Pret Sounds

28:41First quarter numbers were nicely up, but a little bit behind analyst expectations. And actually, if you look at it, it's the company's second weakest profit number in five years. So shares after trading yesterday were initially up about 5%. But once the investment in AI got digested, they're actually marginally down. So the one good thing about the numbers, there was really good free cash flow. So there was about$1.4 billion of free cash flow generated. And that raised analysts' eyebrows in a positive way. But being slightly cynical, I do wonder if this is just maybe slightly flattered in the short term, because in the second breath that he had, he announced that he's going to be spending$25 billion this year on AI.

29:26And that's up from about$8.5 billion last year. and it's up from 20 billion, which was the last forecast. So this is going into cyber cabs and the TerraFab chip manufacturing plant and there's AI solutions. So, yeah, is this AI or is it core automotive? You tell me. Yeah, well, you get that feeling. We're getting almost like the Apple where iPhones, iMacs, AirPods, whatever it might be. There's so many different products that they're selling now. It's not just based on one specific thing and is Tesla with its robots. So just you reminded me, I don't think I've mentioned this week come wake up to any of that robot that was chasing those wild boars off the streets of Warsaw.

30:03I don't know if you caught that video, but that was on the BBC website. That was an eye opener and what to Elon Musk's world of robots might look like. Right, Judith, thank you. 85058 if you want to join in the chat. It's 5.32. Chicago talks a lot. Hold on, let me step over here. People are talking too much. We debate about food, deep dish, tavern style, who's got the best beef? We yell across rooms, across blocks, across generations. Yes, nice earrings, Grammy. And now we're doing it on our phones, too. Video calls from the L train, group chats that never shut up. Neighbors texting you the score before your TV catches up.

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31:49Wake Up to Money with Sean Farrington. Good morning, it is Wake Up To Money on BBC 5 Live. It's 25 to 6. It is Thursday morning, the 23rd of April. Getting a little bit closer to that Thursday, the 7th of May date, when millions of voters will head to the polls in the biggest set of elections across the UK since the 2024 general election. So voters in England will be electing local councillors and mayors. Those in Scotland and Wales will elect representatives to their national parliament. The last decade, of course, here on Wake Up To Money, in almost every programme, dominated by various economic uncertainties, unprecedented crises, concerns about the cost of living across all communities.

32:30Something brought into sharp focus in recent weeks, given that ongoing war in Iran. Here on Wake Up To Money, we're interested to hear what the major political parties will be telling voters in the coming weeks about their plans for the UK's businesses, economy, for households, for trade. for the next 10 minutes. We're going to focus on the vote in Wales, and Plaid Cymru in particular, where voters in Wales will decide who will take the 96 seats that are up for grabs in their newly expanded national parliament, the Senedd, Adam Price, MS, member for Carmarthen East and Deneva, and former party leader of Plaid Cymru joins me in the studio.

33:04Very good morning to you. Good morning, Sean. Pleasure to be here. Now, plenty of issues. Let's see what we can get through in 10 minutes. It's one that has come up a lot on Wake Up To Money. You had many people getting in touch with us. It's about second homes and the wider issue of second homes. Plaid Cymru actually supported the Welsh Government's measure of those higher council tax premiums, up to 300 % on second homes. And it's interesting in your manifesto, you say you're going to work with local authorities to review the effectiveness. Do you think at this point it's done damage to the economy in place?

33:38No, I think that the fundamental objective, of course, was to address the housing crisis that many of those communities that have very high levels of second home ownership have in terms of affordability. Very difficult to get on the housing ladder in general in Wales and across the rest of the UK, but that's particularly acutely in some of these areas where they have very high levels of second home ownership. So the purpose really was to recalibrate, to rebalance really. But I think when you implement any policy like that, then there are always things that you need to review. And I think we're pragmatic in most things.

34:22We hear what people are saying in terms of getting the balance right and in terms of reviewing particularly in terms of the effect on people in the holiday let market, for example, because there is a balance to be struck there. You know, tourism is an important part of the driver for those economies. Sounds like you think it might have gone too far in place. Yeah, I think that, you know, we absolutely recognise the need to review and we're pragmatic and open to suggestions in terms of how we can get the balance right. And on that concept of, you know, being able to buy a home in the area you grew up in, when you see consequences of, say, a policy like this in some areas where the house price, you hear from estate agents, The house price is actually falling quite a bit quite quickly.

35:10Is that a good thing for those areas when that happens? Yeah, certainly anything which actually pushes affordability in the direction that we want to see, where it's more affordable relative to local wages, then absolutely. But, you know, you don't solve the housing crisis with one policy and you have to work right across the whole area. So, you know, we've got to improve the levels of social housing, for instance. You know, it's good to see the council housing is starting to happen again in local authorities in Wales, but we've got to push that up higher. So we are increased. We plan to increase the level of social housing provision, including council housing.

35:55You've got to look at affordability in all kinds of ways in terms of those who want to buy as well. So we want to look at ways in which we can improve the way that we design land transaction tax, stamp duty as it used to be, in terms of first-time buyers. You've got to work across a range of policy areas to get this right. And just on the tourism consequences as well, has it been, when we hear about certain parts of the Lim Peninsula, for example, where regular visitors have felt unwelcome because of this change in wider policy. Is that a worthwhile sacrifice if generally you're pushing up the cost of owning a second home in an area, creating barriers to the attractiveness of an area?

36:45Well, we certainly wouldn't want anybody to feel unwelcome at all. being welcoming is written into our cultural inheritance in Wales. The knock-on effect of that, sorry, the sort of point I was going to be getting at is that tradespeople in that area then don't have the amount of work that they had before and having to travel much further afield. Yeah, well, certainly this is one of the things that we want to factor in to any of our review is getting the balance right because, yeah, tourism is an important driver. You know, we can't be over-reliant on tourism in any part of Wales because that creates its own problems.

37:30But it is an important element in driving economic prosperity and we want to grow our tourism sector. We get a very, very low proportion of overseas visitors, for example, who come to the UK, come to Wales. as they visit Scotland, they visit other parts of the UK, but they don't come to us. So there are things that we want to do to actually drive the tourism sector. And we're speaking very, we're in close consultation with the hospitality sector in terms of how we can drive growth, both for the hospitality sector in general, but also for the tourism as part of that. Another aspect, it's interesting you say don't want to be over-reliant on tourism.

38:14Do you feel Wales is over-reliant on the public sector or not reliant enough on the private sector? Just looking at the proportions of workers in Wales in the public sector is 30%. Across the UK, that average is more like just under 24%. Is there an over-reliance there? I think it's absolutely the case that the private sector is a key engine of economic growth And that, you know, if we look at Wales's position economically, you know, one of the key factors which explains our relative underperformance, you know, vis-a-vis our potential vis-a-vis the rest of the UK, it is underperformance within our private sector.

39:00So we're not sufficiently diversified. We don't scale our businesses. It's a problem across the UK generally, but it's certainly even more intensely the case in Wales that, you know, we don't get enough small businesses growing to medium size and medium size into large business. So what are we going to do about it? We've got to inject a bit of urgency and also a bit of agility into government policy. And one of the ways that we're going to do that is to create an arm's length development agency. Why arm's length? Because, you know, there's plenty of evidence around the world that actually creating an agency which is arm's length of government can work with a greater degree of dynamism and urgency.

39:38Getting under the bonnet, working with firms to understand, you know, where are the growth opportunities for you? What can we do to help that? Some of it is access to capital. We have a development bank in Wales. Some of that at the moment is what you might call passive capital. What we need is active capital. So it's not just access to finance, but also knowledge, you know, kind of diffusion of technology, etc. You know, what can we do to help you unlock new product markets, new export markets, working that sort of very granular, hands-on fashion, arm-in-arm with business. We're, you know, we're ready for that.

40:12And, you know, how do you get in within that? How do you get better paid jobs in Wales? Wales ranks ninth out of 12 when it comes, you look at regions of the UK when it comes to earnings. How do you get higher up that list or just get that number of those average earnings higher? I think, you know, part of it is what I've just described earlier in terms of actually growing, scaling our businesses. But also, I think we can, you know, look around us here in Media City. You know, the importance of injections of public and private capital together in, you know, particular anchor investments in key sectors and clusters where there are opportunities to build growth platforms.

40:57You know, and they exist the length and breadth of Wales. You have, you know, the world's leading compound semiconductors cluster in Cardiff and Newport. You know, you have the development of Wilbur and the opportunity that represents in Anglossi, etc. So the opportunities with offshore wind, we have 15 gigawatts in the pipeline of offshore wind. That represents an opportunity for the manufacturing supply chain. But the way that you actually utilize those opportunities, you know, through this development agency, is that we need to get the public sector and private sector working together to unlock that opportunity.

41:38Does that mean that the Welsh government needs to be ever more on top of its finances? Because one of the criticisms from the Institute for Fiscal Studies, for example, who have assessed your party's manifesto, has said that you're not really facing up to the fiscal reality facing the next Welsh government. You need to get some big decisions, tough decisions made yourself before you expect businesses to be investing massively in the region? Well, we recognise the reality of the financial envelope that we are working within. And that's one of the reasons that we asked one of the leading economists in Wales, Professor Gerry Holtham, who has advised the Welsh Government, the Northern Irish Government in the past, to actually assess the deliverability of our...

42:25There's the word achievable. It's not necessarily one that people who would look to invest in areas would think, OK, in the coming weeks, we're going to hear if you've got a big childcare spending plan, what is the big thing you're going to do to cut costs elsewhere, to raise money elsewhere? Where's that instant thing? I think in setting out your vision and your plan, you always have to set out a plan which is ambitious but achievable, you know, because you want to drive, you know, the delivery. But you've obviously got to do it in a way that's financially sustainable. I think that's what we've done.

43:01In terms of childcare, for example, I mean, it'll cost 400 million at the end of by the end of the term. And, you know, there's 330 million by year three of, sorry to be a bit techie, but, you know, the barnet consequential is the money that we get as a result of spending in England. Do you think in the manifesto there should be something there that says this is where the explicitly where the money is going to come from? Well, we've had it audited. And in that case, you know, 330 million of extra money will come to us because of childcare spending in England. and it will cost 400 million. Yes, we're spending a bit more because our offer will be more generous than the rest of the UK.

43:38That's partly really to drive economic growth because obviously that will enable more people to work in the workforce. We have lower levels of economic inactivity. It's one of the key reasons why we're currently underperforming, but there's nothing inevitable about it. It's because of poor political leadership in the past that can change and make the sense. Adam Price of Plaid Cymru, MS member for Kamar the Niest. And Deneva, thank you very much for your time this morning. Now, I've been chatting to the boss of Pret-a-Manger, who told me the pinch of food inflation and fuel volatility due to the conflict in the Middle East is starting to feed through to the business.

44:14Panna Christou says, so far they've tried to protect customers from those price rises, but added businesses can't continue to absorb hyperinflation, high rising costs forever. He's been speaking to me in the latest Big Boss interview podcast. PrEP was a single channel analog business before COVID. No connectivity with our customers digitally. The only way you could really buy PrEP is walking into a store. and subsequently off the the the changes i would call us now an omni-channel business that has a digital relationship with our customers so using delivery uh using subscriptions using loyalty programs you know we have a a range of products we now sell in supermarkets as well as you know give still giving people a great experience when they walk into a prep store So it's definitely meant that we have to broaden our horizon and look at different sales channels.

45:11But I think that's not any different to many other businesses that operate in a similar segment to PrEP. Do you think with, for example, the attempts that you've made with coffee subscriptions one way or another, at times that has overcomplicated things? Because you launched a subscription that was£30 a month and you could get five coffees a day. I think barista made coffees or whatever the small print was that I saw on that, coffees a day for that. But then after a time, you scrapped that. Yes. So we initially launched the subscription in September 2020 when our stores were empty due to COVID.

45:52And we really saw a resurgence of customers coming in and utilizing the subscription. I think the first day of launching the subscription, we had about 30 ,000 people that signed up. What we did see as, you know, general commuters and workers and customers started to come back in, we really needed to evolve the subscriptions. So in July 2024, we made a change. So instead of£30 a month and free drinks to£5 a month and get your drinks for half price, which we still have today. So a lower barrier to entry, but a slightly different variation to the subscription. And actually, we've seen the new variation of the subscription grow close to 25 % in the last 12 months alone.

46:37Can you be innovative when you're lower down the rungs of an organisation? And I sort of use that analogy particularly because if people caught your LinkedIn profile, the bit that sort of talks about the background of somebody and effectively their CV online, they might have seen that yours went viral. and it looks almost exactly like the rungs of a ladder would without any rungs being missed out. So I've just got it up in front of me just to give people a bit of an idea. It starts off January 1995, floor manager whilst studying, assistant manager, store manager, brief time, blockbuster, then to Pret as assistant manager, assistant general manager, and we go on and on up.

47:23It feels like almost every single individual level, head of operations, UK managing director, to Chief Operating Officer and Chief Executive Officer. Did you feel along that route, were you being innovative to make that what must feel like quite a rare journey? It's been a wonderful journey, and I think I've seen the business from founders to the ownership structure it has today. And I think that gives me a unique insight into the business. I understand and I know how it is to work in our stores. actually everyone in our offices twice a year will work a full day in our stores getting in five o 'clock in the morning making sandwiches serving customers including myself and i think i always find that quite a sobering event to do and and you know i spend a lot of time out and about in our shops and and the biggest question i ask people is what can we do to help you on a store to store so you've got back in recent times there are things that people have spoken about around automation you know if there are manual processes in our kitchens and and front of house uh you know is there more that you can automate what role does ai play in pret so again those are things that i think us and many companies are still uh trying to figure out just going back to some of the insights that we can get from you about you know what we see on the shelves in your Pret stores?

48:50What's the thinking behind the scenes? A very hot topic at the moment is what is going to be the consequences on food prices from the current situation, the war in Iran? Are you starting to see that play out in price pressures for you now? We, you know, have held our pricing pretty tightly since, you know, for the last two and a half years or so, has priced way below inflation. What we are seeing is volatility when it comes to fuel. We have trucks bringing fresh ingredients into our stores every single day, so we're seeing a negative impact due to that. Looking at the volatility of energy costs, we got burnt quite heavily during the Ukraine war with an increase in energy costs back then.

49:36Clearly, they have come down a lot and we have locked our energy costs to the end of 2027. And then really, I think, is waiting and see what happens through the supply base and our suppliers. So, yes, we are watching closely. We are seeing some inflation coming through the system. I think as it currently stands, we don't have any plans to put prices up off the back end of that. we are looking at how we can do everything within our control to mitigate on costs to protect our customers. But do you have a feeling if this goes on for a certain length of time then it will inevitably start to feed through into the food prices customers are paying?

50:18Clearly it's quite possible and I think everybody is waiting with bated breath to see what happens. Will there be a deal? Will this calm down? Businesses will not be able to withstand hyperinflation forever. So I think we're just watching it very closely. What about issues with supply, given the array of ingredients a store like yours will have? Have there been some issues or envisaging some issues that certain ingredients are going to have problems? Into the UK, no. So we've had no problem whatsoever. We do source most of our ingredients locally in the UK and the stuff we don't generally comes from southern Europe.

51:01What we have found, though, so we have a great business in the Middle East, and the Middle East has been our fastest growing market over the last two to three years. So things that we would be exporting into the Middle East, sometimes that will be taking a little bit more time. So that's something our teams on the ground there are looking at closely. But I'd say here in the UK at the moment, no issues. But again, where it is closer to the environment of the Middle East, we have seen some challenges. Does it make you think you might need to slow down your growth ambitions or presence in the Middle East?

51:41No, not at all. I think our franchise partners that we work with in the Middle East are very focused on prep for the long term. Yes, this is a challenge moment in time, but by no means to this point have we had any indication of slowing down or differences of ambition. I think that within that part of the world, especially the GCC, on the visits I've made out there over the last five years, there is so much investment going on there. There is a real, I think, positive sentiment with these countries that are growing, that are evolving, whether it's the UAE, Saudi Arabia. This is going to continue, in my mind, for many decades, this investment.

52:25So I think you will see the region change evolve for the better long term. And I think this is just a moment in time for them to navigate through. We've talked about the coffee subscriptions. Another aspect that people will have seen change would have been the size of some of this stuff and the price that goes with it. Very, very big salads that seem very, very expensive to the concept of popping into a store on your high street for a bit of lunch. Have you found people have been paying£12 for a salad? Yeah, the new salads, which we call the super plate range, has been a roaring success. You know, we are selling 40 % more units than we expected.

53:05And again, I think customers see the portion size, see the quality of ingredients, and understand this is great value. You still need the cash, though, don't you, for that size? Where are they moving from, I guess is the question. What were these customers doing before who were willing to spend over£10 on that? I think they've moved from more traditional bread-based products, because I think that there is a migration towards people trying to consume less bread. I also think as well what we've seen from these salads is customers buying them more in the evening. So we are seeing a very high amount of those being sold in the evening, much more so than baguettes and sandwiches.

53:46So that's Panno Christou, who's the chief executive of Pret a Manche. You can hear the full chat on BBC Sounds. Have a search for our Big Boss interview podcast there. Judith McKenzie's been with us this morning, partner and head of Downing Fund Managers. Judith, that battle on the high street for our coffees, for those quick lunches, the quick evening meals, hotting up, isn't it? It is. In our office, it's either a debate about going to Gregg's or Pret. And, you know, there's quite a big price differential between the two of them. And, you know, I get what you're saying about moving to less bread-related products.

54:21But it is quite a thing for the consumer to go out and be spending£15 even just for breakfast. People are starting to notice the price, I think. And it's a bit of a reminder about perhaps where Pret is. You know, they've got hundreds of stores in London and you're often seen in big cities and at stations. And Greg's, excuse me, almost everywhere. That has been another dynamic, hasn't it? It has, yeah, yeah. And Greg's very much at that kind of lower entry level sausage roll. I can't remember how much you pay for it, but certainly it's a significantly cheaper breakfast that you can get. And Greg's maybe not quite as healthy as Pret, but it's a different price point completely.

55:01Yeah, that decision many are making at the moment about how much they spend on their food. Judith, thank you for your time. Judith McKenzie from Downing Fund Managers. Thanks to everybody who's been in touch as well. Got through plenty on Wake Up 20 today. That is it from us. Wake Up To Money from BBC 5 Live That's it from Wake Up To Money You can download the podcast every Monday to Friday So please make sure you subscribe We'd also love it if you left us a review When you do, get in touch Keep the conversation going any time as well On social media, use the hashtag Wake Up To Money 5 Live Sports So here's the first ball of this series All the cricket muted off Check for LBW lives on BBC Sounds.

55:46Smash straight back down the ground, this girl. Hear ball-by-ball coverage of the biggest competitions on the domestic and international circuits. It's a ball cricket and it's the huge one. Jeez. Settle down, Duffer. Sorry, mate. Cricket on Five Live Sport. Oh, I've living every ball of this. Listen on BBC Sounds.

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