Coverage of the Pub Strategy and Investment Conference

The following articles have been sourced from the Pub Strategy and Investment Conference, hosted by Martin Information, which gave an overview of the pub market as it is today and provided valuable insights into marketing, branding and investing in the industry.

Experts such as Colin Wellstead, director of Christie & Co, and Peter Martin, chief executive of Martin Information, spoke about the current pub market, and there were panel discussions between various leading industry figures.

Here is a brief overview of some of the presentations.

The property deals keep on coming...​

Although we are just a quarter of the way into 2002, already several major deals have been done - the most notable being Enterprise's purchase of Voyager and Unique from Nomura.

But, according to speaker Colin Wellstead (pictured)​, director of Christie & Co, the property deals show no sign of slowing down or stopping.

He said three major deals dominated last year - the purchase of 998 Bass pubs by Nomura, Whitbread's sale of its 3,000-strong pub estate to Morgan Grenfell Private Equity, which in turn sold 439 pubs to Enterprise, and the sale of 646 pubs by Scottish & Newcastle (S&N).

"From those three major deals some 4,600 pubs changed hands," Mr Wellstead said. "Some 1,900 pubs were converted from managed houses to leases and tenancies and some 750 pubs were sold on."

He said the pubs converted to leases were all quality managed houses where the new lessee was often either the existing manager or a new entrant to the pub trade.

Pubs that were sold on included those with a higher alternative use value. For example, the White Hart in Willesden, London, was sold by S&N to Enterprise Inns and had a value of £250,000 as a pub. It was subsequently sold to a developer for more than £1m.

Similarly, Mr Wellstead said, "yesterday's concepts" were also often sold on.

The movement in the pub trade was having an effect on values, Mr Wellstead told the conference.

He said that in December 1998 Inn Partnership sold 1,241 pubs for £370m - an average price of £298,000 per pub.

Then, in February 2002, Inn Partnership sold 1,200 pubs for £489m - an average price of £407,500 per pub.

Profitable freehold pubs were increasing in value, Mr Wellstead said, although developers often don't realise the cost of development when sold. Leaseholds were holding their value.

The branded, managed sector, including JD Wetherspoon and SFI Group , is an "active if selective" market while the unbranded, managed sector, which includes Noble House and Wizard Inns, is showing "less activity, although some companies have aspirations to grow", said Mr Wellstead.

Regional brewers, such as Belhaven and Greene King, are being acquisitive, but selective. Buying in small packages and individually means they can move quickly and are often location driven.

The tenanted/leased owners are "hugely acquisitive" said Mr Wellstead, and continue "churning" at the bottom end of their estate.

All of which, he concluded, means despite the large numbers of deals that were made in 2001 and the early part of 2002, the property deals will keep coming.

Brands failing to respond to consumer needs​

According to statistics there are 707 different pub brands in the UK. According to Simon McQuiggan and Pete Brown, there are barely 10.

The pair, who run advertising agency LoweBrand, said they would argue that many pub brands do not conform to the essential principles of branding.

Brands must respond to consumers, be different from one another and be consistent, they told the conference.

Responding to consumers is vital because, according to Mr McQuiggan, brands only exist in the mind of the consumer. "To be meaningful, you have to respond to a real consumer need," he said.

For example, the fact that women felt uncomfortable in pubs was addressed by All Bar One (pictured)​, which created a pub that women felt comfortable in without excluding male customers.

"All Bar One made its name by being different from everything else in the market place," said Mr McQuiggan. "Now everywhere you go looks like an All Bar One."

Brands are only brands when they deliver time and time again, Pete Brown said.

He said brand meaning came from many sources. Lager brand meaning comes largely from advertising, whereas pub brand meaning comes mainly from experience.

It is delivered by the location of the outlet, the staff, the décor, the quality and range of drinks, the food and the ambience.

Mr McQuiggan said brand research showed that while young people and families are being well catered for in the pub market, there are 6.5 million people - the older generation - being overlooked.

"The 45-plus age group is more affluent and it's not being looked after," he said. "There is a real gap in the market and it will be interesting to see what happens when a pub company realises that."

He said the branded pub was not dead. "Brands aren't even hitting puberty yet, there's a long way to go," he said.

"Many pub companies are too quick to drop brands and move on, but the big brands like All Bar One don't do that - they evolve instead of ditching the brand.

"Pub branding is not a simple fix-it. Many of today's pub "brands" aren't brands at all."

Investing in the industry​

The pub industry is a good place to invest, according to John Moulton from Alchemy Partners.

He said that by analysing the various components within the trade, it could be seen that pubs will be a good investment for some time to come.

"There is a regular flow of deals," he said. He pointed out that in the past year Pubmaster has acquired 1,200 pubs, Royal Bank of Scotland 456 pubs and Enterprise 900 pubs. Deals such as this will continue, he said.

Tenanted pubs versus managed pubs is a debate that will keep running, Mr Moulton said. It is also a debate that, according to experts, can be read as large players versus entrepreneurs, or even boredom versus creativity, he added.

However, the constant movement between the two is important because "it feeds the deal cycle," he said.

"Constant positioning and constant churn means constant opportunity in the sector," Mr Moulton added.

But it is not just the "churning" process that means pubs are a good investment.

The industry has good cash flow, is more or less resistant to the economic environment and has its basis in "bricks and mortar".

There is no shortage of people who could be management material, Mr Moulton said, and running the risk of offending his audience, added: "It's not the most demanding job in the industry."

But he warned that along with all the good news it was important to be aware that ales are in decline.

"You can't build on the bare bones of booze," he said. "The pub industry now needs to build on other things."