Revving engines and potential investment

Monday 8th February 2021 Weekly Briefing

The Beverage Standards Association brings you Peter’s Monday 8th February 2021 Weekly Briefing every Tuesday morning.

Revving engines

I hear the sound of engines revving up in the eating out market. Money is being mobilised to invest in the sector and is waiting for the off. But I won’t stretch the motor racing analogy any more because it doesn’t go too far. For instance, investment money, perhaps more realistically disaster-prevention money, has already gone into quite a number of restructurings, pre-pack administrations, CVAs and more reorganisations without waiting for the “off”.

Potential investment

What brought on this line of thought has been some announcements of potential investments in the pub sector. Palatine Equity Advisors have tabled three bids for Marston’s (now a pure play pub company without its former, direct brewing interest). And Rooney Anand, former CEO of Greene King,and former Chairman of Casual Dining Group, heads up RedCat, a fund with £500 million, in equity and debt, to invest in the pub sector.

Property assests

The attraction of this sector for investors, being based on tangible property assets, is obvious at this time of uncertainty. But restaurants as a destination for investment are not so obvious given the fragility of the assets being invested in. Investment considerations in restaurants generally boil down to two: is there a profitable, preferably scalable business model, and is there effective management? Both of these have come under severe stress during covid.

Lack of clarity

Consequently, investment opportunities are not obvious; and this lack of clarity is compounded by uncertainty about what the post-covid restaurant world is going to look like. There are questions about the role of delivery, the resetting of profitability models, changes in the relative attraction ofdifferent locations (city centres, suburban, rural, travel-centric), the role of technology in the “customer’s restaurant journey”, and many other issues that have been upended by covid, and whose outcomes are as yet unclear.

Thank you for reading part of the Monday 8th February 2021 Weekly Briefing and full edition can be found at Weekly Briefing Report.