Assessing the industry outlook

“Generally it’s going to be a lot brighter than we have seen recently,” says Sarah Holland of the Met Office. According to the latest forecasts, as large swathes of the UK return to work, and the kids go back to school, the damp conditions of August – among the wettest ever in some parts of the country – will give way to a sustained snap of more agreeable weather that could last the whole of September. It may last even longer, bringing an Indian summer in October. It’s reason for optimism in what has been a caustically tough trading period. The hope that attractively shady terraces and pub gardens would offer enticing refuge from a sustained period of brilliantly sunny weather, and therefore provide something of a fillip to the eating and drinking-out market, has so far this summer not really been realised. There is with the nation, and within this market, a slight obsession with the weather. Not everyone operates businesses that are skewed to the summer months and fairer conditions but operators agree that what we all could use, especially right now, is that feel-good factor that pleasant weather helps engender among our consumers. A bit of late summer sun would be something of a tonic. As well as watching what is happening overhead, the industry will be alive to the economic barometer this September. The coming weeks have been pinpointed by analysts and observers as the time when we might start to get a clearer line of sight on the health of the consumer’s pocket, and their propensity and desire not to forgo the simple indulgences of a drink and a bite to eat out. One of the key questions everyone wants to know is to what extent people are going to come back home, and spend money. September has also been indentified as a period that could see a little more of the market’s pain crystallised, as the quarterly rent rolls and tax bills potentially take an intolerable toll on the market’s straggling operators. It could unfortunately yield further casualties. It will also be interesting to see if the unprecedented level of discounting by both casual dining chains and drink-led bar operators, prevalent throughout July and August, continues next month and beyond. These promotions have been picked up by consumer websites – visit Martin Lewis’ www.moneysavingexpert.com for a taste. Some of this activity has been driven by a desire for customers’ personal data, captured through special offers. But much of it has been about keeping volumes up, albeit at much lower margins. Despite the wet weather, subdued trading environment and deep discounting, the industry’s business leaders remain a positive bunch. A new survey by Allegra Strategies of 200 senior executives suggests that while most are concerned by the current trading environment, many remain highly optimistic about the long-term outlook. 85% of industry leaders described trading in the past 12 months as very challenging, with 36% reporting like-for-like sales down on last year. However, three-quarters of chain operators expected to open multiple sites next year and 55% expected eating out to grow in the next three-to-five years. “Despite widespread doom and gloom, the sector is surprisingly optimistic. Most companies are concentrating on minimising short-term pain, but remain focused on the longer-term positioning and development of their businesses,” says Jeffrey Young, managing director of Allegra. The survey, the more details of which are published in the September issue of M&C Report – out at the end of the week – supports the theory that while practically everyone acknowledges that times are tough for both food and drink, the eating-out market is resilient. Those equipped to ride out the storm, know that the current bad weather cannot last in a market in structural, long-term growth. The summer trading picture will become clearer when a clutch of companies unveil figures, starting this Friday with The Restaurant Group. TRG will be followed in September by Capital Pub Company, Greene King, Individual Restaurant Company, Luminar, Premium Bars, Prezzo, Punch Taverns, Wetherspoon and Whitbread. But what everyone really wants to know is: what happens next? And what happens after what happens next? Allegra's Jeffrey Young will speak at this November's Restaurant 2008 conference, unveiling the full findings of his Industry Leaders survey plus key insights from one of the biggest pieces of research ever undertaken into the UK restaurant market. For more details or to secure your place, call Charlotte Feenan on 01293 846578.