Full price for food — a thing of the past

A new mindset of bargain-hunting has gripped the UK consumer. Tony Halstead looks at how pub operators are taking advantage of the phenomenon with internet vouchers and other discounts.

Recession-hit food pubs and restaurants are embroiled in a multi-million-pound discount war in a marketing-driven attempt to win customers and maintain vital business volumes.

Price promotions, meal deals and voucher schemes have virtually taken over the value and mid-market end of the restaurant and pub chain sector with virtually every big player battling it out for the hard-earned pounds in customers' pockets.

The "discount or die" attitude by operators has seen traditional food pricing deals, once restricted to off-peak midweek trading hours, now in force all day and even into the weekends. And many discounted promotions, which usually only run

through the normally quiet months of January and February have now been extended, some of them apparently indefinitely.

Accountant PricewaterhouseCoopers estimates that 40% of the industry, which accounts for most branded pub and restaurant chains, are now discounting food to the tune of hundreds of millions of pounds each year.

Others are topping up food deals with enticing supplementary offers, often involving free tea, coffee, beer and wine.

Many offers come to customers through in-house promotions or newspaper advertising, but an increasing number of companies are now making use of mobile phone alerts, texts and internet sites as a way of driving business.

Customers are using specialist websites to get details of high-street pub and restaurant chain offers, which often entails downloading vouchers offering a variety of different deals.

Vouchers​

One site, www.moneysavingexpert.com​, regularly lists as many as 36 separate offers from pubs, restaurants and fast food outlets each week. Bob Cotton, chief executive of the British Hospitality Association, says the recession is forcing operators to discount, particularly at the value end of the market.

"Discount deals and offers are virtually keeping the sector afloat and ensuring restaurants stay in business. Outlets have to cover their fixed costs, such as staff wages and utility overheads, and these tactics means critical volumes are achieved.

"Strong marketing, attractive promotions and good value offers may well reduce profitability but, if successful, they will enable a business to survive when those doing nothing will go under," he adds.

"It's unclear just how long this scale of discounting will continue, but my feeling is that it will be around for several more months yet," Cotton added.

Graham Page, consultant for market analyst Nielsen, says mass discounting has been born out of the worst recession the UK has experienced for years.

"People are trading down and concentrating on venues where there are good deals and promotions, fewer and fewer people are paying full price for food or drink in many venues. Nobody knows how long this downturn will last but it may be the way that food pubs and high-street restaurants do business in the future," he said.

"This recession is a whole new experience for the vast majority of people working in the industry and a lot of people are having to learn new skills very quickly. Big managed operations, with their huge resources and buying power, are getting the best out of the discounting spree and are going in with all guns blazing.

"Other smaller operators are having to hang on because they cannot always compete with some of the deals on offer," Page added.

Analyst Peter Backman, from food industry specialist Horizon, warned the current rate of discounting could potentially wipe out profits. "Restaurants and food businesses have high fixed costs and margins are tight. It does not take much to go from making money to losing it," he warned.