Embracing Sustainability: YO! Acquisition Highlights the Commercial Benefits

The £491m sale of YO! operator Snowfox to Zensho Holdings shows the commercial benefits of embracing purpose and sustainability. With the sale price representing a multiple of 14 times Ebitda based on Snowfox’s most recent accounts, Zensho has evidently identified YO! as a business with serious growth opportunities. And research that Nutritics recently carried out, in collaboration with CGA by NIQ, suggests this could, at least in part, be driven by the company’s approach to sustainability, and how that reflects the attitudes of its consumers.

Our report, Sustainability Matters: What consumers want and how brands can win, surveyed 5,000 UK hospitality consumers, and identified which brands’ consumers are the most environmentally conscious. Of the 18 largest hospitality businesses in the UK, customers of YO! were the most likely to consider sustainability when they choose where to eat or drink, the third most likely to be influenced by carbon footprint information, and the fourth most likely to try to lead an environmentally friendly lifestyle. 

These attitudes are reflected by the business itself. YO! is a member of the Sustainable Restaurant Association, the Sustainable Seafood Coalition, and committed to responsibly sourcing its seafood in line with Marine Conservation Society (MCS) guidelines, while the company has also carried out initial Scope 1, 2 and 3 baseline of its greenhouse gas emissions to understand where it can make the biggest reductions to its environmental footprint. In 2015, YO! was one of very few high street restaurants to be praised in the MCS’s Fish2fork sustainability ratings, and its long-term commitment to responsible business has paid off. It has been on a journey with its consumers for a number of years, and those shared values have engendered significant brand loyalty.

Will Beckett, co-founder of Hawksmoor, is a vocal advocate of what he calls “purpose for profit”. For years, Hawksmoor prioritised purpose for moral reasons because it believed it was the right thing to do as a business. Will acknowledges, however, that for the industry as a whole, the moral argument for “doing the right thing” has had limited impact. So, he talks about the need to redefine the relationship between sustainability and cost: instead of asking how much it would cost to deliver a specific purpose initiative, think about how it could be profitable, either in terms of what it means to consumers, your people or investors. 

Whether or not YO! “does the right thing” for moral reasons is irrelevant. Its acquisition is the clearest example for some time in hospitality mergers and acqusitions of the commercial value of embracing purpose. Investors want businesses with good long-term prospects, and by putting responsibility at the heart of what they do, Snowfox has been able to demonstrate that YO! is not just an environmentally sustainable brand, but an economically sustainable business.

Our research tells us that Generation Z and Millennials are much more likely to put their money where their mouth is when it comes to sustainability. A third (34%) of all hospitality consumers are willing to pay more than usual for a brand that has strong sustainability credentials, but that rises to nearly half (47%) of 18 to 34-year-olds. Despite soaring household bills, it’s clear that many environmentally conscious young adults are not willing to compromise their principles, even if it comes at a cost.

This is a timely reminder that while all age groups engage with sustainability, the young generation is much more likely to act on its environmental principles, and it follows that sustainability will become an even bigger factor in decision-making in the years ahead.

The climate crisis has focused consumers’ minds on environmental impact, and not just their own. They also want to see hospitality playing its part – and the multiple secured by Snowfox shows the size of the prize for operators that can seize the opportunity and capitalise on this demand.