Customers lose taste for London's top restaurants

Trendy restaurants seeking to profit from London's growing status as a gourmet paradise have hit a hitch - the dining public has lost its taste for them.

Trendy restaurants seeking to profit from London's growing status as a gourmet paradise have hit a hitch - the dining public has lost its taste for them.

Eateries including Pharmacy, created by Damien Hirst, and the Conran chain have reported falls in profits as they battle for custom. Competition from other sectors, such as pubs, where brewers are turning to food rather than alcohol to make a profit, means too many restaurants are chasing too few diners.

The financial analyst Alan Millar said yesterday: "There are so many new restaurants opening it is starting to take its toll. This is especially true in London, where a lot of high-profile operators are focused."

A London restaurateur said: "Things are tough... because of the sheer quantity of restaurants. The pool of customers is too thinly spread."

Some establishments, such as The Ivy, in Covent Garden, enjoy enduring success and long waiting-lists for a table but the succession of gastro-entrepreneurs with big wallets falling over themselves to open eateries may be about to dwindle after a series of financial results which show all is not well in the sector.

Conran Holdings, set up by Sir Terence to run his 20-strong stable, said profits had dropped 40 per cent to £4.2m. It blamed sluggish trading and the cost of opening two restaurants in London and New York for its flat turnover of £55.2m.

The Hartford Group, which owns Pharmacy, issued a profits warning this month, saying its figures would be "significantly lower" than anticipated after worse-than-expected trading in recent months.

Even the Belgian corporate owners of The Ivy this year admitted they were finding things hard in the other part of their business, a chain of restaurants specialising in chips and mussels. Belgo, which also owns two other exclusive London restaurants, Le Caprice and Sheekey's, reported a drop of £300,000 in pre-tax profits to £1.6m for the last half of 1999. The company is looking to expand beyond London, where the ratio of restaurants to diners is more favourable.

David Page, chairman of the Pizza Express chain, which has also seen a fall in turnover despite being one of the industry's top performers, believes it is the choice in London that is to blame for sluggish profits. "The market has been very competitive over the past 18 months. Every single bar and pub has started selling food. Beer sales have been in decline, so they've turned to food and there has been an enormous number of meals hitting the high street. Even though demand is going up at a fantastic rate, in some areas supply is beginning to overtake it."

The fall in profitability for big players has been met by a general cooling towards the restaurant sector among City financiers, who see little prospect of sustainable long-term growth. A takeover bid last week for the Oriental Restaurant Group, which is planning to expand its London-based chain of Asian eateries nationwide, produced no knock-on effect for other restaurant stocks.

Less glamorous corners of the eating out industry are feeling the effects of a more discerning clientele who now demand higher standards of food when they dine out.

The Aberdeen Restaurant Group, which runs the chain of steakhouses frequented by generations of day-trippers and tourists, earlier this month reported a fall in profits from £1.02m to £332,000 last year. It blamed "very difficult" trading conditions.