Pulling power

Despite operating only three per cent of pubs in the UK, Mitchells & Butlers rakes in nine per cent of the industry's sales. Andrew Catchpole speaks to chief executive Tim Clarke about the growth of the company.

Tim Clarke is a big player in the world of beef ribs and turkeys. It's a quirky admission that visibly amuses him and something he rightly suspects that few people know. Of course, he is better recognised as the serious 47-year-old chief executive of Mitchells & Butlers, the 2,000-strong pub estate jockeying with Spirit Group for the position of number one managed pubco in Britain.

Since 1995, back when M&B was the Bass Retail estate - and Tim Clarke was aged just 37 - he has been at the helm. It's no surprise then that Tim's unexpected revelation is made to illustrate a serious point.

"As a company we are a major purchasing power in the world market for these products, rivalled only by people like Tesco," says Tim. "This means we can offer better value, so attract more customers and thus increase our purchasing power. It's a virtuous circle."

It was a casual mention of a rival managed operator which prompted the talk of turkeys. However, Tim is careful not to directly knock his competitors, sticking instead to the business philosophy behind M&B's market-leading performance.

"The point is that we have high quality pubs taken from the cream of the old Bass and Allied estates," he says. "And it's the high-quality end of the market which will continue to thrive."

"Consumer spending is slowing and drinks sales may be close to a plateau," he adds. "But there is a fundamental change in the market, in peoples' lifestyles, with working couples, higher expectations, a premium on time, yet money to go out and spend."

His argument is that those who are locked into a downward spiral of discounting and high wet-led sales will continue to feel the squeeze.

"Take food - in less than a decade sales have risen from 10 per cent to 30 per cent of our sales," he explains. "Or drink - we had to ask ourselves, are we trying to encourage people to drink more, or respond to the customers' higher expectations by focusing on the quality of the drinks offering?"

M&B's recent AGM statement gave the answer. Total retail sales for the first 16 weeks to January 2005 were up five per cent, led by strong growth in food sales, up 10 per cent, with drinks sales up by two per cent.

Since its 2003 demerger from Six Continents, the ex-Bass hotel and pub group, M&B has emerged as a force to be reckoned with. Its generally high-turnover outlets take a net average of £15,000 to £16,000 a week. And so, despite operating just three per cent of the country's 63,000-odd pubs, M&B punches well above its weight, accounting for over nine per cent of the industry's total sales.

M&B has an impressive portfolio of historic and upmarket destination pubs, but the heart of the business lies in its roadside Toby Carverys and Harvesters, plus the high street-located All Bar Ones. Tim refers to these concepts as M&B's engine room - brands which give "huge efficiencies of scale".

The Toby Carverys alone average 2,200 covers per venue a week, contributing to M&B's average food take of £5,000 per outlet. An impressive figure when compared with the UK average total pub turnover of £3,000 to £4,000 a week.

It's not all plain sailing, though. Smoking prohibition looms for venues serving food and high street trading - even for M&B - remains tough. In 25 per cent of M&B's outlets food accounts for 10 per cent or less of sales, which means a smoking ban on food pubs would force tough choices.

"In these outlets we would be forced to look hard at the commercial options," Tim says. "Dropping food to allow smoking is not the way we want to go, which is why people like Ted Tuppen (Enterprise), Tim Bridge (Greene King) and I have delivered a strong message to the government saying the industry should not be forced into a choice between smoking and food."

So what does the future hold for M&B? Of the 63,000 pubs in Britain only 6,000 or 7,000 cut the mustard as viable houses in the managed sector, according to Tim. "We own 2,000 of the top quality pubs and naturally if any other of the 6,000 or 7,000 came up for sale then we would take a look. But financial considerations come first and we would be after top end returns."

Rival managed operator Spirit has recently shaken the chaff from its own 2,000-strong estate and, frankly, there doesn't seem to be a lot of high quality estates left for either of these managed giants to buy. However, Tim insists M&B is a long term player, with all the growth-driven impetus that implies.

One thing is certain - under the stewardship of Tim Clarke, M&B appears to have hit a winning formula. The City certainly approves of his virtuous circle and customers continue to vote with their feet. Only the beef cattle and turkeys awaiting dispatch to M&B's hungry catering operations may disagree.

M&B: the facts​

• Mitchells & Butlers was founded in 1898 from the merger of two Midlands family brewing businesses. Further mergers took place, the most notable being in 1961 with Bass, Ratcliff and Gretton to form Bass, Mitchells & Butlers. In 1967 came another merger, with Charrington United, creating Bass Charrington, subsequently shortened to Bass plc. Mitchells & Butlers remained as a trading name within the Bass group's business for many years
• M&B turned over £1.5bn in 2004
• M&B's average weekly take per outlet is £15,200, over double its 2004 figure, and three times the industry average
• The M&B sales split in 2004 was 34 per cent beer, 30 per cent food, 26 per cent soft drinks, wines and spirits, and five per cent each accommodation and machines
• M&B's 2,000 outlets include: bar chains O'Neill's, All Bar One and brasserie concept Browns; the food-led Harvester and Toby Carvery; the softly branded Nicholson's pubs, Ember Inns, Sizzling Pub Company and Vintage Inns; plus an unbranded portfolio such as the White Horse in London's Parson's Green and the Philharmonic in Liverpool.