On the face of it the latest on-trade figures for January look pretty robust, particularly in light of the growing popularity of Dry January, but the new Coffer Peach BusinessTracker for the major restaurant and pub groups show the sector needs to make hay before it is faced with the fall out or rising wage and operating costs, and inflationary pressures on consumer spending.
How restaurant and pub groups face up to increased costs in the coming months with be key to how they keep consumers coming through their doors.
We might be waiting for Spring to be sprung, but there is still time to reflect and look back on more key trading data for January. This time thanks to the Coffer Peach Business Tracker figures which monitors sales across 34 of our leading pub and casual dining restaurant chains.
Its top line figures show that despite the much hyped rise in those prepared to go through a Dry January, there were still plenty willing to go and whet their whistle, or at least eat out even if they were not doing much drinking. Overall like-for-like sales for were up 1.9% across the country versus January 2016, with again London performing the most strongly up 2.2%.
When this is broken down in to different channels then it is clear restaurant chains continue to win out over pubs, up 3.3% up on last January, on a same-outlet basis, while pub group sales were only up 1%.
Peter Martin, vice president of CGA Peach, the on-trade research group that helps produce the Tracker in partnership with Coffer Group and RSM, said the figures are encouraging in that it even a notoriously quiet time of the year people were still looking to spend their money eating out.
He said: ”After a busy Christmas and New Year period, when sector like-for-likes were up a healthy 2.2% on 2015, many expected January to be more muted – but consumers seem to have continued to go out to eat and drink, and in particular eat.”
“Part of the rise can be put down to a prolonged New Year break, and results have also been uneven. Although the majority of the operators in the survey saw a rise in sales, that was not universal,” he added.
That said we should not get too carried away. As Martin warned: “It also has to be remembered that January is always a weak trading month, so swings at this time of the year will not overly affect business fortunes, but with latest figures showing inflation running at 1.8%, this is a level of the growth the market will need to maintain.”
London’s 2.2% like-for-like increase was buoyed by a 3.8% like-for-like increase amongst restaurant groups, again showing our appetite for eating out, in groups in casual dining outlets.
Hit from Dry January
CGA’s figures also looked at the impact of Dry January which is clearly now beginning to make its mark on our drinking habits, in what was its fifth “official” year.
CGA found that Dry January was particularly effective amongst younger age groups with over a quarter (28%) of 18-34-year-olds taking part. This slipped well down to only 14% of over 55s. But CGA also noted those figures tailed off during the month.
Other key findings from the January figures show the total sales growth amongst the 34 groups monitored was up 4.4%, which CGA puts down to the continued positive impact from new openings.
It also stresses the overall like-for-like sales are only running at just 0.8% ahead for the 12 months to the end of January, essentially in-line with most of last year.
Difficult first half
The first half of 2017 is going to be difficult right across the on-trade, but particularly amongst the major operators and groups with large staff numbers as they have to cope with increased labour costs and increases to the National Minimum and Living wages.
Trevor Watson, executive director for valuations at Davis Coffer Lyons, said consumers are also going to have to deal eventually with accelerating inflation. “The next few months will see significant cost pressures for operators in both the pub and restaurant sectors, not least of which is the new rates assessments. Operators are likely to look to pass these costs on through higher menu prices. Some brands and businesses will be better placed than others to do s,” he said.
Paul Newman, head of leisure and hospitality at RSM UK, added: “These results offer cause for optimism albeit with a dose of realism. Besides exchange rates and rising transport costs…operators will need to see sustained levels of sales growth continue in the months ahead just to stand still.”
* Coffer Peach Business Tracker collects sales figures directly from 34 leading companies. Participants include Mitchells & Butlers (owner of Harvester, Toby, Miller & Carter, All Bar One etc), Pizza Hut, Whitbread (Beefeater, Brewers Fayre, Table Table), Pizza Express, The Restaurant Group (Frankie & Bennys, Chiquitos, Brunning & Price), Spirit Group (Flaming Grill, Fayre & Square), Casual Dining Group (Café Rouge, Bella Italia, La Tasca, Las Iguanas), Stonegate (Slug & Lettuce, Yates’), TGI Fridays, Marston’s, Azzurri Restaurants (Zizzi, ASK), Wagamama, YO! Sushi, Prezzo, Novus (Tiger Tiger), Fuller’s, Carluccio’s, Young’s, Living Ventures, Strada, Amber Taverns, Hall & Woodhouse, Gaucho, Intertain (Walkabout), Giraffe, Loungers, Byron, New World Trading Co, Peach Pub Co, Le Bistrot Pierre, Laine Pub Co, All Star Lanes, Le Pain Quotidien and Downing LLP (investment partner of Antic London).