Food sales driving M&B growth

Mitchells & Butlers (M&B) has reported an increase in sales across the 10 weeks to July 19, with its succesful drive to take more share from the food market compensating for declining drinks sales.

In an interim management statement covering the third quarter of its financial year, the UK's biggest managed pub group, operating brands including All Bar One, Harvester and Vintage Inns, saw like-for-like sales up by 1.1 per cent.

Like-for-like food sales were up 5.1 per cent compared to a decline in drink sales of 0.2 per cent - M&B pointed to an overall decline in on-trade beer volumes of around 10 per cent in the quarter as evidence it is outperforming the market.

M&B said the pub market is seeing robust demand for good value pub food, as well as drinks sales linked to food. Around two thirds of its total sales are now generated by a food driven visit, with beer accounting for only around a quarter of sales.

The company said it is well placed to benefit from what it believes are "long term, structural" changes in the pub market.

In its residential pubs, which account for 76 per cent of total sales, like-for-like sales were up two per cent, with "particularly powerful" performances from the value Pub & Carvery and Sizzling Pub Co brands, as well as strong growth in the Vintage Inns and Premium Country Dining formats.

In the tougher high street market, accounting for the remaining 24 per cent of sales, like-for-likes were down 0.1 per cent. M&B said "a very challenging market for later evening venues" was offset by good growth in both central London and high street pubs in the rest of the UK.

The company is continuing to assess its ability to convert to REIT status, as well as exploring options for asset swaps or sales of non-core businesses and some smaller pubs.

With market conditions expected to remain challenging as consumer spending weakens further, M&B said its focus remains on "continuing to generate profitable market share gains" from driving value and volume sales. The company expects "higher food and energy prices will intensify the cost pressures next year, although, as these prices are very volatile, the precise outlook is still unclear."

Earnings are expected to be in line with forecasts.