Industry analyst fears big Q1 bills could cause another Patisserie Valerie

Respected foodservice analyst Peter Backman predicts that some well-known brands will join stricken high street chain Patisserie Valerie in becoming smaller – or even disappear – as the restaurant industry faces continued pressure on costs.  

Mr Backman paid tribute to the “resilience” of the foodservice sector and suggested the restaurant sector could be following the same pattern as the pub sector, whereby a period of consolidation was required to ease overcapacity.

He noted that in December, pub sector sales were “distinctly positive” and said that the rebalancing of supply (in terms of numbers of pubs) and demand is bearing fruit. 

Remarking that the rebalancing has come about partly as a painful reduction in capacity for operators, he added that increased premiumisation, resulting in an increased average transaction spend, had been another factor.

“There are lessons here for the restaurant sector, which is only now starting to reduce capacity to a meaningful extent, and where premiumisation has not yet been explored in depth. In the meantime, all casual dining operators are having to cope with existing overcapacity.

“Their sales and profits will be reduced to the extent that overcapacity exists and the impact of this will be felt in the first quarter of 2019 when, as always, big bills come in – and balance sheets become more stretched. I expect some well-known brands to join Patisserie Valerie in becoming smaller, or to even disappear.”

Mr Backman gave his verdict on the current state of the market in a summary of his QBR Q4 update, which provides an overview of key trends during the most recent calendar quarter.

He reflected on high levels of growth in the pub sector during Q4 as a result of improved wet sales and better food sales, while quick service operators with a well-established model, such as Greggs and McDonald’s also performed well.

“Casual dining chains on the other hand struggled against overcapacity and many found it difficult to get into positive growth over the festive period,” he said.

Pinpointing sectors where growth and innovation are most likely in 2019, he commented: “Hotels, for example, have been growing for most of the period since 2014, especially since the Brexit referendum which lead to a fall in the value of the pound and provided opportunities for hotels to raise prices where foreign visitors make up the majority of the customer base. Meanwhile, the contract catering sector has benefitted from growth in the City of London, although less so in the rest of the country.”

Authors

HAVE YOUR SAY...

*

Related posts

Top