- Indie restaurants and drink-led pubs in decline
- Managed and branded casual dining operators continue to expand.
THE North East could be Britain’s best-kept secret for restaurant and pub operators, according to the latest AlixPartners CGA Peach Market Growth Monitor report released today.
Tyne Tees region saw the fastest pace of openings, mainly managed and branded casual dining restaurants and licensed premises. The region has 23.6% more licensed premises than in 2012.
This year (March 2017) it saw further growth in food-led sites of 3.5% compared to the year before. In Newcastle this equates to 15 net new openings of all types of licensed premises over the last year, and 65 since 2012.
“We are not talking about spectacular growth in the north east, but in the context of a 1.2% drop in net openings for Britain as a whole, it represents an excellent 12 months,” said CGA Peach vice president Peter Martin.
“By comparison, London has seen 16.6% growth in licensed premises over the five year period, and southern England overall has seen 13.3%.”
Vibrancy within the North East can further be seen in Newcastle City Centre, which is behind only Manchester on a measure of growth in food-led sites in major city centres in the last ﬁve years. At 34.9%, its rate of new openings has been faster than cities including Leeds, Cardiff, Liverpool and Birmingham, all of which have seen surging interest from restaurant operators this decade.
Most of these openings have been of casual dining restaurants located in retail and leisure developments. Part of the growth is down to the availability of new business development money. Multi-operators are now looking at previously difficult markets such as Middlesbrough and Sunderland.
“The foodie scene is burgeoning across the North East,” said Martin. “Interest in food and drink is increasing further aﬁeld into rural Northumberland too. Brands still have to work hard for traction, but with good local knowledge and the right propositions and price points, there is scope for them to step up their presence here.”
However, nationally, the growth of multi-operators is at the expense of community drink-led pubs and independent restaurant sectors. This sector is seeing a steady decline due to the challenges of increased property, food and people costs, said the report.
The uncertainty over Brexit negotiations is also taking its toll.
In March 2017 there were just over 122,200 licensed premises in Great Britain – 1.2% fewer than 12 months ago. It is the ﬁfth quarter in a row that the Monitor has recorded a decline in premises. This equates to net closures of 1,527 premises over the last year – around four a day.
However, within the overall decline of licenses premises, the number of managed licensed venues—including cafes and hotels as well as restaurants, pubs and bars—rose by 2.5% in the year to March. And the number of managed restaurants has increased 6.0% since March 2016. That is equivalent to 316 net new restaurants—or one new opening a day.
The most successful managed casual dining brands are those that had incubated in London and expanded further afield.
Managed drink-led or ‘community locals’ offering cocktails and craft beer also saw an 8.7% growth in new openings in the year to March 2017. This has come from the likes of Greene King and the Ei group that have been transitioning many pubs to various managed formats; and pub turnaround specialists such as Amber Taverns, said the report.
The entertainment based segments, cafes and wine bars, also added 273 sites in the 12 months to March.
Martin said: “The decline in licensed premises, while hardly welcome for the sector, is readily explained. It is driven in large part by ongoing closures of [traditional] drink-led premises – mostly local and community pubs that have relied on drinkers for the bulk of their trade.
“The smoking ban, cheap supermarket alcohol and a healthier lifestyle agenda have all thinned out British pubs over the last decade. On top of that, a large tax burden and spiralling property costs have conspired against licensed operators. Economic uncertainty, exacerbated by Brexit, has squeezed on consumer spending. Inﬂation in food and drink costs and the raising of minimum wage levels haven’t helped either.”
AlixPartners managing director Paul Hemming added: “There is no getting away from the fact that the eating-out and drinking-out sector as a whole is being challenged as never before. The cost pressures in play make it inevitable that profit margins will be squeezed, and there is a limit to how far pricing and menu engineering can compensate.
“The reality is that multi-site owners will now be faced with returns on investment less than the 30-to-45% that they have enjoyed in the past 10 years. They will, however, remain at healthy levels when compared to many other industries. Whilst this means some business plans will need to be rewritten, the market leading players will still offer highly attractive investment opportunities.”
The North East’s Top Ten Hotspots:
% change in numbers of licensed premises since March 2016
City/Town Changes in total sites
1 Newcastle – 26
2 Darlington – 9
3 Gateshead – 7
4 Seaham – 6
5 Redcar – 4
6 Harrogate – 2
7 Consett – 2
8 Blyth – 2
9 Middlesbrough – 2
10 Richmond – 2
Eight more trends in new openings
The Market Growth Monitor’s guide to the hotspots and black spots of Britain’s city centres and high streets:
Big cities trump big towns In many areas of Britain, the broad trend in consumers’ eating and drinking out habits lately has been away from large towns and towards major city centres. Market Growth Monitor ﬁgures show that city high streets have seen a 4.4% increase in new openings over the last three years, against a 0.6% decline in large towns.
The north-south divide is narrowing.Recent trends in new openings have been in favour of the north. Of the ten city centres with the best growth in licensed premises in the last year, seven – Manchester, Liverpool, Newcastle, Edinburgh, Leeds, Bradford and Glasgow – are north of the Midlands.
Manchester and Liverpool are buzzing. The pace of new openings in the North West hubs of Manchester and Liverpool continues to gain momentum. Between them, the two city centres had 53 net new openings in the 12 months to March – equivalent to one a week. Many of them have been casual dining restaurants, but premium bars with an emphasis on cocktails and craft beer have ﬂourished as well.
Retail developments have driven growth what many of the city centres showing growth have in common is the success of major retail and leisure schemes. Brands’ presence in Liverpool has been hugely helped by the popularity of Liverpool One, for instance, and in Leeds by the Trinity centre. Newcastle has beneﬁted from Intu’s revamp of Eldon Square.
Cities are taking commuter belt trade in several cases; big cities would appear to be drawing new openings out of their adjacent towns. Huddersﬁeld’s number of licensed premises has fallen, perhaps because of the attraction of Leeds close by. An exception to the trend is Manchester, where a vibrant city centre seems to be having a halo effect, with both Altrincham and Stockport adding licensed premises in the year to March. Both places attract young professionals working in Manchester, and new restaurant and bar concepts have followed them there.
Market towns are holding up while many large and suburban towns have seen a modest decline in licensed premises. However, high streets in smaller towns have held their numbers reasonably well. Their number of premises has edged up by 1.0% over the last three years – lower than the ﬁgure of 4.4% for cities but better than the decline of 0.6% for large towns. It is the result of some multi-site casual dining operators turning to market towns for their next phase of growth.
Some seaside towns are struggling. Of the ten large towns with the most high street closures in the last year, three – Weston-SuperMare, Margate and Blackpool – are on the coast. These, and other classic British resorts, have seen visitor numbers fall for many years now, and that has reduced their appeal to managed pub and restaurant groups.
Cafes and wine bars are taking circuit bars’ share in towns. On high streets in large towns, the number of venues classiﬁed by CGA Peach as circuit bars has fallen by 8.0% in the last three years – but the number of licensed cafes and wine bars has risen by 5.9% in the same period. In small towns, the corresponding ﬁgures are a 6.5% fall in circuit bars and a 9.2% increase in cafes and wine bars. It points to a shift away from nights out that revolve around drinking and beer, towards a more sophisticated experience.