Coronavirus effect: July sales in UK pub, bar and restaurant chains down at 50 per cent

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 Coronavirus effect: July sales in UK pub, bar and restaurant chains down at 50 per cent

Summary

  • According to data from the latest monthly Coffer Peach Business Tracker, sales in July 2020 were down 50.4 per cent on year-on-year basis.
  • Reluctance from the customers to come out for eating and drinking impacted the sales and spiked the requests for home delivery orders.
  • While the sales at the bars plunged 3 per cent, it was a fall of 59.8 per cent for restaurants, which was more than the pubs that recorded a decline of 44.7 per cent.

The July 2020 sales for Britain’s managed pub, restaurant, and bar chains reduced to almost 50 per cent as compared to the same period of summer 2019. The data from the latest monthly Coffer Peach Business Tracker showed that sales for July this year was down 50.4 per cent on year-on-year basis. The tracker showed that sales at the bars plunged 63.3 per cent, numbers for restaurants were down 59.8, and the pubs recorded a fall of 44.7 per cent.

The Coffer Peach business tracker collected data from 49 group-owned and managed companies that operate in excess of 7,500 sites. The consultancy firm, CGA along with the Coffer Group and RSM, the auditors produced the data.

(Source: Coffer Peach Business Tracker)

Reasons behind lower sales numbers for July 2020

The business insight consultancy firm, CGA that worked with the Coffer Group to produce the data believed that the decline in sales numbers mirror the fact that the sector is not completely back in business and the companies reopened their sites gradually. It could also be understood that the reopened sites have traded below their usual levels.

Drawing attention to the analysis that the pubs did better business in comparison to the restaurants, CGA commented that it is a mixed picture in general. Within the managed pub groups, it was the sales for drinks that were recorded to be higher than food. The consultancy reasoned that the higher sales figures for drinks could be because people wanted to visit the pubs for social reasons after having stayed at home during the lockdown. However, it would be interesting to see the impact of reduction in value added tax (VAT) on food and the government’s scheme of ‘Eat Out To Help Out’ (applicable for the entire month of August 2020) not only on sales of food in the pubs but also if it would encourage the restaurants to reopen swiftly in coming times.

Also read: Britain’s Hospitality Industry May Not Benefit From The VAT Rate Cut

The consultancy also observed that London which was hit earliest is still grappling to gain momentum. While the restaurants were hit more than the pubs, region-wise London suffered more than the rest of the UK. For the month of July 2020, trading at London fell by 58.3 per cent as compared to outside the M25 orbital road (The M25 or London Orbital Motorway is a major road encircling almost all of Greater London, England), which was down by 48.5 per cent.

Though by the end of July 2020, approximately 76 per cent of the group-owned sites that were operating in February (before March 2020 when the lockdown was imposed) reopened, there was a substantial gap between the numbers for pubs, bars, and restaurants. The tracker presented the numbers for outlets that were back in business in July.

The managed pubs that reopened were 94 per cent, 62 per cent for bars, and just 36 per cent for group-operated restaurants. Talking about the pre-lockdown times, CGA mentioned that the casual dining business was strained even before the outbreak of the coronavirus pandemic and several companies were reducing by closing many sites, besides getting into restructuring process. The crisis brought by the coronavirus pandemic has accelerated that trend in the sector and it is difficult to say how many of those group-owned restaurants would reopen (certainly under current ownership) in coming times.

Also read: Pizza Hut hires Alvarez & Marsal for guidance on company voluntary arrangement: Possible restructuring on cards

Amid the ongoing fight against the coronavirus infections, there is lack of confidence among people to come out of their houses. Given the social distancing and sanitisation guidelines issued by the government to be followed by the pubs, bars, and restaurants to operate during the pandemic, requests for home delivery orders have increased. The Coffer Group tracker mentioned that among the casual dining groups, delivery accounted for 13.1 per cent of sales in July 2020. This is rise from 7.4 per cent recorded in March 2020 and 5.9 per cent in February. Emphasising on the trends for delivery-led sales, CGA stated that it has emerged as a characteristic feature of lockdown and is expected to continue as a crucial aspect of the sales for the dining companies in coming times as well. The consultancy stressed that efficient delivery would comprise to be a growth driver for the successful businesses in the sector.

Commenting on the importance of the measures taken by the government to support the sector, RSM Global, a company engaged in audit, tax, and consulting services, pointed out that the sales figures for July 2020 presents a challenge for the companies. The audit company stressed that it would take some more time for the consumers to develop the confidence for visiting the pubs and restaurants amid the risk of catching the Covid-19 infection.

Given the rent moratorium and the furlough scheme ending soon, it is crucial to extend the Corporate Insolvency and Governance Act. The end of this Act would mean that from the beginning of October 2020, the directors of the companies would be held liable for debts in case the company is trading whilst being insolvent. In such a scenario, an extension would provide the companies additional time to restructure their finances, while the sales also begin to improve. Regarding the government’s initiative of ‘Eat Out to Help Out’, RSM Global commented that the scheme has provided the sector some relief, however more help would be required to protect the jobs.

Conclusion

It is to be noted that after lifting the lockdown restrictions, the government allowed the pubs, bar, and restaurant chains to reopen from 4 July 2020. Despite this, nearly two-thirds of the restaurants did not reopen. Given the social distancing and sanitisation related guidelines for the sector, issued by the government to check the spread of the Covid-19 infections, the customers were reluctant to visit the pubs and restaurants. This hesitation of the Britishers resulted in a spike for home delivery requests. Experts believe that the numbers for August 2020 is likely to improve as the ‘Eat Out to Help Out’ scheme would encourage people to resume their old habits of visiting the pubs and restaurants, at least in some areas.

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