Rewind 12 months ago and 2013 was being labelled as empty and difficult compared to the Olympic-driven 12 months previous. What rubbish. Without trying to sound too much like a BBC4 documentary presenter, sector commentators may look back in years to come and describe 2013 as one of the most important years in the evolution of the UK’s eating and drinking out sector and a launch pad for a new era of innovation, growth and investment.
Firstly, it is the year that the shackles placed on M&A activity in the sector were truly loosened, kicked off by one of the biggest surprises of the year, with Tesco’s acquisition of Giraffe, and followed by a number of high-quality operations changing hands or receiving significant investment, most notably Byron, Cote, Drake & Morgan and Hawksmoor. A further factor will come into play in 2014 with renewed interest in the issues market, which could eventually be home to Carluccio’s and Tragus. A process for Las Iguanas is due to start in earnest next year, while similar noises are being made around YO! Sushi, Patisserie Valerie, Gaucho and Bill’s.
On the bigger ticket front, the future of Gondola should come into greater focus and like Pret A Manger its future may be found, either in part of whole, on the listed market. Investors also continue to keep a watch on early-stage groups such as Comptoir Libanais, MeatLiquor, Yalla Yalla, Cabana, Tapas Revolution, Iberica, Le Bistrot Pierre, Red’s True BBQ and Caravan.
While further US burger-led chains look to launch in the UK and Five Guys pushes on with its aggressive roll out plans, Wagamama will be expected to formulate its plans for the US, while YO! will hope to regain momentum in its Stateside venture.
While not starting a rush of retailers acquiring other sector operators, Tesco’s acquisition of Giraffe did lead to a number of new joint ventures, including Patisserie Valerie trialling concessions in Next outlets and Lidl teaming up with Subway. It is thought that other tie-ups are being looked at, while I understand that Tesco is keen to add further brands to its portfolio with a sandwich chain being its next mooted target. It has also given company owners a further exit option.
For the pub sector it has at times felt more like revolution than evolution, such has been the progress made, especially on the food-led managed side. Much of the investment made in the sector in the past few years in service, design and offer is now bearing fruit with impressive and innovative results from larger players such as Fuller’s, JDW, Spirit, through to smaller multiple operators like Oakman Inns, Tim Bacon’s New World Trading Company and Clive Watson’s City Pub Company. The EIS route to funding continues to allow highly-regarded management teams re-enter and rejuvenate the market.
Innovation in the tied-model and the need to tap into the operational know-how of experienced operators is also allowing new businesses to be created (Pesto in a Pub and Mezze for example) and others to grow (the Mark Derry-led White Brasseries).
April next year will see the end of an era with Ted Tuppen stepping down from Enterprise Inns, safe in the knowledge that the group has turned the corner. Rival Punch Taverns will hope to be in a similar situation come then after a year of trying to get its debt restructuring disposals through. A failure to do seems unimaginable. Either way a further raft of pub disposals from the group during the year should provide further opportunities for regional and fledgling operators to reinforce their estates.
The Government’s response to its consultation into proposed intervention in the tenanted pub model, which was expected by the end of this year, has now been pushed back to the New Year. Consumer affairs minister Jo Swinson wrote: “The best decisions are made on the best evidence. We’ve got lots of it now and will decide on the next steps very soon.” It’s safe to say that there’s less clarity than ever about what those steps will be, but opponents of intervention have certainly given ministers and officials a lot of chew on over the festive season.
The sale process around Orchid will come under scrutiny in the first part of the year, as will the next moves for the increasingly impressive and TDR Capital-backed Stonegate, a future IPO candidate for the sector. The performance of the newly listed Eclectic Clubs and Bars will be keenly watched in terms of market sentiment for the whole sector and for the health of the late-night category. There will also need to be signs that the Graham Turner and Tim Cullum-led team at Novus are making progress after a difficult 12 months, while the feeling persists that Alchemy will again look to explore its options regarding Inventive. There is also the expected return to the sector of ex-Novus chief executive Steve Richards to look out for.
There are many more strands to pick up on (consumer loyalty, digital innovation and job generation to name three key ones) that will continue to play a significant role across an increasingly buoyant sector, but that is for another time (next Monday morning I expect!). The last 12 months should be viewed as a period when the UK’s eating and drinking-out sector truly regained its confidence. 2014 will be about using that confidence to push the boundaries even further. It should, as always, be an interesting ride.
