusions as to how difficult trading conditions are. The combined effect of discounting, the forthcoming impact of increases in the National Minimum Wage and the treatment of service charges, higher oil prices, and VAT increases will continue to put a lot of pressure on profit conversion for most operators over the next12 months.”

Richard Hathaway, Head of Travel, Leisure and Tourism at KPMG, commented: “These positive results are reflective of the sales momentum that larger branded groups have been able to maintain through the downturn so far, largely due to continued successful promotional activity.

“Despite these relatively health top line numbers for the bigger players, inevitably there are winners and losers across the industry and our experiences of working with the independent sector, illustrates that there is a different story for some.

“We are seeing smaller players struggling more as they can’t command the same economies of scale to support significant discounting. They are also more vulnerable to the impacts of factors such as their location, less brand recognition and pressures of financing, particularly if they own their own property. We have already had experience of insolvencies in this part of the sector and are likely to see more.

“It remains to be seen how the industry performs over the coming summer months, but hopefully a spell of warm weather will go some way towards extending the sales levels we have seen in the tracker, across the whole of the sector.”

Peter Martin added:”Contrary to what the major supermarkets are saying about eating and drinking-out, it is still alive and well. There is a consistent line from the major food retailers that they are gaining food sales at the expense of pubs and restaurants. These figures would challenge that. What consumers actually want is a good deal wherever they can find it.”

Added David Coffer, Chairman The Coffer Group: “We are immensely proud to be associated with this ground-breaking Business Tracker initiative. This research will provide a crucial insight into how the leisure sector is performing during a period of unprecedented pressures. An understanding how the UK restaurant and bar market is performing will be invaluable to all sections of the industry- from operator and landlord, to banker and private equity investor.

”The Coffer Group is at the vanguard of the leisure industry and has worked closely with Peter Martin for nearly two decades. We are very pleased with the outcome of our latest association with him and believe the Tracker is something the industry has needed for a long time. I and my directors look forward to playing our part.”

Companies participating in Peach Business Tracker include Mitchells & Butlers, Whitbread Restaurants (including Beefeater, Brewers Fayre and Table Table), Punch Pub Company (formerly Spirit Group), Gondola (owner of Pizza Express, Zizzi and ASK), Tragus Group (operator of Bella Italia, Strada and Café Rouge), TGI Fridays, Barracuda Group (including Smith & Jones and Varsity), Wagamama, Carluccio’s, Paramount Restaurants (owner of Chez Gerard, Bertorellis and Caffe Uno), Novus Leisure (operator of Tiger Tiger) and Gaucho Grill.

For more comment contact:

Peter Martin, Founder, Peach Factory
01704 550383(office)
07889 209896 (mobile)
peter@peach-factory.com

Helena Holm, communications manager, Coffer Group
020 7299 0709
hholm@coffergroup.co.uk