MCA’s Big Fat Review of the Year

January

The year began in surprising fashion with a bidding war for a tenanted pub company – unthinkable a year before – as Patron Capital and Heineken duked it out with Emerald Investments (remember them) for control of Punch. Heineken had pretty much declared the whole thing a done deal back in December but Emerald, founded by one of Punch’s inaugural directors, Alan McIntosh, kept up the chase until the beginning of February.

The deal prompted speculation that other big beasts of the sector were likely to follow suit, including Admiral Taverns (tick) and even Ei Group (not so much). The deal eventually led to the departure of several senior figures in the Punch team, including chairman Stephen Billingham and chief executive Duncan Garrood, leaving chief financial officer, Steve Dando, at the helm. A new CEO is due to be announced in the new year, with a key figure at a rival pubco, understood to have already accepted the role. The positive momentum for the pubs sector was reinforced by the sale of 160 pubs, let to Greene King, by US private equity firm Cerberus Capital Management to a private Hong Kong-based property developer, in deal valued at c£400m.

While the momentum was with pubs, 2017 reinforced the warning signs for the casual dining sector that the times were a changing. Looking back from the tail end of a tumultuous year, it seems surprising now that the decision to close six Jamie’s Italian sites should have caused such an almighty fuss. Maybe it was Oliver celebrity status and perennial bonhomie that sharpened the schadenfreude, or (now ex) chief executive Simon Blagden’s clumsy allusion to Brexit, or perhaps we all realised straight away that it was a sign of things to come, but suddenly the Naked Chef seemed terribly exposed.

Only 30% of senior eating and drinking out sector executives started the year positive about the trading environment

February

A blast from the restaurant sector’s past took a (final) turn in the limelight in February, as the Kout Group sold the Little Chef brand to Euro Garages. Weeks after completing the deal, Euro Garages began a programme to close down all Little Chefs, replacing them with other brands available to them such as Starbucks and Greggs. It is thought the majority will be rebranded under the coffee shop brand.

February also saw MCA update on our Top of Mind survey, which made predictably sober reading as only 30% of senior eating and drinking out sector executives started the year positive about the trading environment.

In a year of senior figures leaving their roles, one that should not go unmarked is David Buttress at Just Eat. As MCA’s recent foodservice delivery report underlined, Just Eat remains by far the dominant force in the sector, especially looking at the picture outside the capital, and Buttress deserves an enormous amount of credit for laying the foundations for what is now a FTSE100 company.

March

David Campbell took home the coveted Retailers’ Retailer of the Year title, just a month before his shock departure from the group. Whatever the reasons for his departure, Campbell’s track record in consolidating Wagamama’s position as one of the UK’s best performing restaurant companies cannot be underestimated.

While Wagamama has continued to flourish following Campbell’s departure, there has been little cheer for The Restaurant Group’s investors this year. In March chief executive Andy McCue admitted that there was still a ‘long journey’ to recovery but insisted the ailing Frankie & Benny’s brand can “get back to where it was an beyond”. With its current rate of discounting it has certainly returned to the prices it was offering ten years ago but we will have to wait until Spring to get an update on trade. Positive signs for the group include the imminent arrival of Kirk Davis from Greene King, whose momma didn’t raise no fool, but analysts are still putting the smart money on a sale and break-up.

This year has arguably represented a turning, or more accurately a tipping, point in the rise of delivery

April

This year has arguably represented a turning, or more accurately a tipping, point in the rise of delivery – as mainstream casual dining brands found the lure of the moped too strong to ignore any longer. April saw MCA reveal Nando’s entry to this crowded market – with leading analyst Simon French predicting the chicken king had the best chance of taking on Domino’s at its own game.

There were more sobering signs for the restaurant trade as Tasty, the Kaye family-backed operator of the Wildwood and Dim T brands, reported a profit warning and put a package of sites on the market.

May

The pressures building on the eating-out sector began to show in May with an MCA poll showing that more than half of operators felt they had no choice but to put up prices, with an average of 3%-5% expected over the rest of the year.

There were further changes at the top in the casual dining sector, as Andy Manders ended his brief stint as Byron chief executive and in another of the year’s plot twists, Richard Hodgson departed PizzaExpress - later to turn up at YO! Sushi.

June

Operators across the country peered out from between their fingers as listed operators lined up to admit trading was far from perfect – first Revolution Bars Group and then Comptoir, with the former saying some new openings had been slow to hit targets and the latter admitting mature sites had struggled.

However, there as light amongst the darkness, as Leon secured £25m of new funding and Marston’s made another headline-grabbing acquisition by taking on the Charles Wells beer business for £55m.

MCA’s Pub Market Report reinforced the generally positive messages coming out of the pub sector during 2017

July

MCA’s Pub Market Report reinforced the generally positive messages coming out of the pub sector during 2017, highlighting the narrowing of the gap in terms of revenue growth between pubs and the wider eating-out market. On the M&A front, Draft House swooped for the six-strong Grand Union estate, with the remaining venues being taken back by Young’s.

Meanwhile…. you may be sensing a theme here…. on the restaurant side, MCA was reporting the travails at Handmade Burger Co and the increasingly troubling signs at Byron.

August

The relative quiet of silly season was punctured by Stonegate’s bid for the beleaguered Revolution Bars Group, sparking off a thoroughly entertaining and increasingly bad-tempered battle with the Deltic Group. This bar brawl continued until October with Stonegate’s offer being rejected and Deltic having been forced to walk away from the deal; after receiving little love from the Revs board. One of the blockbusters of the summer, we eagerly await the sequel in 2018.

There was further action in the market as it was revealed that bidders were circling Admiral Taverns, with C&C Group and Proprium Capital emerging as the successful suitors a month later.

September

It’s only fair to point out that not all was rosy in the pub garden during 2017, as Greene King’s trading update for the 18 weeks to 3 September in which it revealed like-for-like sales in its managed arms were down on the previous period. Chief executive Rooney Anand was later to admit that sales had been hit in part due to its exposure to value food as well as the decision to defer brand optimisation capital expenditure in the previous financial year. Anand was later to stress that Greene King is certainly not looking to exit value food.

TRG meanwhile confirmed MCA’s story from earlier in the year that it was launching a new concept, Firejacks, and that it would be exploring new geographies for its booming Brunning & Price pub estate.

October

MCA’s Restaurant Market Report warned that operators were in for a challenging period of market correction until supply better aligns with demand, but stressed that the market was still set to be worth £20bn by the end of the year.

In the departure lounge this month were Simon Blagden of Jamie’s and Jason Myers leaving Busaba Eathai. However, there were also appointments, including Graham Hall moving into a new role aiding the growth of Richard Caring’s restaurant brands and the development of new concepts for him.

Meanwhile, Be At One ended long-term speculation about its future direction after completing a £20m refinancing with Santander.

Murdoch’s departure came within 24 hours of long-term Gaucho Group chief executive Zeev Godik also announcing he was stepping down

November

Further drama in the better burger sector, this time promoted by poor sales at Gourmet Burger Kitchen and the departure of chief executive Alasdair Murdoch, led MCA to ask whether the UK had reached peak patty. The revelation of Murdoch’s departure came within 24 hours of long-term Gaucho Group chief executive Zeev Godik also announcing he was stepping down. Quite apart from the implications for the eating out sector, the revelations played havoc with MCA’s print run, breaking just as we were going to press.

In others news, Clive Watson, the last person to float a pub company (in 2007 with Capital) returned to the IPO market with the newly christened City Pub Group, with a plan to double its currently 34-strong estate over the next three to four years.

Laine Pub Company became the latest to appoint advisors to assess future funding options. It also acquired the four-strong Distinct Group, taking its portfolio to 60. It was the Gavin George-led group’s third group deal of the year – after buying six sites from New Pub Company and a further two from the Flynn family.

December

As we enter the final straight there was final some good news about burgers, as MCA revealed Bridgepoint had reached an agreement with Restaurant Brands International to become the UK master franchisee of Burger King, which currently operates over 500 sites here. There was also speculation that Byron’s rescue deal may value the company at a significantly higher rate than was at first feared.

This was also the month in which Zizzi announced a trial of pizza-to-go counters in Sainsbury’s – an interesting move and one which I have no choice but to mention as I put it in the intro.