Food and drink – a natural combination

Owning a restaurant brand looks like being the latest fashion accessory for the ambitious pub group this summer. Laurel has La Tasca, Ultimate has Bel and the Dragon and now Greene King seems set to add Loch Fyne to its collection. Only last month, I suggested in M&C Report that Mitchells & Butlers might consider a casual dining acquisition, perhaps The Restaurant Group? Last week, that suggestion was echoed in an analyst’s note by Simon French, of Numis. The trend is gaining traction, as the Americans would say. The only surprise is that bars and restaurants haven’t come together earlier. Of course, you can argue they have already. M&B would claim to be the UK’s leading casual dining business and Whitbread has owned Costa for many years now. Nevertheless, the pub industry’s move into food has remained broadly within the pub environment. M&B may be kings of the pub restaurant, but apart from the Brown’s acquisition it has avoided high street eating-out. It has been accepted for some time that pubs and restaurants are essentially in the same business, but the two sides of the market have still been wary of getting into each other’s operational territory. One of the main reasons for this has been a nervousness about having the necessary hands-on skills to succeed. Ironically, this skills gap is now a factor prompting this new togetherness. As eating-out grows and wet-led businesses struggle, the need for pub and bar groups to gain a bigger slice of the food market and to acquire the operational know-how to make the most of it has increased. Smoking and the mounting pressure on alcohol have just added to the urgency. The fact that they can also expect a higher business valuation as a restaurant rather than a drinks-based enterprise has not escaped them either. The Greene King move for Loch Fyne adds another dimension, however. As a brewer, it understands brands. Pubs have not been an easy market to leverage brand values, especially on a national scale. Restaurants provide a different opportunity. The public understand and like brands, especially when eating out. Greene King boss Rooney Anand is a brands man with an FMCG pedigree. If his company does land Loch Fyne, it will be fascinating to see how it develops its franchise. Loch Fyne possess all the attributes of a major brand – Scottish heritage combined with modern “green” credentials. It has been developed carefully by another marketing man in chief executive Mark Derry. Can Greene King take it to a different level? If it does, it will be its beer brand building skills that will need to be employed. It can be argued that the country’s brewers have been among the slowest to recognise the importance of food in their pub businesses. Could it be that their beer brand skills eventually allow them to make a bigger splash in the food arena than other pub owners? That would be a new fashion. Peter Martin is co-creator of the M&C Report and founder of the Peach Factory