¡Café Virtual con Luis Comas de AmRest!

It would be a pleasure. I'm delighted to be with you. It's a conversation among friends, so I'm happy to share whatever you'd like.

I was smiling when you said that about COVID seeming like it's passed — I didn't have it in my budget forecasts for this year either. It turns out China had COVID this year and we have business there with a brand called Blue Frog in Beijing and some cities. Some of our cities have been severely affected by restrictions. But I'll also share something interesting — in a forum like this with our executives recently, I was talking with a colleague and we were saying: how many crises have we been through? We're no longer in a crisis model, we're in a "permacrisis" — permanent crises are part of our environment. You jumped from COVID to the Ukraine war, but I remind you that in between, we had a logistics crisis where containers weren't arriving, a chips crisis where car companies were buying washing machine factories just to extract chips and get their cars running. So in my sector, I haven't jumped from one thing to another — I've gone through several mini stages of crisis, especially at the European level. Fortunately, I can give you a European perspective. We have presence in all countries from Russia to Spain, in practically every country, which gives us radar stations and thermometers that help me understand the European and Spanish dynamics. Coming from where we come from, with all the forced learnings that crises have brought us — and regardless of what everyone says about how this has accelerated digitalization changes, which are real — some companies have benefited more from this forced process of change. I foresee, and this is somewhat the crystal ball, and it's reflected in my budget for next year: it's going to be a year that varies by area of Europe. We're at different speeds and different crisis levels. The biggest factor affecting all of us is determined by the increase in energy costs. That energy cost implies a negative ripple effect throughout supply chains, food manufacturing, transportation, and finally the product that arrives at my restaurant. I have to try to absorb that increase in a reasonable way so that the consumer doesn't overpay for something I'm already paying more for. So I need to be more efficient, buy better, negotiate better, and somehow adjust my sales channels — whether digital, drive-through, delivery, pickup, or in-restaurant — so the overall sales mix doesn't suffer that brutal impact from the cost increases. To give you some examples across Europe, for us chicken is hugely important. We operate almost a thousand KFCs across Europe, and in some countries the price has gone up 35% — 35% — because the farmer who raises chickens needs heating, and his heating costs have increased 120% in those countries. Energy is what triggers the entire inflation process for us. The price limitations being considered right now are one possible solution. Remember that in Europe generally, gas has a price component inflated by speculation. There are a bunch of brokers who have been involved, and the price has had spikes of up to 70% at certain points in the cycle due to speculation. So it's not really about production and transportation — there's financial gaming behind those prices, combined with geopolitics and other supply factors. It seems like things are stabilizing. Prices at the end of this year and start of next quarter seem to be leveling off, so we're starting to observe a plateau in that inflationary peak of supplies and products, and it should start coming down. I was talking to experts who told me inflation takes 100 days to reach its peak and a thousand days to return to baseline. So I think we're at the top, and what remains is a certain decline. I'm moderately optimistic because the market is a living animal that adjusts quickly and forces competition. Supply and demand are always in tension and always readjust to each other. I believe this beginning of a decline in energy and food prices will allow us to recover some breathing room and momentum. But it's also true that the consumer, beyond restaurant spending, is feeling much more pain in their wallet than before — not just inflation but also shrinkflation. I was talking to someone who said the person who goes grocery shopping on Sunday, their food no longer lasts until Sunday — it lasts until Thursday, because they're paying more and the package of slices has fewer grams than before. All the portions have changed. There's also a factor of tax increases, salary inflation, and so on. Spain, France, and Italy possibly have the lowest consumer confidence indices in Europe right now, and we're very concerned that people are shifting. Something curious is happening in some countries — in the middle class, there's a split occurring. Some people from the middle class are falling into lower consumption. Crises always produce a cascade where your consumption, your lifestyle, your spending, and your frequency drop a step. But now, curiously, the upper part of the middle class is maintaining premium consumption. In Madrid generally, in all of Spain, it's hard to find premium restaurants — restaurants at 50 euros per head and up — with no empty tables and no reservations. You'd think it's crazy, but that consumption is actually increasing. The standard dining segment at 20-35 euros per head is basically flat — it's not growing, staying at levels similar to 2019 but not exceeding them. Meanwhile, there's a very strong shift toward fast food consumption. My reading is that this lack of traffic in mid-range categories is going to force companies to buy customer traffic — to promote, to be more aggressive in attracting people. And I'm going to transfer that to my suppliers, telling them: to be competitive, you need to be more competitive too. And this will produce the inverse effect of competition in the supply chain, and I hope that accelerates the decline in process inflation. Specifically in Spain, if we have a summer — last summer we were still 15% behind our projected figures. We didn't recover fully. The cost per stay went up but not the number of visitors — there were no Russians, no Chinese, no Americans. That's an important part of the visiting population that wasn't there and it seems won't be there yet for a while. With all those consequences — the fall in inflation, a semi-decent summer like last year — I hope that if the energy situation consolidates now — the problem isn't gas in Germany for this December, but it's the gas in Germany for next December. This is the big debate happening now in Germany and other countries: how to guarantee supply for next winter. Alliances with Qatar and other things are happening little by little. I hope the last quarter of the year starts to show a positive change in general trends, because all prices will have adjusted. On top of that, Spain has an election year with lots of media noise and messages of all kinds, which also affects confidence. Capital costs are rising and will keep rising next year. Both Europe and America continue raising the cost of capital. They're different types of inflation — one is supply-driven, the other is consumption and financial — and it needs to be managed so that companies' investment capacity isn't paralyzed. Central banks need to ensure they tighten enough to stop inflation but don't stop productive investment either, because otherwise you end up in a Japanese scenario where you're stuck in permanent inflation with no consumption and the economy doesn't advance. It's a peculiar year. I'm giving you a lot of data in blocks.

Well, there are several formulas. There's a part that's legal regulation — the languages and requirements you have to comply with that place you closer to one culture or another group. But in terms of consumption, for the big brands we operate at a national level, we're practically standard across the country. The product offering is the same. However, the usage and consumption of the product differs. Let me give you an anecdote — Telepizza has a product that's fantastic, the "canelones de Tapaterra." Curiously, in Catalonia and the Levante, it's a star product. On Saint Stephen's Day, December 26th in Catalonia, that holiday is celebrated in a very family-oriented way with this product. But in the rest of Spain, cannelloni aren't such a well-known product. It's a bit about the diversity sometimes in what we call the product mix we sell. But beyond that, at the brand level, part of a brand's success is also finding the same brand with the same positioning wherever you are, without too many adaptations. Across countries, adaptations do happen. There are products that may differ in some countries for historical reasons, sometimes for supply reasons, sometimes because of competitors or lack thereof, depending on the categories you've wanted to promote more or less. In some cases, we have brands where we are franchise operators of multinational brands like Pizza Hut, KFC, Burger King, or Starbucks, where we always have a correlation and agreement with the parent companies on how we manage the offering by country. And in some cases, like Sushi Shop in France or others in Spain, we determine the product mix ourselves. So the adaptation is more by country at our scale rather than by regions, which was a bit your question about Spain. Within Spain, there aren't that many proactive adaptations from us. Sometimes there is a product that can be adapted, sometimes sales channels are adapted. For example, we have a Telepizza Express format in airports, and in that case it's a different model from what you'd normally find on the street, because it has a range of products designed for travelers — products like wraps and Italian sandwiches designed for quick service. So it's an adaptation not of the region but of the sales channel to a specific location. That's what happens more.

Well, let me give you an example of something that's discussed a lot in my sector, which is the digitalization of sales. If we compare our own company just four or five years ago, and we added up all sales made through aggregator applications on your mobile phone — which at that time were still minimal — plus web page orders, self-ordering kiosks in restaurants like you find in fast food today, which at that time were extremely rare — if we lumped all of that into what we call digital sales, all operations done through some digital device, including aggregators, delivery, all of that — those digital sales across AmRest as a whole, brand by brand it can vary, could have been single-digit percentages. In four or five years, that now represents more than half of our sales through some device. More than half, totally. So the way we interact with consumers has changed dramatically. I come from a school where the smile, eye contact, good appearance, and personal service — hospitality — were the key to building business. Today, I have to transfer hospitality to a phone, to an aggregator, to a website, to a self-ordering kiosk. That's changed. The future we see is a greater diversity of consumption moments. And as a marketing expert, you know it's not one consumer — it's different consumption moments. You with your family might consume one way on the weekend; in your daily life at the office, you consume differently, and it's still you. One time you're consuming alone because you want convenience and speed, and you spend 10 euros. Another time you go with family for pleasure and enjoyment, and four of you spend 100, 120 euros, but it's still you. So we need to talk about consumption occasions and moments, not just consumers. That's determining that many customers have discovered different consumption models they didn't know before. The most obvious is delivery — it wasn't famous before. You and I didn't pay attention when delivery was only a Chinese and pizza business, and nobody else. Today you can order everything. You want someone to bring you a ham or a phone — it's all there. Where are the models? There's a change in restaurant design better serving more differentiated consumption models. For example, with Burger King — it was my story when I talked about the beginnings of the standalone buildings with the first drive-throughs — that was a new model 25 years ago. In the United States, it's standard since the 60s and 70s. In the US, 60-65% of sales are through the drive-through window. In Europe, we're not at that level at all, but it's growing and taking that form of consumption. What happens is that consumption models are evolving. For example, Starbucks locations designed to operate 24 hours with only drive-through — no seating, no dining room. Just through an application that you download, with geolocation connected to your Siri, you go in your car and tell Siri you want a Frappuccino the way you like it, and Siri tells you the closest one is three and a half kilometers away on your route. Would you like to order it? You say yes, and Siri automatically connects with the Starbucks app and places the order at that store. It prints out just in time for the calculated arrival of your car so it comes out fresh. You've already paid for it. You just arrive, say your name and code, pick it up and go. I believe that's the ultimate example of a different consumption form, and there are countless similar scenarios happening. Restaurants of the future will be more digitalized both in back-of-house and front-of-house, and above all, we're going to offer more consumption options for the same brands but in different ways.

There isn't one — it varies a lot. It's a completely different profile, and as Fran was saying, it's not one consumer — it's consumption moments. Traditionally, fast food draws from a group of people 35 and younger, primarily. But that doesn't mean you and I aren't consumers of fast food at some point — occasionally, with family, or when you don't know where to eat at an airport, you can't find any brand you recognize, and you say I'll trust this one. For convenience and comfort you go into fast food, and you're not a typical customer, but on that occasion, something catches your attention and you try some products. So talking about a single consumer is very generic. Today we segment our entire offering extensively, and the way we interact changes. When I said the consumer has changed — yes, they've changed. And the good thing is consumers always have options. If I did everything digitally, that customer who doesn't like digital, who prefers personal service, I'd be pushing them out of my consumption. So you always have to find what's the most comfortable option for each consumption moment, for each consumer, to give them options and ease of working with us. The process always goes brand by brand. For example, Sushi Shop for us is a brand with a very strong weight in delivery and takeout more than dine-in consumption. That consumer has evolved with us over the years through delivery and all the new ordering formulas. Our own apps, discounts, aggregators, last-mile delivery — all those things are part of the daily life of that brand. But that's less evident at Telepizza, where consumption might be more about the in-restaurant experience — the waiter service, the fuller experience. That's what people seek there. And you yourself can be a customer of both — one moment you order sushi by delivery, and another moment you go somewhere a waiter serves you with a smile and you enjoy a table with a tablecloth, a great price for the generous portion, and you love it. It's not the customer — it's the consumption moment and the brand. There are more standard profiles by brand, but in general, everyone has evolved toward a more multifaceted customer who changes more in the ways they order.

I was born in Almería, and when I was about 12 I moved to Torremolinos. My childhood as a restaurant consumer — I grew up in an era where we'd buy one Fanta with two straws to share with a cousin. When I did have the chance to eat well, I remember three restaurants from Malaga from that era that are engraved in my memory. One is very well known and I know the family of the founder — Restaurante Lázaro, the typical beach chiringuito that was already historic in my father's time, where you had the best sardines on a skewer with... It was a dish of Malaga-style frying that if you haven't tried it, it's wonderful. I remember going there as a child to enjoy that variety of fried fish products — it drove me wild. It was like a celebration. Where do you want to celebrate? At home. But then there were two restaurants from that era that were also new at the time — international restaurants were still rare in Spain. I'm talking about when I was very young — I'm 55 now. I remember two. One was an Argentine restaurant in Torremolinos called Los Pampas. It was an Argentine grill that served sirloin on a wooden board with chimichurri and a knife stuck in it. I remember not only the quality of the product being fabulous, but the presentation — the knife stuck in the board, the sauce arriving, the product cooked on a charcoal grill with that glow from the juices coming out of the meat. It was something truly wonderful. And another that made a big impression on me as a small child, and I think I'm repeating it because it was so impactful — it was a small place that still exists today and is famous in Andalusia: Mamma Mía, a pizza chain that originally was in Torremolinos, Fuengirola, and later in Córdoba. I remember going to the original one in Torremolinos, which captivated me because it was the typical restaurant in the imagination of a traditional pizzeria — checkered tablecloths, Italian decoration. Back then you'd say it was outdated and old, but at that moment, 40 years ago, it was a visual impact. Discovering Italian pizza was new food — discovering a four-cheese pizza or any of the pizzas was like an international discovery without traveling. Pizza didn't exist, neither refrigerated nor frozen pizzas. You only ate pizza there, so it was a moment of great enjoyment. I remember good products — I love cooking, I'm a cook, and I love the quality of food. But I remember those different things — the presentation, the settings of the restaurant, and above all the quality and craftsmanship. In the case of Lázaro, the best grill master I've seen in my life. I also heard David Muñoz not long ago say his favorite food was a cold tortilla sandwich his mother used to make when they went to the beach. Think about how special that would be — he had it stored in his memory in a super special corner.

Fortunately for us, many and very varied, in several chapters. For example, some are driven by new regulations coming in, and what we do is adapt to those scenarios. For instance, in energy: the use of green energy, recycling materials, solar energy — that's active in many parts of our business. The recycling of packaging and all products that can be biodegraded or recycled. The use of containers that can be reused by consumers — from the bowls we're testing for Sushi Shop, where the customer can refill their bowl in the future, to the reusable cups at Starbucks. That's a fundamental part. We do very active management of all waste and food waste management to reduce waste — not just productive waste but finished product waste too — with companies and internal programs like Too Good To Go, which also help lower our waste index so we have less product than what's really necessary. The entire packaging area — there's an impressive process happening there.