What lies ahead for Yates's Wine Lodges?

Yates's Wine Lodges was voted top Pub Retail Brand at The Publican Awards 1998. We report on what lies ahead for the successful company.

With a background in high street retailing, it's no surprise that George Marcall believes that pubs can learn a lot from supermarkets.

He came into the industry only three years ago when he joined Yates's as a non-executive chairman to support the resurgence of its Wine Lodges.

Not long afterwards he was tempted to leave his director's job at travel operator Airtours to head up Yates's retail division.

Now, after becoming the first-ever non-family managing director of the whole group, he is guiding its brands through a period of record growth.

He was originally part of Marks & Spencer as it spread its empire in the UK and overseas and saw Airtours grow from a small private firm into an international group.

"I've always been involved in companies as they're being developed, so Yates's offered an opportunity to join an exciting company at an important stage of growth," he said.

"I try to think in the same way as the big supermarkets. We are focused retailers with a strong retail brand and an emphasis on customers."

But the Bolton-based company's embrace of retailing dates back to only 11 years ago when Peter Dickson, now the chairman, took over as group managing director.

Created in Oldham near Manchester in 1884, Yates's started as a chain of high street pubs selling the wines and spirits that the original Yates brothers, Simon and Peter, imported from around the world.

With their focus on wine and food and their deliberate targeting of women customers, they curiously echo the new female-friendly branded pubs of the 1990s.

But earlier this century, the Yates family opted to concentrate on importing, allowing the retail units to become less important.

However, in the mid-1980s Dickson, the great-grandson of Peter Yates, launched a major review of the group and started to reclaim the retail business.

The management has steadily expanded the estate of managed houses beyond its original roots in the North West, with a national portfolio of 97 branches, including 76 Yates's Wine Lodges.

The wholesaling operation now accounts for less than five per cent of group profits, solely distributing the group's own brands to supermarkets, freehouses and cash & carry outlets.

These include Yates's Red Bibby and White Australian, based on blends that Peter Yates invented a century ago.

The long-term target for the estate is to double to 200, with plans for at least 25 by the end of next March.

Already 16 further sites have been acquired and are due to open by next spring, 12 of them Wine Lodges.

Another 10 sites are conditional on planning or licensing consent.

The rate of growth has increased steadily over the years, with five new units opened in 1994/95 compared to 28 in 1997/98.

The size of units has also grown, with average retail space rising from 2,700 sq ft in 1996/97 to 3,400 sq ft in 1997/98.

Although its headquarters are still in the North West - known as "base camp" to staff - Yates's now has its eyes set on the South.

Four years ago 56 per cent of branches were in the North West, but that has dropped to just 30 per cent.

In March this year only 12 per cent of them were in London and the South-East but, by the end of September, that will have risen to nearly 20 per cent.

"We have a Southern bias towards opening at the moment," Marcall said. "Opening units in London and the South brings benefits in terms of being able to generate higher returns."

The mainstay of the estate is still the Wine Lodges, which were developed into a Victorian concept in the mid-80s.

It has become one of the UK's most successful brands, this year winning the title of Retail Brand of the Year at The Publican Awards.

"The City likes us because, when we open a new Wine Lodge, we are immediately trading at peak capacity," Marcall explained.

The branches are designed to adapt throughout the day, ranging from a food-led venue at lunchtime to a party venue at night.

The branches make a third of their weekly income in the peak trading hours of 8pm to 11pm on Thursdays, Fridays and Saturdays.

But the Wine Lodges are now building up trade during the daytime by offering new menus and launching a money-back guarantee that all meals will be delivered within 15 minutes.

A national pricing promotion has also stimulated sales outside of peak times.

They started by offering Boddingtons and Carling at a standard lower price across the country, which is now being extended to other brands.

The concept has now been revised at three branches which have been refurbished in Preston, Croydon and Bolton.

A larger proportion of these sites is set aside as retail space, with changes in the lighting effects, decor and music.

"Brands have to be continually shifting to keep up with the market," Marcall explained.

The fickleness of the market prompted Yates's to launch its suburban traditional freehouses, Watling Street Inns, three years ago.

With eight branches now operating, Yates's has halted new openings to embark on a review of the concept which is due to be completed next year.

The company has also begun a year-long review of its smaller version of the Wine Lodges, called Blob Shops.

Developed for the student market with more emphasis on alcohol, the concept has been limited to nine branches until the review is over.

"We have some reservations about the longevity of the concept because, although it suits the market now, that could change in a few years' time," Marcall said.

The group has successfully tested its newest concept, the Ha!Ha! Bar & Canteen, in Bristol, a female-friendly upmarket food pub.

It was developed by Amanda Willmott, who was behind Bass' All Bar One as well as Allied Domecq Leisure's city centre bars Carpe Diem.

Since opening in February it has been trading ahead of expectations, so Yates's is pressing ahead with plans for another four in the Greater London area.

Despite the company's reliance on concepts, there are still a handful of units trading successfully without branding.

These include the Blackpool nightclub, Addison's, named after the founder's great aunt Mary who created the wine business in the mid-19th Century which led to the formation of Yates's.

The group's latest results showed pre-tax profits for the year to March were up 30 per cent to £13.6m.

Comparing the current estate with the same number of units the previous year, like-for-like sales have risen just two per cent.

But Marcall said: "Like-for-like sales are quite flat in the market, so we think two per cent is fair."

He said the management had put a strong base in place to support this expansion, including a new state-of-the-art computer system across all levels of the business.

The group has also freed up capital by setting up a joint venture, Quintain Estates, which acquired 15 freehold properties from Yates's in a leaseback agreement.

The group has also invested heavily in training, from barstaff up to management, and has opened a new £750,000 residential training centre near its Bolton offices.

Marcall said confidently: "We have invested in the infrastructure so we have enough resources to continue supporting a rapidly expanding business."