SBHD: The British pub trade is undergoing a revolution. With the beer market in decline, operators are being forced to look at ways to improve their proposition. Themed pubs and restaurant-style facilities could prove to be the way forward.
The average British pub has had its fair share of make- overs in the past 20 years – from grimy, smoked-filled watering holes, to spit-and-sawdust bars, to shiny citadels of youth. In that time, the big brewers have tried to cater for niche fashions and trends but have reacted to rather than read the consumer.
But since the Government’s MMC report of 1989 on the brewing industry pub operators have started to listen to their customers. After being ordered to sell vast tranches of their estates, firms such as Bass, Whitbread and Scottish & Newcastle (S&N) were left with the dual challenge of streamlining operations and coping with greater competition.
It is the latter aspect of the Beer Orders that has had particular impact. Smaller outfits, such as Boddingtons and JD Wetherspoon, are leading the way in the sector largely because they are relatively specialised outfits that concentrate solely on pub retail. “We are part of the new breed of pubs. We don’t brew, we just run pubs,” says Wetherspoon marketing manager Suzanne Wilkinson.
The JD Wetherspoon chain was launched in 1979 and operates mainly in the Greater London area. It has 101 pubs and plans a rapid expansion programme to establish a national presence within the next five years.
Boddingtons sold its brewing interests to Whitbread six years ago in order to specialise in retail. Larger than Wetherspoons, with 450 managed and tenancy pubs, the North-Western company is highly profitable. It posted Ãº25m pre-tax profits last year, on Ãº100m turnover.
But not all small players have capitalised on the MMC report. Piper Trust, which runs the highly successful Pitcher & Piano bars, launched a chain called Springer Inns by acquiring seven pubs from Grand Metropolitan’s Inntrepeneur estate. The venture went into receivership a year ago. “People were naive. They thought it was a real opportunity to make money in an area where things were not as they thought they were,” says Pitcher & Piano managing director Andrew Bonnell.
As with other aspiring pub owners who failed, Springer Inns argues that it was not offered the choicest parts of the brewers’ estates. “It is probably correct that we couldn’t run the pubs. But it would also be fair to say that the brewers talked up the quality of the sites and that the rents were quite high,” says Bonnell.
Springer folded four pubs and has relaunched the remaining three as Dog & Firesides. It is a salutary tale and a reminder of the sheer clout that the big brewers have.
But without the smaller fish Bass and its peers would arguably still be in the dark about giving consumers what they want.
The future of the British pub lies with service, says Barclays de Zoete Wedd brewing analyst Jonathan Goble. “Staff are increasingly important, and the pub you go into and get scowled at has a limited future. Customers are more discerning. Also, the major competition facing the pub is drinking at home. The drink/drive pressure, the fact that peoples’ houses are now more comfortable and that the take-home opportunities have been enhanced by the widget have all contributed to this,” he says.
In a BZW report on the pub scene entitled The Future of the British Pub, Goble argues that food is the way forward. “There’s a huge market for eating out that is set to grow faster than consumers’ spending as a whole. If a pub can offer good food and a nice atmosphere it is a good proposition,” he says.
Bass – with 2,600 managed and 1,400 leased pubs – is the first to admit it has been slow to catch on to the growing trend of eating in pubs. It is spending Ãº120m this year on developing its catering concepts and expanding output.
“We have always had a strong reputation on the wet side of the business, but in recent years we have been seeing major growth in food. We recognised that we needed to put a bit more effort into food and reposition the estate,” says Bass Taverns spokesman Bob Cartright.
Bass is planning a major launch programme for “branded” pubs this year. It is targeting the thirtysomething market with a family restaurant called Deep Sea Dens – built on to existing Bass pubs. At present, five outlets offer a wide-ranging menu and a children’s play area; the brewer aims to expand the chain to about 30 by the end of the year.
The smaller players would never underestimate Bass’s retailing prowess, but they do see the company as being slow to innovate. On being told that Bass is developing Deep Sea Dens, Boddingtons financial director John Brearley claims his company has had a similar concept, Captain Coconut, for some time.
Both Boddingtons and JD Wetherspoon are careful not to overplay their emphasis on food. Boddingtons has a pub/restaurant concept called Henry’s Tables. “I must stress that this is both a pub and restaurant. Beer is a declining market, but I don’t see it changing that much. We don’t want to kill the pub trade with the restaurant, we want to keep the atmosphere,” says Brearley.
While Boddingtons has taken steps to better understand customers, the big pub chains, in particular, remain wedded to local marketing through individual pub managers and specific promotions. Few of the large pub chains believe that advertising is an appropriate method to attract new customers.
“We would only consider TV advertising if we decided to go with strongly branded operations,” says the Bass spokesman.
However, S&N, which doubled its estate last year by acquiring Chef & Brewer from Grand Metropolitan, has employed an fmcg marketing director, Martin Robinson, who has worked with Sara Lee and McKinsey.
There is little pub branding these days. Robinson and his team are even considering scrapping the Chef & Brewer name – arguably the UK’s best known large pub brand. “We are looking at what Chef & Brewer means to people but it is not a top priority,” says Robinson.
Most of the S&N estate is unbranded, but it does have a real ale pub called the Rat & Parrot and a cafe bar, dubbed TJ Barnard. The company has plans to roll out no more than 50 of each.
S&N is also experimenting with a high-tech computer games and video games pub concept called Big Hand Mo. It is designed to attract 18 to 24-year-olds, which, although a declining group, is high spending and likely to make a comeback in the late Nineties, according to BZW.
Independent pub and bar owners believe an axe-wielding culture still exists at some of the large chains. They claim the companies and their employees are devoted to cost-cutting rather than innovation.
But this attitude is changing as the brewers start investing millions of pounds in their estates. It could not be more timely given that the beer market is declining by one to two per cent a year.
“For a long time people [in brewing] have accepted a decline in this market as inevitable, but it’s up to us make to sure it doesn’t happen. If we respond by offering the customer what they want there won’t be a decline,” says Robinson.