Whitbread: Parker pens the changes

The need to instigate or accelerate change is something that visits many organisations, and the eating and drinking-out market is not apart. When one thinks of the companies that have mastered change, names such as McDonald’s and JD Wetherspoon spring to mind most readily. Other brands that have undertaken not inconsiderable transitions in recent times include Café Rouge, Costa Coffee, Pizza Express and YO! Sushi. Punch Taverns is one of the major names currently wrestling with itself as it attempts feverishly to create and roll out branded concepts in its managed house arm with the ability to take market share, and to build a leased model that every stakeholder in that sphere can believe in. Change, as the cliché goes, is the one constant. On this front, there is another company that, to my mind at least, has achieved as much as any in the past three or four years: Whitbread. Under the leadership of outgoing chief executive Alan Parker, in concert with chairman Anthony Habgood, the company – once dubbed, perhaps unkindly, the civil service of the leisure industry – has emerged as a streamlined group built around coffee, budget hotels and mass-market eating-out. Gone is David Lloyd Leisure, Marriott, Pizza Hut and TGI Friday’s plus quite a bit more besides. Last Thursday, Parker, presenting his final set of full-year results before he leaves the group in the autumn, unveiled a 7% rise in full year profits and spoke of “positive momentum across the business”. He said taking market share had been key to the performance. Premier Inn had returned to growth and Costa Coffee – something of a star performer for Whitbread – had delivered its 32nd quarter of like-for-like sales growth. Both of these brands are set to take further big strides in to international territories, as well as filling in the gaps in their home market, with the growth economies of China, India and Russia high on the agenda. The position that Parker leaves the group – as a focused and streamlined business with what it believes are “the right brands” – is testament to his stewardship. On the one level, it has been about the quiet re-organisation of Whitbread around its strengths. But is has also been about delivering enhanced brand propositions coupled with better execution. In the world of budget hotels, there is now a clear distinction between the offers of Premier Inn and nearest rival Travelodge, while in the coffee-bar market – as I have written here before – Costa has been transformed. Of the big three players, for a long time it played catch up to Nero and Starbucks in terms of product quality and execution. This is clearly no longer the case. It seems that the last part of Parker’s puzzle has been the restoration of the group’s pub-restaurant division, a job that Parker – as he marks his retirement by sailing off across the Atlantic – will concede is definitely a work-in-progress affair. The task began in earnest a couple of years ago with a burst of innovation with Taybarns and the creation of Table Table. Taybarns, the seven-strong all-you-can-eat restaurant format, is undergoing a period of gestation, as Whitbread fights year-two sales declines and bids to bring down the £1m conversion costs. Last week Parker told M&C: “Taybarns is doing really well. These were converted from other formats and the increase in sales in their first year was 100%. “Sales have dropped off a bit in their second year to 80%. We will see how these perform in the second half of this year and will be making a decision [about expansion] later this year.” Table Table was designed in part answer to the basket-case that was Brewers Fayre, which two years back was undoubtedly the unloved child – a confused and under-invested 400-strong concern, which Whitbread itself wasn’t sure had a future. A large chunk were sold, some fuelled the first few Taybarns, some were converted to Beefeater. The remainder were split almost down the middle, with half emerging as the new Table Table brand and what was left reconstructed in a new leaner variant of Brewers Fayre. This new brand, which went from zero to 110 outlets almost overnight, is designed to be an accessible, everyday offer to quite a value-minded customer. It is perhaps the weakest or least distinct of Whitbread’s four pub-restaurant brands, although it is designed to sit behind each individual pub, which acts as a “local champion”. While much of the talk has been about the creation of new formats, as much work as been undertaken at Whitbread’s two long-established pub-restaurant brands, Brewers Fayre and Beefeater. When Parker assumed the CEO role, both brands had badly lost their way. Like many other operators, the group has focused on fixing some key fundamentals: raising standards, enhancing the products on the plate and improving the pub-restaurant environment. At Brewers Fayre, the work has been about reasserting the brand’s predominantly blue-collar positioning as a “good value food and drink, served by people who care in a nice and clean environment”, while the company is moving the Beefeater brand to a new template, dubbed internally B3, which features the word “Grill” added to the name, in a bid to own both the steak and grill occasions, backed by a more contemporary look and feel – with the kitchen out front, in the restaurant – and an upgraded menu. More on this is the forthcoming issue of M&C. For now, it is clear there is more work to be done, although Parker has ruled out any more asset swaps or sales, under his watch at least. But what is also clear is that Parker leaves Whitbread a very different beast from when he stepped up five years ago. A few days ago he told my colleague Dominic Walsh that when he steps down from the group in November, he would love a FTSE 100 chairmanship as part of a “balanced portfolio of private and public roles”. He probably won’t be short of offers.