A strong festive period for drinks-led operators, but plenty to consider in the months ahead

We consider how the strong trading results from the Christmas period can give drinks-led operators the confidence to be bold and proactive in 2019.

Consumers might be drinking less overall, but trading results suggest the Christmas period was no less festive as a result - despite Visa estimating consumer spend to be down 1.0% year-on-year in December (its strongest decline since April 2018), like-for-like sales were up +4.1%1 over the Christmas and New Year period for the Food and Beverage sector. Although consumers are spending less, they are choosing experiences (such as eating and drinking out) over buying ‘stuff’. This shift towards experience has been growing over the past couple of years and began to take off in 2018 with the rise in social entertainment concepts such as mini golf and bingo, the increase in the number of market halls and the trend for immersive experiences.

Looking more closely at this sector, it is the drinks-led operators which are driving sales growth, with several large businesses showing like-for-like sales performance above 6%.

According to CGA’s Coffer Peach Business Tracker, drinks sales were up +6.4% whilst food was up +3.6% over this period. With little change in covers compared to last year, we can assume that the gap between food and drinks sales is largely driven by growth in people trading up to more premium products. This is something we expect to continue into 2019, and has the added benefit of being margin accretive – so businesses should make the most of it!


These results are encouraging for the sector and highlights that the move by F&B businesses to increase relevance to the consumer after a long period of complacency when it comes to proposition is working. However, they need to be put into perspective and considered alongside more subdued long-term growth and decreasing profitability.

Warmer and less variable weather conditions across December, having a full weekend before Christmas and longer school holidays may have also contributed to sales improvements when compared with last year.

Whilst performance over the festive period has been good, underlying like-for-like growth over the past year is only just hovering in the green at +1.0% and is below inflation, at 2.9%. With increasing input costs, margins are being squeezed and sales are not translating into profit, as we’ve seen recently from profit warnings issued by Brighton Pier Group and Revolution Bars.

Alongside this, the underlying trends we saw testing the sector last year remain the same. Consumer behaviour and preferences are evolving faster than ever, household budgets are being squeezed, and falling consumer confidence is now at its lowest point since July 2013. Looking at the Market, uncertainty around Brexit remains high, staff are in short supply and operators are facing changes to immigration laws post Brexit. Competition is fierce and the market saturated, new entrants embracing technology and digital pose a threat to established players.

So what?

Christmas is the biggest trading month for all F&B businesses, but the following months of January and February are some of the hardest. To counter this, many turn to heavy discounting (particularly in the casual dining sector) which further erodes diminishing margins. There are several ways businesses can generate top line growth, however it’s vital that a balance is maintained between this and improving overall profitability. Our view is that these positive results should be used to give companies the confidence to be proactive and bold going into 2019, with a focus on:

  • Creating brands with truly differentiated propositions
  • Using customer data and digital to better engage with consumers
  • Using technology to improve efficiency
  • Creating a culture which empowers frontline teams and hence improves performance
  • Modernising structures and ways of working to improve responsiveness to change
  • Understanding the consumer and getting to grips with evolving trends in the market


It was a strong Christmas for wet-led operators, and there is cause to celebrate the work that has been done so far. But companies can’t afford to be complacent, all the problems that existed before Christmas haven’t gone away. These results should provide the confidence and drive to be bold and focus on the big stuff that will make the difference in 2019.

Insight by Sophie Atkins, analyst at EI | Stone & River.

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