Alteredtastes worry Belgo

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BELGO, the moules et frites restaurant operator, has not proved an appetising investment for Mogens Tholstrup.

The London caterer and socialite sold his upmarket restaurants, The Collection, Daphne's and Pasha, to Belgo in May of last year for pounds 5.5m. He took pounds 3m in shares, a stake he is understood to have retained. Initially, the deal looked a good one for him. The shares were priced at 91/2p and were soon trading at 121/2p.

But Belgo has been caught up in the malaise afflicting restaurants and cafes across the country, and the shares have almost halved to 61/2p, wiping more than pounds 61m off the company's stock market value and almost pounds 1.9m off Mr Tholstrup's stake.

It is not just restaurant chains such as Belgo, Chez Gerard and City Centre Restaurants that have been affected by the consumer downturn. The same forces drove down the value of pub and hotel companies such as Whitbread and Bass. Most notably, the retail sector has been hammered by intense competition on the high street and the increasing price-consciousness of customers.

Belgo has now responded by delaying plans to spread its distinctive brand across the country. Luke Johnson, Belgo chair- man, said: "The buoyancy of the South-east in general and London in particular means that these areas have been out-performing the rest of the country."

Nevertheless, the capital's palate is notoriously fickle and the popularity of Belgo's trademerk Belgian fare may have been affected by the emergence of other culinary fads, such as Alsacian food. In response, Belgo has sought to spread its culinary risk. It opened a pizzeria called Strada, in Battersea, south London, and, four months ago, Bamboo, a French Vietnamese restaurant in the centre of the capital. The firm has also two opened Bierodrome bars in London.

Belgo will be comforted by the results of a recent survey which suggested that the boom in eating out was continuing. The survey, by Mintel, the consumer market analyst, showed that 16 per cent of adults visit a restaurant at least once a week. Ten years ago, only 7 per cent ate out every seven days.

Nevertheless, the competition among London restaurateurs is intense as more and more eateries begin to open in the capital. The pressure has been felt especially by Chez Gerard, which operates the eponymous French outlets as well as the Livebait fish bars. Its acquisition of Richoux has not been a success and the chain is expected to be sold off.

By comparison, Belgo's trading performance has been robust. In September, it unveiled pre-tax annual profits of pounds 4.6m, and it paid out its first dividends.

However, the company has also outlined plans to diversify away from the fashion-conscious London market. It is in talks with potential franchise partners in Japan and Finland. It already has a franchised outlet in Jersey, as well as venues in New York and Dublin.