Scottish On-Trade State of The Nation Christmas New Year 2017

The Scottish Licensed Trade Association today releases its Christmas/New Year review, sponsored by KPMG LLP, containing key insights on Scotland’s burgeoning food and drink sector.

Paul Waterson, Chief Executive of the SLTA said:-

“Our survey is an indicator of the key challenges facing the wide range of small to large businesses who trade within the wider hospitality sector, covering pubs, hotel groups and late night premises.   Our survey is based upon quantitative research from over 600 retailers covering the length and breadth of the country and is supported, not only by our core stakeholders, but by many of the major chains and our partners in the Scottish Bartenders Network.   After successive years of decline, we are starting to see some emerging signs of growth with 39% of businesses reporting increases, but this is offset by poor Christmas trading with 53% of outlets saying they were down at Christmas/New Year.  Government legislation, whether this is national or local, continues to be the biggest challenge facing retailers, particularly for rural operators who are often the lifeblood of local communities. Worryingly, ZERO rural operators reported growth over the Christmas/New Year period.   This is extremely concerning given the importance of tourism to Scotland’s economy.”

One area that the SLTA is interested in exploring further is developments in the digital economy.   Waterson added “This year we asked respondents to call out the expected growth areas in 2018, and we are delighted to see Scottish craft beer and gin being highlighted, but we also see online bookings and the digital economy coming to the fore. This is an area where we can work with the Scottish Government and other tourism bodies to ensure businesses and visitors have high speed Wi-Fi and mobile coverage in remote and rural communities.”

Another area of positive news is that more and more on trade retailers are stocking beers, food, spirits and soft drinks from local producers, Waterson commented “The buzzword in 2018 is to expect growth in anything craft and as a sector we have a massive role to play in delivering Scotland’s food and drink strategy.’’

The report is the latest half yearly review from the SLTA and provides key insights on food and drink performance directly from front line retailers across city centre locations and rural locations.

Waterson further added “The SLTA has been the voice of the licensed trade in Scotland since 1880 and this report demonstrates our ambition for retailers to work with manufacturers and brand owners by sharing the front line key insights which our retailers are uniquely able to provide to manufacturers and wholesalers.”

Alistair McAlinden, Head of Hospitality & Leisure for KPMG  LLP in Scotland, said:-

“It is encouraging to see that more than a third of respondents have reported growth during 2017 – an improvement on the prior year.  However, a significant proportion of operators are reporting year-on-year decline, which – together with disappointing festive trading results – is indicative of the headwinds which continue to affect the sector.   Perhaps unsurprisingly, rates and labour costs are of greatest concern to operators, but with fewer outlets expecting a decline during 2018, cautious optimism appears to be the order of the day.

Remaining as lean as possible, whilst embracing changing consumer tastes and expectations, represents the key operational challenge for the Scottish Licensed Trade in 2018.

The efficiencies and opportunities for promotion which can be garnered from effective use of digital technology will undoubtedly enhance customer experience and allow operators to maximise trading performance during the year ahead.

In testing trading conditions, old fashioned pragmatism should be borne in mind, including acknowledging when a change in strategy could allow a business to achieve its full potential.  Whilst at the larger end of the market, the CVA recently sought by Byron Burger illustrates one way our firm is supporting Leisure clients in a constantly evolving hospitality marketplace.”

 

EXECUTIVE SUMMARY

Retail Headlines

Relative to the total calendar year, Christmas sales were poor, with 39 % of outlets growing in the calendar year, but this fell to 28% at Christmas & 53% of outlets showed a decline at Christmas.

Multiple outlet operators out-performed single outlet operators (40% in Christmas growth versus 22%).

Once again rural outlets are under real pressure – no rural outlets were in growth at Christmas.

Category Performances.

Independent/craft beer sales out-performed the market at Christmas. By contrast mainstream beers showed 59% of outlets in decline.

75% of outlets are now stocking independent/craft beers versus 62% last year.

Spirits & soft drink sales are marginally ahead of the market.

Although food sales marginally out-performed the market at Christmas, sales across all categories of outlets who sell food are on a par with those who don’t.

Macro-Economic Challenges.

Government legislation. (National, Local, Rates, Minimum Wages) consistently remains as the biggest challenge facing pub and bar operators.

The threat of competition from off trade has fallen – minimum pricing?

Commercial Rates remain a huge concern with 75% of outlets mentioning rates as a big concern.

 Outlook

The long-term outlook is mixed, less outlets are expecting growth versus their actual performance in 2017, but by contrast less expect a decline.

For first time we asked retailers to tip their expected growth & decline categories in 2018:

On the way up: Anything Craft, Scottish Gin, Independent/Craft Beer, Online bookings.

On the way down: Mainstream beer & spirits.

 

All data copyright SLTA 2018

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