Facing up to reality in the pub trade

The smoking ban, the credit crunch, poor weather and steeply rising costs are regularly cited as contributing to the pub industry's ills. Whether pub...

The smoking ban, the credit crunch, poor weather and steeply rising costs are regularly cited as contributing to the pub industry's ills.

Whether pub companies and pubs could have done more to prevent the current travails - and what can be done in future - were two of the key topics at The Publican's fourth Industry Leaders Forum, which took place in Oxfordshire last week.

Caught out

Enterprises Inns' chief operating officer Simon Townsend said he believed the pace of the downturn had caught a lot of people out. "If anything the current conditions are exposing mediocrity in the industry," he said.

"Great trading conditions have allowed mediocre operators to do OK. Many of these are not used to working really hard just in order to stand still, which is the case today."

Most of those gathered agreed that the current downturn would lead to many pubs closing and lots of operators leaving the trade, although Townsend noted the industry shouldn't get carried away with the notion of a reduction in capacity.

"The bottom 10,000 pubs in the UK account for around three per cent of the industry's overall turnover. Such pub losses will obviously be painful for some people but the concentration of better pubs will be better for consumers in the long run," he said.

Punch Taverns group commercial director Jonathan Paveley said his business had seen "little impact" from the smoking ban until last November, when the darker evenings started and the buzz surrounding the Northern Rock affair was at its height.

"This seemed to hit some core consumers' sentiment, but it remains to be seen whether it's a short-term issue, a frisson of fear," he said.

Recalibrate the retail offer

Competition from other types of retailers was noted, particularly the targeting of pub customers by the likes of Marks & Spencer with its pub meals in a box, and the new breed of coffee shops offering comfort and value.

Marston's Pub Company managing director Stephen Oliver said such promotions tapped into today's price conscious times, while Barracuda Group chief executive Mark McQuater said that pubs were now up against specialist retailers which made many boozers look like the department store of old.

Meanwhile, peripheral pub consumers, particularly smoking ones, no longer popped in for a pint since the smoking ban, he said, and the move to cater for smokers may have led to operators forgetting to address facilities for non-smokers, whom the industry has declared so desirable. "Perhaps we need to recalibrate our retail act," he added.

JW Lees' managing director William Lees-Jones said one of the pub trade's sticking points was doing a "large number of things badly. We get all excited about things like coffee, but we still do it badly", he said, a view shared by Enterprise's Townsend, who said that more food wasn't the answer "if it was done badly".

Ian Payne, former Laurel Pub Company chairman and now overall boss of its former operations including La Tasca and Slug and Lettuce, agreed a lot of rival outlets were "nicking our lunch", but he also wondered whether the industry was currently seeing merely a trend, "or whether we are witnessing a sea-change in terms of how consumers wish to spend their leisure time".

Image problem

While acknowledging the current problems faced by the industry, Fuller, Smith & Turner chairman Michael Turner wondered if something else was going on.

"We have seen regular campaigns in certain sections of the media, and now with the government, highlighting the effects of binge-drinking, setting unit limits which have no scientific basis and bringing the pub sector into the equation," he said. "This is leading to another issue, that of the impact on the consumer's subconscious that pubs are a bad thing."

Turner wondered whether the industry's policy of engaging with government had backfired on it - and whether there would have been less legislation against the pub industry if its representatives had refused to deal with Whitehall.

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Mapping the way forward

As well as looking at some of the negative aspects of the industry, executives pinpointed a series of key areas that were working well in their estates - and which could offer further inspiration to the trade.

Marston's Pub Company's Stephen Oliver picked out accommodation and top-end food as two areas where the pubco was seeing some success - although he echoed the thoughts of others when he said perhaps there were now too many pubs offering food which simply wasn't good enough.

Others pointed out that there were still real opportunities for licensees who concentrated on the wet side of the pub business - be that cask ale, wine or even cocktails. "Cask ale has been consistently undersold. The hand-built pint is a missed opportunity," said Enterprise Inns' Simon Townsend.

"We mustn't lose sight of the fact that wet-led businesses can be fantastically sustainable. Good cask ale offers low operating costs and high margins, and it still has a really important role to play in pubs."

Jonathan Paveley of Punch Taverns echoed this when he said he had a number of its pubs had seen cask ale sales improve following line-cleaning work instigated by Brulines. "Cleaning lines improves sales; it's as simple as that. Too many see it as a chore, rather than an essential part of their business," he declared.

Mark McQuater of Barracuda picked out wine as a category that was really working across its outlets - and highlighted the positive knock-on effects of customers enjoying a more measured rate of drinking at its venues as a result.

For Ian Payne, representing the typically high-street managed sites ranging from Slug and Lettuce to La Tasca, cocktails were in growth.

But as well as the opportunities, the old challenges were becoming greater, the forum agreed, with Everards' Stephen Gould pinpointing recruitment as a major concern. "Licensees earn an average £40,000 a year for 100 to 125 hours a week - in the new environment that's simply not good enough. And there's a direct link between that and attracting and retaining talent."

Charles Wells' chief executive Paul Wells said the industry was facing a "costs tsunami". For those with integrated businesses everything - utilities, raw materials, transport - was on the rise, while licensees themselves faced dramatic margin squeezes.

But Stephen Oliver said more tenants and lessees needed to take up the business packages that were being offered them by their pubcos.

"It's incredibly frustrating. There's a unique degree of resistance from people who think there is something in it for us. They are deeply suspicious of anything we have to offer."

Who was who at The Publican's fourth annual Industry Leaders Forum?

• Simon Townsend, chief operating officer, Enterprise Inns

• Stephen Gould, managing director, Everards

• Michael Turner, chief executive, Fuller, Smith & Turner

• Ian Payne, chairman, Bay Restaurant Group & Town and City Pub Company

• Jonathan Paveley, group commercial director, Punch Taverns

• Mark McQuater, chief executive, Barracuda Group

• William Lees-Jones, managing director, JW Lees

• Paul Wells, chief executive, Charles Wells

• Stephen Oliver, managing director, Marston's Pub Company

• Martin Thompson, business controller - managed retail, Coca-Cola Enterprises

• Andy Slee, licensed trading director, Coca-Cola Enterprises