Flight to flight

Air passenger traffic is set to treble by 2040 – from 7 billion people to 22 billion, Jonathan Robinson, group business development director at SSP, told delegates at MCA’s Food To Conference last week. He said that at the same time the increase in low cost airlines meant more passengers were buying food for their onward journey.

Extra security measures have also increased the time that people traditionally would have spent at the airport, so the market for food and drink operators “is bigger than you might think”, he said.

It is a market that businesses, big and small, are looking at afresh. Some are looking at an opportunity to create value at a time when capex is restricted and trading/expansion for their core brands remains challenging – see Casual Dining Group (CDG) and The Restaurant Group (TRG) – others for the chance to secure guaranteed footfall, raise brand awareness and trial new formats – whilst at the same time ticking their own expansion boxes.

As an example of the scale of the current opportunity, 35,000 cups of coffee are sold at Heathrow Airport per day. While breakfast is also big business, accounting for up to 60% of all food and drink sales. For example, EAT might be struggling on the high street but at its sites in Heathrow (x2), Gatwick and Edinburgh airports, the company reaches weekly sales of £100k-£110k.

“More and more passengers are flying on low cost carriers, which typically means that you don’t get food on flights, and that results in people not only buying food in the airport before they get on but also buying grab and go style food to eat in the air,” he said. Robinson said there had been 18 international low cost carriers established in the past three years, and that trend is set to go on, “and in most cases they are not offering food for free on board”.

Over the last six months, brands and individuals as diverse as Bodean’s, Gordon Ramsay, Grind, PizzaLuxe, Spuntino, Paul Hollywood, Barburrito and BrewDog have secured new partnerships or flagged up plans to enter the transport hub arena with new concepts.

David Abrahamovitch, co-founder of Grind, is clear on what the benefits of his brand’s link up with SSP are: “The reason it made sense for us, is that we have always had this café-bar model and a restaurant model. It gives our café-bar model a home because I don’t believe in the viability of rolling out that model on to the high street.

“It is a very competitive market and the economics don’t stack up, £5 average transaction, the trading spikes you get and the concentration of trading during the week. I see these guys that are cited as our competitors, I see their plans to roll out loads of A1 sites, which are going to do £8,000 to £15,000 a week, and I see it as a hard slog. On top of that all the costs have got more expensive across the board. We love the café-bar model and the chaos of it, doing 1,000 coffees a day. But finding sites that can do that level of volume in London is difficult, they are few and far between. Whereas put that model in a train station or airport, and you will do that level all day, every day, seven days a week.”

Spuntino’s co-founder Russell Norman says: “We’ve been talking to TRG Concessions for many years about doing something in airports, both with Polpo and Spuntino. It’s important to note the difference between TRG and TRG Concessions, by the way. The former creates and operates brands like Garfunkel’s and Frankie & Benny’s, the latter operates concessions for brands that already exist in the terrestrial world. Therefore, the core values of Spuntino are as essential to TRG Concessions as they are to us. There would be no point doing this otherwise. The partnership allows us to reach new locations and new audiences, but with an outfit that understands the importance of recreating an authentic experience. We control everything.”

SSP has taken the lead in continually refreshing the portfolio of brands it works with, but TRG has also been working on a number of the partnerships that have come to fruition over the last month, since the middle of last year. It is thought that conversations with the likes of BrewDog, Barburrito and Spuntino took place as far back as last June (in Spuntino’s case “a number of years”), the company aware that it was in danger of falling behind SSP in terms of depth and freshness of its concessions offer. Barburrito has leady opened its first TRG site at Edinburgh Airport, whilst TRG is known to be looking at updating its offer at Gatwick, which could provide first locations for the other two new partner brands.

The partnerships also allow the likes of SSP and TRG access to a plethora of new offers and creative ideas, as both look to evolve their own established formats.

However, operating in an airport is challenging. SSP’s Robinson points out that due to the security measures, undertaking shop refits, the delivery of supplies, and even the recruitment of staff, bring additional complexities and costs that you wouldn’t get if you were operating on the high street. “You have to build your logistical and operational muscle,” he said.

Robinson added that for those operators wanting to move into this market, particularly on an international scale, it is important to understand the local culture at the different airports you are looking to operate in. Leon for one will be heeding this advice over the coming years, as the brand looks to ramp up its international presence through its ongoing partnership with HMSHost International. EAT is also set to increase its European transport hub presence, a site in Barcelona Airport is set to follow its recent debut overseas excursion at Madrid Airport with the Ibersol-owned Eat Out Group.

A concession to a different direction

TRG’s struggles with its core restaurant brands – Frankie & Benny’s and Chiquito – are well documented. Chief executive Andy McCue has spoken over the last year of placing greater emphasis on both the group’s concessions business, which has been well run by managing director Nick Ayerst for a number of years now, and pub group Brunning & Price, where Mary Willcock is also doing a fine job at the helm. He said in January that he was keen to secure new partnerships for the TRG Concessions business and that growth in the Brunning & Price pub estate this year would outstrip 2017, and would step up again in 2019

With these new brand signings, the concessions business is going through the gears, which begs the question of whether we will we see another pub group acquisition to complement Brunning & Price? It’s not to say that these moves would change the dial for the company’s overall profits in the short-term but medium term would help to rebalance the business away from Leisure to maybe 50% profit. A rebalancing that is surely needed, despite some small signs that the work being carried out on the restaurant brands is yielding results.

Its rival CDG has invested significantly in its fledgling franchise and concessions business, which is being led by Mark Nelson, including winning the contract to run all food and beverage concessions at Jersey Airport; winning a competitive tender process to run two pubs formerly operated by Geronimo Inns within Heathrow Airport and securing exclusive contract from Italian wine producers Feudi di San Gregorio, to operate its DUBL wine bar concept in the UK, with the first site planned for Luton Airport.

Whilst the noise on its concessions and international aspirations has been dialled up, it has died down on Café Rouge and Bella Italia, both brands that are arguably in the eye of the trading storm.

Over a decade ago, I recall Steve Thomas, the then chairman of the AIM-listed Food & Drink Group phoning the then M&C editor Mark Stretton in regards to a company’s recent name change. My former boss had pointed out, with tongue firmly in cheek, that the change from the Hartford Group, the then owner of Jamie’s Wine bars and the Henry J Beans restaurants, to the Food & Drink Group, must have taken up countless hours to come up with. Thomas, is his usual abrasive style, called in to point out to Stretton that as the group did “food and drink” the name made perfect sense in a ‘does-what-it-says-on-the-tin-style’ argument, referencing the reasoning behind TRG’s name in passing.

A year later TRG would acquire the then 14-strong Brunning & Price in a £32m deal. A decade on, the current direction of travel both for the group and the current wider sector suggests that its obvious moniker may be in need of an upgrade.