Cutting it on the high street
Britain's town centres are over-pubbed, with operators desperately discounting in order to compete. By Mark Stretton.
There have been enough column inches devoted to discounting, irresponsible pricing and the self-styled "Tescos" of the pub sector to decimate a small rainforest. The high street is a massive talking point and every trading statement from a city centre operator refers to the cheap drinks offers engulfing drinking circuits.
The current round of price slashing began just over a year ago when Laurel started selling strong continental lager at £1.65 a pint. Things got really tough from October 2002 and it quickly spread until almost every managed house operator was dropping prices in a bid to get customers through the door.
So with Stella reassuringly cheap and some companies facing an uncertain future, it was time for The Publican to dust off its biggest pair of drinking slippers, raid the petty cash jar and hit the high street to find out exactly what was happening out there.
Croydon was the destination of choice. The town, which is just on the southern outskirts of London, is apparently the marketing man's version of Everyman-ville. In the marketing world Croydon is seen as the perfect test-bed for consumer behaviour and it boasts a strikingly large number of branded high street outlets. It also, rather handily, is where The Publican's offices are based.
All walks of life are here.
In the 18 months before things started to get really tough on the high street the number of branded outlets in the centre of the town practically doubled. Banks, offices and shops have become bars and the town is now home to a plethora of brands including All Bar One, Babushka, Bar Med, Edwards, Flares, Goose, Fuller's Ale & Pie, Hog's Head, JD Wetherspoon, Jim Thompson's, Litten Tree, McClusky's, Lloyd's No.1, PALs, Tiger Tiger, Yates's and Walkabout.
Unbranded operator Wizard Inns owns four outlets in the centre - Bar Monaco, CRO Bar, the Ship and the Porter & Sorter. Greene King has a managed outlet called the Brief, Young's has a house called the Dog & Bull, and there are a few individual operators dotted around like Bamboo, Heroes and the Stop plus a number of tenancies on the edges.
In other words, for an "ordinary" town Croydon is just about as competitive as it gets. It is interesting to note the ownership of all these pubs and bars because out of 23 on the core Croydon circuit, 14 are in the hands of public companies and six are owned by businesses heavily backed or owned by private equity firms. The companies that have rushed into the town centre are those that need to grow the quickest. Clearly the town centre has too many pubs and now A-boards litter the high street advertising cheap food and cheaper booze.
Companies such as Luminar and Yates recently reported that the main trading sessions of Friday and Saturday nights are still there but people's desire to hit the town midweek has virtually disappeared.
Yates Group said people's habits have fundamentally changed with very few venturing out during the week while Luminar boss Steve Thomas put it more eloquently when he said: "If your job was under threat would you go out and get hammered during the week?"
The so-called dark nights of Sunday to Thursday are a lot darker and the weekday lunchtimes are a lot quieter.
Consumers aren't flooding into the high street until they finish work on a Friday. To the horror of trade bodies, Luminar's answer has been to offer a fixed door-entry fee and unlimited alcohol although Mr Thomas maintains this is happening across the industry.
What is quickly obvious is the ferocious battle for business during the week, especially at lunchtimes. The competition for the consumer pound has been reflected in Croydon through a raft of Monday-to-Thursday offers, or "targeted promotions", in practically every outlet in the city centre.
The circuit was built on the fact that people like to go from pub-to-pub on Friday and Saturday nights. Now everyone is desperate to fill the business with customers in every trading session of the week because most have taken on hefty leases and need to sweat the asset to pay the bills.
Consequently, it is not just the cheap Stella Artois promotions that are thrust upon the customer but bucket-loads of food offers.
Most surprising, perhaps, is the fact that operators like Tiger Tiger, the late-night bar and food brand with a penchant for top-end prices, is offering £3 lunchtime meal deals. It was not long ago that two modest lunchtime sandwiches and two drinks would render little change from a £20 note at Tiger Tiger. Now baguettes, burgers, curries and sandwiches are all available at £3.
Next door, Bar Monaco is offering a similar £3 deal while a couple of units along Edward's, Mitchells & Butlers' premium bar, is offering two meals for £5.95, Lloyd's No.1 is running a two-for-one meal deal and Yates's is offering two meals for £5.90.
The same applies at Goose, where two meals are available at £5.50. Bar Med offers two for £5.99 and Litten Tree has a host of offers including a rather uninspiring Curry Club, featuring a curry and a pint for £4, which sounds very much like a Wetherspoon offer.
Even Regent Inns' Australian bar Walkabout, which is deeply opposed to any form of discounting, is knocking out a selection of lunchtime meals at £3 a time.
It would take too much space to document all the cheap offers but it is worth noting that Pret a Manger, McDonald's and Starbucks, strong brands that compete directly with pubs for lunch and coffee business and are not discounting, seem busier than ever. Perhaps most telling of all was the fact that at £6.50 per head the most expensive "basic" lunchtime offer to be found in Croydon (specifically targeting shoppers and office workers) was at the flagship store of department chain Allder's. Whoever sets the prices there clearly hasn't been to the pub lately.
The lines between the mainstream discounters - the likes of JD Wetherspoon (JDW), the original discounter that has set its stall out as a permanent purveyor of cheap drinks - and the rest has become blurred. JDW has been slowly hiking prices in a bid to halt declining margins while outlets such as Goose, Mitchells & Butlers' rival me-too offering to JDW, SFI's Litten Tree and Yates's have all pursued a price-led approach.
"It appears that most operators have looked at ways of driving top-line sales and decided to follow Wetherspoon," said Geof Collyer, an analyst at Deutsche Bank.
"It is not the discounting that makes Wetherspoon a good business, it's because it knows how to operate. Yet virtually everybody has followed suit which has led to a vicious downward spiral."
Bar chains, whose parent companies had quite happily labelled them "premium" or "discerning" or "exclusive" 18 months ago, are now offering four shots or four bottles for £5. Pub companies that had previously argued their brands were strong and differentiated are now slashing prices.
Tiger Tiger is running happy hours from 5pm to 7.30pm every night with bottled beers at £2 and £1 off all cocktails.
At Bar Med, the chameleon bar concept run by troubled group SFI, there are promotions every day on selected drinks from 5pm to 8pm under the strap-line "Happy Hour - where an hour lasts longer", when brands such as Bacardi, Budweiser and Foster's are available for £1.50.
According to research by WestLB Panmure, the average price reduction at Yates's on items including Beck's, Boddington's, John Smith's, Metz and house wine is 29 per cent. This included the core trading sessions at the weekends. "Going head-to-head with Wetherspoon is a brave move," said Doug Jack, an analyst at Panmure. "The level of discounting indicates that life is still
