Hungry for success - Greene King moves into Scotland

Greene King recently made its first foray into Scotland. The managed estate team tells Mark Stretton how the Dalgety Taverns deal was done.

At the Greene King head offices in Bury St Edmunds a map depicts the coverage of the brewer's managed pub estate across the UK. The northern tip barely goes above Scarborough, but then few within the company could have imagined that it would need to reach far beyond.

That map became redundant two weeks ago when the company took the final step to becoming a - geographically - national business with its first foray into Scotland. The managed arm of Greene King bought Dalgety Taverns, an eight-strong pub estate that will be converted to the Hungry Horse brand.

"It wasn't too long ago that the Greene King map barely extended beyond East Anglia," said pub company managing director Neil Gillis.

"The Dalgety deal is a very exciting move for us. In the context of other deals, such as the Old English Inns transaction (£102.6m), it's not very big, but strategically it's very significant."

Many pub companies are starting to see Scotland as an untapped market. Enterprise, Pubmaster and SFI are looking north of the border. Two of the most successful brands in the UK market, Revolution and Walkabout, recently opened venues in Scotland.

The Greene King managed boss looked to Scotland for opportunities via Ireland. "When I first joined Greene King, we spent a weekend in Dublin," said Neil. "It would be a fantastic market for us but because of the limits on the number of licences, it's very expensive. We realised that Scotland was quite similar but without the restrictions."

A characteristic of the Scottish market is that it contains many more freehouses than England or Wales and it does not seem as developed in terms of the number of chains or brands.

The Dalgety Taverns business was set up by Willie Rowan with one pub in Dalgety Bay. He borrowed £1m to buy two more before buying a five-strong package from Tom Cobleigh to take the estate to eight.

The estate stretches from Dalgety Bay in the north east to Kilmarnock in the west.

The properties are all large-scale new builds, between five and six years old. "These really are among the finest houses in Scotland - they could have been hand-picked," said property director Donald Stevenson.

"As we understand it, Willie had just about everyone knocking on his door but resisted every offer. I think we were very fortuitous in our timing.

"As soon as he agreed to meet us we knew we had a chance," Donald added.

But Greene King's first move into Scotland was clearly a risk and the decision to buy was not taken lightly. Donald met Willie shortly before Christmas, and talks were ongoing before a team that included Neil and Donald spent two days visiting the properties in March.

A whole multitude of considerations must be taken into account when looking at a package of pubs - the potential buyers had to assess trading, the kitchen profile, the square footage, the layout of the bar, what type of pub it could make within the Greene King portfolio and so on.

But more importantly, say Neil and Donald, is what is happening outside the pub. Important factors included the footfall of people in the locality - if there are workers and shoppers in the area - the type of housing in the area, how big is the car park, if there are likely to be any problems with the neighbours, and much more.

Before going to see the sites, the Greene King team already had something of an understanding of the locations and the type of demographic areas the pubs fell in. They used research compiled by the AA to assess the flow of traffic passing by each pub and they also used data collated by Experian, a credit card checking agency that works with various consumer geography companies.

Using this information, Greene King could build a mental picture of the people and surroundings of each Dalgety pub. "It's clearly not the same as going to each area - feeling and touching what you might be buying," said Donald. "We did have some reservations about some of the locations but they were soon quashed when we saw the pubs in the flesh."

Understandably, during the tour Willie Rowan was very keen that his Dalgety staff should not know that he was taking prospective buyers through his estate, for the sake of team morale apart from anything else. Neil and Donald were asked to dress very conservatively, in dark suits, because as far as workers were concerned, they were insurance assessors. "It was quite easy. We had to talk about replacement values and the fascinating architecture and generally act very boringly, asking lots of dull questions - it came very naturally to us," joked Neil.

"Acting aside, it is a very tiring two days. It is absolutely vital to maintain concentration otherwise you could miss something. By the end of it, you are absolutely bursting from all the coffee and fizzy water."

The financial numbers involved were not disclosed but safe to say Willie need not work again. The company will spend between £80,000 and £300,000 converting each site to Hungry Horse. The company will employ an area manager to head the Scottish region.

Last week the Greene King management visited every pub to welcome the Dalgety staff to the company. One of the essential elements of a deal, says Neil, is to keep incoming staff happy. "The critical thing is to keep them inspired and motivated," he said. "We now need to explain what Greene King is about and what Hungry Horse is about - you have to sell it to both the customers and the staff."

Marketing director Adam Collett said the eight sites would be treated exactly like the other Hungry Horses. "We don't want to make patronising changes," he said.

"It won't be called Hungry McHorse, that's for sure. However, we may have a problem with the menu - haddock is the fish of choice in Scotland so we will have to think of a new name for our fish and chips dish - at the moment its called Good Cod Almighty."

In 1970, Greene King was a small Suffolk brewer with 40 pubs. Greene King Pub Company, the managed business, now has more than 600 pubs, and the tenanted business, Pub Partners, more than 1,200.

Neil says he hopes the company can finally shake the redundant and outdated labels of "Suffolk brewer" and "super regional".

"We are a national company," he said. "Historically, all pub companies started in one area. Even a company like Enterprise has concentrations in certain geographical areas - it just happens that ours is East Anglia."

The company said it does not have any numbers in mind but will look for more opportunities in Scotland for Appleton's, its fresh-food pub concept, and its Old English Inns division, as well as for Hungry Horse.

"This represents a quantum leap for Greene King," said Donald. "Scotland is a relatively untapped market that we believe holds big opportunities."

Pictured: Neil Gillis (centre) and Adam Collett (right) of Greene King, recieving the Publican's Pub Company of the Year award from Frank Skinner at this year's ceremony​

For more on this year's Publican Awards click here.