Last week Punch Retail announced it was rebranding itself Spirit Group, saying it is confident enough about growth that it plans a flotation, likely to be valued at about £2bn, and a demerger from sister company, the Punch Pub Company. But that appears to be going against the trend in a market that is approaching maturity.
So far, no one has called “time” on the branded pub chain concept, but observers believe demand for the uniform experience of branded and centrally managed hostelries may be drying up. This is illustrated by the fact that the fastest growing of Six Continents’ (formerly Bass and owner of brands including All Bar One and O’Neill’s) chains is the unbranded Ember Inn.
The Firkin-branded pubs were one of the first chains on the scene, offering a themed, youthful environment and operating 185 outlets at its peak. The bulk of these have been sold to Six Continents and Punch Retail and, after conversion, few remain. JD Wetherspoon, on the other hand, launched its chain in 1979 and is now the nation’s largest brand with 541 sites in the UK.
“The market is maturing and there’s less capacity on the high street. The total number of pubs will remain static and I believe a large number of managed pubs will convert to leased pubs, depending, of course, on where the pub is located,” one analyst says.
“Six Continents has ceased rolling out its brands entirely. Well known brands such as Wolverhampton & Dudley Breweries’ Pitcher & Piano bars and Yates’s Wine Lodges are also slowing down, as is Scottish & Newcastle’s portfolio.”
He also says the market is polarising, with JD Wetherspoon remaining healthy but middle-range chains faltering. One of these middle range pubs is Six Continents’ O’Neill’s, which the analyst says is now seen as a “tired” brand.
The figures back up his assertion, with Six Continents admitting the number of O’Neill’s has stayed more or less static over the past few years.
The lack of growth in branded pubs does not worry Spirit Group commercial director Andrew Knight, who says his company is looking at opening many more outlets next year. The company’s portfolio includes 174 Mr Q’s, 49 Q’s, 50 Two For One outlets, 31 Bar Room Bars and 130 Punch Food Pubs – by comparison the company has 603 unbranded pubs, though the number will diminish if Spirit maintains its strategy of conversion.
This year, says Knight, the group will open another 20 Q’s sports bars, which offer entertainment, TV, sport and games and target 18to 25-year-olds and regular punters. The company also wants to open another ten of its city centre-based brand Bar Room Bar and more of the Two For One low-priced pub restaurants.
Explaining the growth strategy Knight says: “I think that older brands like O’Neill’s and Yates’s Wine Lodge are struggling because they are not evolving. You need to be up to date by listening to customers, managers and using market research. Branded pubs have historically been formulaic and Spirit tries to avoid this. That means continually updating the pubs, such as changing the signage, the name and the pricing policy.”
He argues that Spirit can grow as it has developed niches and keeps its propositions attractive, especially in city centre locations. For instance, the Two For One pubs offer low-cost meals, but provide creative menus.
JD Wetherspoon head of marketing Claire Martin says her company plans to open 80 Wetherspoon pubs and ten Lloyds Number One pubs this year, to add to the current stock of 17. Bought by Wetherspoon in 2000 from Wolverhampton & Dudley, Lloyds offers music and video to younger pub-goers.
However, she accepts the market is bound to mature but says there is no sign of it slowing at the moment.
Six Continents appears to have recognised the slowdown in demand for branded hostelries, as the unbranded Ember Inn offering has added 62 sites in the past 12 months. Six Continents communications director Bob Cartwright says the student brand It’s A Scream was the company’s only branded pub chain to show significant growth and even that brand has grown by just 82 sites since its launch in 1995.
Cartwright says Ember Inns are positioned as regular community boozers. The only unifying theme is a ban on children, juke boxes and loud music. He says: “Embers is a newish idea. There’s a huge market of lapsed pub-goers and we aim to entice them back to comfortable pubs. We also want to keep hold of regular pub-goers.”
But he rejects the argument that O’Neill’s is a tired brand, despite the fact that it has not added to its stable of 90 pubs for the past three years. “We are still evolving the brand. Now it is more modern, accessible and family-friendly and has moved away from its image as an Irish pub.”
He admits that finding sites is a problem and says: “All Bar One occupies many high-quality sites already and there are only so many available.”
The challenges faced by the branded pubs sector are growing, but Spirit’s intended investment shows a confidence that is not easily dented.