Last year was rough, wasn’t it? The social and political earthquakes of the past 12 months have shaken the hospitality industry as much as any other, leaving many uncertain and worried for the year ahead.
Brexit, Trump – you know the story, you’ve read it a million times already. Whichever side of the fence you sat on, the world has apparently never felt as divided as it does now.
Politics doesn’t exist in a vacuum – in the wake of 2016’s seismic events, many hospitality businesses rang in the new year more uncertain of their future than ever, despite the fact the British public has never been more receptive to good food and willing to part with their cash for it.
Economic hardship is expected but, while the impulse to doom-monger in the face of ailing markets and social pessimism may be strong, pubs – especially those that have successfully carved a space for themselves with enticing food offers – have a tendency to surprise with their resilience.
The Brexit effect
Brexit will no doubt remain a focal debate for multiple pub operators and independents alike.
While the true effect of Britain’s exit from the European Union on hospitality businesses is yet to be revealed, the outlook for many – especially smaller businesses – is not wholly positive.
Uncertainty as to what form Brexit will eventually take has made the distressing prospect of rising imported food prices and a weak pound squeezing customer spending increasingly likely.
Accountancy firm Moore Stephens predicted early in December that almost 6,000 pub and restaurant companies had at least a 30% chance of becoming insolvent over the next two years thanks to a combination of the two issues. And apparently the answer isn’t as simple as “sell more British produce”.
Moore Stephens restructuring partner Mike Finch previously explained: “It is unrealistic to expect UK restaurant groups to avoid the impact of the fall in the pound by substituting for UK produce – they are going to face a big hit.”
Small and medium-sized businesses would find it harder to weather the hit thanks to the notoriously low margins and tighter constraints they typically faced, he continued.
“[Businesses] have to make tough decisions as to how much they try to pass on to consumers; too much and they risk losing business, too little and they lose margin."
“There may be further challenges to come as the UK’s trading agreements with Europe remain uncertain. Many in the industry would consider the idea of additional import tariffs on foodstuffs with horror.”
The picture becomes all the more worrying when you introduce the fact the UK is also due for a natural, cyclical economic downturn over the next two years, according to Peter Backman, managing director of foodservice consultants Horizons.
He says: “Brexit is not helping. One problem is the falling value of the pound pushing food prices up, but also fuel prices are going up which adds to transport costs which are then added to the price of food.
“Also heating, cooking, all that’s going to go up. Not to mention equipment that comes from overseas.”
But JD Wetherspoon boss Tim Martin, whose strong pro-Brexit stance made headlines in the lead up to the referendum and its aftermath, believes a British hospitality industry free of Brussels’ imposition can only thrive.
“I can’t see how it will negatively affect [food businesses’] operations,” he says. “[Economist] Patrick Minford calculates that food prices for the whole country will decline by 8% if we get out of the EU and get rid of all the EU-imposed tariffs on non-EU food-producing countries.”
He continues: “Frankly, people are starting to believe in myths. I know someone who has a small restaurant operation in London who was very cross with me at Brexit, but his trade has boomed since.
“The pound has gone down and we’ve had a massive influx of foreign tourists. British tourists are saying its more expensive to go abroad and are staying in the UK. Cornwall had a great summer, for instance.”
Martin believes people have got carried away with the “tribalism” of the referendum, picking and choosing economic arguments to support their political stance.
“The pound was too high,” he argues. “Everyone knows that. The pound was overvalued and had to come down, it was causing economic problems.”
There’s also the issue of immigration that Brexit brings with it. For food operators already facing a chronic shortage of skilled chefs which shows no signs of abating in the near future, the prospect of losing EU staff on whom many of them rely is a major worry.
“It can’t get easier as we move into next year,” says Backman. “Labour is becoming scarcer and, dare I say, quality is going down. At the same time, we’re going to find that consumers are getting less confident and are going to want to eat out less and spend less.”
Wetherspoons’ Martin is less pessimistic. “I think people are thinking in a tribal way and going ‘my fantastic Spanish chef may not be able to come here in the future’, which isn’t true.
“The Brexiteers I shared a platform with – Boris Johnson, Michael Gove, Priti Patel – all understand that immigration is necessary and desirable. But the EU gave immigration a bad name.”
In Martin’s opinion, operators should be far more worried about gaining tax equality with supermarkets and lowering VAT.
Beyond Brexit, the eating out sector continues to evolve. Delivery operators such as Just Eat and Deliveroo are achieving a level of prominence few would have predicted for them at the turn of the decade.
They have been bolstered in their rise by the younger “digital native” generation, whose overwhelming desire to have food and culture at their fingertips could see delivery begin to encroach on traditional hospitality businesses as the generation ages and its spending power grows.
“Delivery is wide open at the moment,” says Backman. “It’s growing and primarily taking business away from retails but adding incremental sales to the eating out market.”
But for the moment, he says, delivery represents an opportunity rather than a threat to pubs.
“There is no reason why pubs can’t get in on that market,” he says. “They tend not to, but there’s no reason why not. They’re doing food and are known in the locality, why not go a step further and have it delivered?”
He points to Punch’s deal with Just Eat last summer as an example of how pubs can benefit from working with delivery services.
The two companies announced in July a partnership allowing pubs with no food offer or catering facilities to have fresh food delivered from local Just Eat restaurants to customers’ tables.
“Older people can argue that eating a meal at home is not the same as eating out,” says Backman. “But if you’re sitting there and suddenly hungry, why not?”
But, he stresses: “For operators that don’t go down the delivery route, it’s not necessarily that they’re going to lose business. They just might miss out on an opportunity.”
Despite the pub trade’s somewhat unfair reputation for uncompromising cultural conservatism, pubs have shown themselves to be remarkably adaptive when it comes to trialling new ideas, particularly when it comes to menu innovation.
“What we call being innovative – keeping up with trends and new ideas – pubs are quite good at that,” says Backman.
“I went to [a pub] last night and had some duck and there was a Korean sauce on the table for us to pour over it. Korean is up there; it’s a modern trend, as is duck. And so is adding the sauce yourself – personalisation. They’ve hit all three trends.”
A number of larger operators have launched standalone food-led concepts Backman notes as being particularly successful, such as Mitchells & Butlers’ recently opened Chicken Society concept.
At the time of writing, the chain had identified approximately 20 pubs across its substantial portfolio that could house the concept, which offers spit-roast chicken and duck with a limited range of sides including mac & cheese, corn on the cob and fried courgetti.
It’s not traditional pub food. Then again, the idea of what “pub food” is has never been more fluid.
At the premium end of the spectrum, high-end chefs are increasingly moving into the pub trade, serving up haute cuisine free of the stuffiness and white tablecloths previously associated with their level of cooking.
They haven’t always been welcomed with open arms – some have faced backlash from local communities afraid of losing their perch at the bar, while others have been accused of cynically shooting for better property prices outside the London bubble without a genuine affection for pubs.
But whether it is duck fat chips, kimchi and gochujang or spit roast duck, the sheer variety of food available in the sector has challenged industry and customer perceptions of what “pub food” is – and what it can be.