Simon Evans: The glass is definitely half-empty as drinks groups go to the wall

Consumers are tightening their belts and an industry is contracting
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The Independent Online

When celebrity eaterie The Ivy has tables avail- able at very short notice and tea at The Ritz can be reserved just one week ahead, you know things are getting tough out there.

A combination of a dearth of US tourists and a reining in of the corporate credit card may be contributing to the downturn in fortunes at the top tables. But further down the food and drink chain, a raft of failures last week showed how the average punter, more likely to sup beer than Bollinger, is tightening his belt too.

Food and Drink Group (FDG), the listed firm behind the likes of Jamies Bars and Henry J Bean, last week fell into the hands of administrators from BDO Stoy Hayward.

The group, which used to operate under the moniker Hartford, is probably best remembered for its ownership of Notting Hill's once-trendy, and Damien Hirst-inspired Pharmacy restaurant.

FDG's decline has been swift. Management put it up for sale at the start of the year but a lack of bidding interest and an April profit warning led to its shares being suspended. Long-term equity holders have all but seen their stakes wiped out, with the stock worth around 5 per cent of its value one year ago.

Mainpaint, a private equity-backed group, has come in and scooped up the firm's most prized assets, such as its operations in the City of London and Chelsea. But a rump of the business remains on the shelf.

Trendy London might hog the headlines but last week Cains Beer, an award-winning brewery that operates more than 100 pubs with around 1,000 staff in the North-west, called in the administrators too. PricewaterhouseCoopers was the beneficiary this time when Bank of Scotland pulled the plug on the group after the lender failed to back an 11th-hour rescue attempt.

The chain was in a bad way, hit by the smoking ban, spiralling drinks taxes, falling consumer spending and a huge negative equity bill on the 26 pubs it owns. Unsurprisingly the administrators are talking up interest in Cains, though the chance of big job cuts remains very high.

Another regional drinks chain going under last week was the Kent-based Bar Group, owner of the Bok Bar chain, adding to a growing list that includes: Bar Sport, The Massive Pub Company, Herald Inns, Robert Tchenguiz's Laurel Pub Company, the Sports Café and Soho Clubs & Bars – all have which have found themselves victims of the credit crunch this year.

There was also a new twist last week in the Oddbins saga, with Castel Frères, the French group that bought the off licence chain for £57m in 2001, finally admitting defeat and selling the business for an undisclosed amount – undisclosed because Castel's management is no doubt too embarrassed to say how little it netted from the sale.

Oddbins, which incredibly still has 158 stores across the UK despite the raft of closures made by its former parent, now falls into the hands of a consortium led by Simon Baille, whose father ran Oddbins in the 1970s.

Baille junior admits he has a challenge on his hands. I wish him luck: while he got the business for a song, the chances of reviving the fortunes of Oddbins must be very slim indeed.

Michael Turner, chairman of the Fullers brewing group as well as the British Beer & Pub Association, was quoted as saying last week that the combination of negative effects smashing the drinks industry means it is facing its toughest squeeze yet.

So far, those firms in the sector hitting the wall have been at the lower end of the size spectrum. Bigger failures in the drinks arena must surely be around the corner.

Last week I said July would go on record as the month the airline industry changed forever.

For the British drinks industry, August could be the month that will define the arena for a generation.

Johnny Foreigner's funds are welcome. Patriotism just makes you poorer

Thank heavens we're not Americans. Yes, I know it's become something of a national sport to slate the Yanks, but our front page story would cause outcry across the Atlantic. Imagine if it turned out, for example, that Oregon was in negotiations with Middle-Eastern sovereign wealth funds to be a joint venture partner on its offshore energy needs.

If you can't imagine, just look back to 2006, when Senator Hillary Clinton and Congress got into a protectionist tizz over Dubai Ports World's proposed takeover of US ports owned by P&O. The fact that the friendly nation of the United Arab Emirates (UAE) might own a few ports was declared a scandal by a war-on-terror obsessed media and over-zealous politicians alike.

Investing in a new energy grid, as a UAE sovereign fund might well do off the east coast of the UK, has even more security implications, if you think in that way. Couldn't those foreigners shut down our power grid, leaving us easy prey for attack? It's nonsense, of course. By freeing up our markets to these incredibly successful investors, the UK is tapping into funds that it would otherwise struggle to raise. Sovereign wealth makes the creation of this hugely complicated offshore national grid all the more likely.

Similarly, it was refreshing that there were so few jingoistic objections to the idea of French utility EDF taking over British Energy, despite its vital importance to the future of nuclear new build.

That said, Ed Mayo, the chief executive of the National Consumer Council, made a good point last week. He argued that overseas owners of British Energy companies, such as Spain's Iberdrola controlling Scottish Power, should find ways of making it clear that they are not raising prices as a result of price caps in their own country – in effect, to ensure that UK customers are not subsidising people in other countries.

But even if we are, the benefits of our free market are clear. We have an encouragingly ambivalent attitude to overseas ownership, and that means we get access to their cash and expertise.

Will the Games deliver gold for the sponsors?

There will be a lot of crossed fingers as the Olympics gets underway in Beijing – and not just the athletes looking to win gold.

Sponsors have paid on average $72m (£37m) each to associate themselves with the two-week jamboree. Estimates suggest that "proud partners" will spend as much as $1.5bn plastering ads on walls and taking TV airtime. But will they be so proud, or indeed happy, when the curtain comes down?

There are plenty of indicators that the likes of Coca-Cola, Kodak, McDonald's, Panasonic and Adidas – all attempting to get their hands on the Chinese consumers' yuan – could feel short- changed. Sixty per cent of Chinese people polled recently thought Pepsi, which isn't sponsoring the event, was an official sponsor.

Throw in the negative connotations of possible drugs cheats and Free Tibet campaigners and the bang sponsors are getting for their buck seems distinctly underwhelming.