Life is not universally bleak

There has been a chill wind blowing through the UK eating and drinking out market since Christmas. But new Peach Factory research suggests that pessimism is not universal

Doom and gloom abounds. Tumbling like-for-like sales have led to share price crashes and at least one administration.

Yet, there have been glimpses of sunshine too. Domino's Pizza had a bumper Christmas, while Tragus, owner of Café Rouge and Bella Italia, followed up the caution of competitors with a solid plus 4.5% like for likes for the festive season.

So what is it really like out there? How bad is trade?

To get a better sense of the state of the market, Peach Factory last week conducted its own poll of chief executives across both the pub and restaurant sector, among both big and small businesses. In all 33 company chiefs responded to the online survey.

And what was the result?

The best description would be that the market had an 'uneven' Christmas and New Year; the picture was far from uniform. While some operators had a dire time, others flourished. However, pubs fared much worse than restaurants and food business overall was markedly better than alcohol sales.

Looking forward, the majority of operators believe that January and February will be tough, but the outlook for the 2008 as a whole is much more optimistic.

Trading across the board appears not to have been as bad as some predicted. The survey provided a complete spread of results ' 48% of respondents reported negative like-for-likes, 3% saw no change, while another 48% had positive like-for-likes. In all, 36% reported like for likes above 3%, with 15% ahead by 7% or more. In contrast another 15% had like-for-likes down by 5% or more, with 24% seeing sales dip by just 1% to 3%.

Which of the following descriptions best describes OVERALL like-for-like sales over the Christmas period compared to the same period last year? (% of respondents)
Down over 7% 9%
Down 5% to 7% 6%
Down 3% to 5% 9%
Down 1% to 3% 24%
No change 3%
Up 1% to 3% 12%
Up 3% to 5% 15%
Up 5% to 7% 6%
Up over 7% 15%
Source: Peach Factory, January 2008

What was clear, however, is that food sales across pubs and restaurants continued to grow, while alcohol sales suffered. In total, 78% of respondent companies saw food like-for-like sales grow over Christmas, with 24% reporting increasing in excess of 7%.

Alcohol sales suffered much worse, with 65% of both pubs and restaurants seeing sales down.

Which of the following descriptions best describes like-for-like FOOD sales over the Christmas period compared to the same period last year?
Down over 7% 6%
Down 5% to 7% 3%
Down 3% to 5% 3%
Down 1% to 3% 3%
No change 6%
Up 1% to 3% 27%
Up 3% to 5% 15%
Up 5% to 7% 12%
Up over 7% 24%

Looking to the future, 45% of businesses surveyed anticipated like-for-like falls in January and February, while 21% predicted no change and 36% expected an increase.

For 2008, as a whole the picture is more balanced, with 48% expecting an upturn in trading, 21% predicting no change and 45% anticipating a downturn. (See tables below)

What do you anticipate trading to be like for your business in January and February, compared to the same period in 2007?
Signicantly down 12%
Slightly down 33%
The same 21%
Slightly ahead 27%
Significantly ahead 6%
Source: Peach Factory, January 2008

Food saves pub and bar market from worse fate
However, when you strip out figures for those companies that operate predominantly in the pub and bar business, the result is bleaker, but also even more polarised between food and drink sales.

In the pub sector, the view was almost unanimously down over Christmas with 81% reporting negative like for likes, although it was not an unmitigated disaster as 45% saw only a 1% to 3% decline, although 18% saw falls in excess of 5%.

Intriguingly, within that no operate saw food sales fall ' 90% reported increases. Over a third (36%) saw food sales increases of over 7%. In the starkest contrast, not one saw alcohol sales grow, with the majority (55%) recording falls of 3% to 5%.

It also has to be said that pub groups remain the most pessimistic for the future with 82% expecting a slump in January and February and 55% predicting a trade downturn for the year as a whole.

Restaurants looking on the bright side
All the optimism lies in the restaurant sector ' 72% reported positive like-for-likes over Christmas, with half (50%) reporting uplifts of between 1% and 5%.

Half (50%) even expect January and February trading to be up on last year, with 72% predicting increases for 2008 as a whole.

Size and geography ' London gets best of Christmas
On a regional basis, across pubs and restaurants, businesses in London saw a slightly better Christmas than those outside, with 53% reporting positive like-for-likes compared with 40% of those operating predominantly outside London and the South East.

London remains on balance negative about January and February trading, with 40% expecting tougher times and 33% flat trading. The balance swings for 2008, with 47% expecting sales increases and 20% a flat market.

In all 60% of businesses outside London saw like-for-likes down over Christmas, 50% expect falling sales in January and February, with 10% predicting no change. For 2008, the verdict is similar to London, and more upbeat, with 50% optimistic about sales increases, 10% predicting a flat year and 40% tougher times.

The sample:
Type of business
Predominantly pubs and bars 33%
Predominantly restaurants 55%
Both restaurants and pubs 12%

Geographical split
National operator 24%
Predominantly in London and SE England 45%
Predominantly outside of London 30%

Company size by site numbers
Less than 23%
10 -50 sites 39%
Over 50 sites 27%