Adapting to changing drinks market

Pre-loading, the recession, the shift to more Saturday night trade — the pressures on the traditional high-street circuit are growing. So what strategies are operators adopting to survive? Tony Halstead reports.

There's a cultural shift taking place on Britain's high street at the weekends. Footfall is down, customers are spending less and the time they spend in venues has been drastically reduced.

This means many operators are seeing their margins squeezed as they launch discounts and promotions in a bid to entice customers through their doors. The nightclub sector has been particularly badly hit, but high-street pubs are also feeling the wind of change.

Frequently cited factors such as the economic slowdown and the curse of pre-loading are the two principle drivers behind the slump, but there are others as well, such as the X Factor stay-in phenomenon and the move from Friday to Saturday night going out.

So how are operators reacting to the changes or will the new trends spell the end for the traditional high-street circuit?

Pre-loading research​

Back in November we commissioned some consumer research from him! as part of our Responsible Retailing Awards. The results confirmed what we in the trade had been saying for some time, that drinking at home before a night out — or pre-loading — had become prevalent.

In fact, the survey found that all young adults drink at home before a weekend night out — with the average man consuming nearly four drinks before leaving the house.

This is having an enormous effect on high-street trade, as Gary Cowles, retail operations director for the Stonegate Pub Company, which operates more than 300 managed houses nationwide, points out.

"Pre-loading is a frequent topic in focus groups we run and is now an intrinsic part of the getting-ready-to-go-out ritual," he explains. "Young people seem to be going out less frequently although they still have their Saturday ritual of getting ready and going out with friends."

According to Cowles, the main reason behind this trend is the cost of drinks in the on-trade.

"There can be no doubt that a contributory factor is the pricing of alcohol and in particular the price differential between the on-trade and the off-trade.

"As a direct result of this, price discounts and price promotions have become prevalent. In most cases it's implemented in safe, controlled environments," he explains. "But we are still seeing some promotions out there that do not fulfill mandatory licensing conditions."

Later and later​

It doesn't stop there either. Another result of pre-loading has been that peak trading hours have moved later every year.

Aaron Mellor, managing director of nightclub operator Tokyo Industries, says circuit pubs and bars in most UK towns and cities do not come alive until 10pm and many clubs do not even bother opening their doors until at least 11pm.

"Trading patterns have changed and operators are having to get used to a much later start and the fact that many customers are arriving the worse for drink.

"People are spending less and limiting the number of bars and venues they visit in the course of a night. Many of them are on the circuit for much less time," Mellor reports.

This has also had a knock-on effect for the nightclub sector, which has already suffered from the change in licensing hours in 2005, allowing consumers to extend their evenings in pubs at the expense of a few hours in a club.

"Before pub hours changed, a lot of people visited a club simply to get a late drink, but now when the time gets to 1am they do not feel the need to go to a club unless perhaps they are celebrating something special," says Alex Salussolia, managing di-rector of bar, club and restaurant operator Glendola Leisure.

"Clubs have been the big losers simply because other venues can now keep hold of their customers for much longer."

Friday to Saturday​

Another of the emerging trends that is having a significant impact on business is the shift away from Friday nights out, says Salussolia.

"Saturday has emerged as the only night of the week when circuit street operators can confidently expect high footfall and good trading volumes," he says.

This is echoed by both Toby Smith, chief executive of Town & City Pubs, and John Hutson, managing director of JD Wetherspoon.

Smith, who looks after the Yates's and Slug & Lettuce chains among others, says his venues have experienced a "resilient" night-time market over the past two to three years despite the recession, but concedes that there has been a major shift from Friday to Saturday nights.

"Our research tells us that cust-omers hold Saturday as non-negotiable, while Friday is treated almost as a weekday due to the number of people who work on Saturdays," he says.

Hutson confirms that the shift in customer traffic hours is affecting even the mighty Wetherspoon. "We are getting our fair share of the weekend young people's market, but Fridays are not now as strong as Saturdays," he says.

"In general terms there are still too many venues chasing too few customers," he adds.

Promotions and discounts​

Wetherspoon, of course, has become known for its competitive pricing model, but others have experienced less success with cutting prices.

In fact, an over-reliance on drink offers and promotions has put the future of scores of nightclubs and late-night venues on the line, according to Bob Senior, managing director of north-east op-erator Utopian Leisure.

"Business on the circuit is in serious decline thanks to the recession and the pre-loading culture, which sees the streets in many town and city centres very quiet until 11.30pm or so," he says.

"It's true to say that some student midweek nights have endured, but fierce competition leads to super-cheap drink offers and declining margins."

Senior reveals that one operator, who has recently quit Newcastle, was offering a treble and a mixer for just £3.99. "It's a measure of just how desperate the situation has become recently," he says.

"Profit margins per head were averaging between £20 and £25 at the weekends a few years back, but it's nothing like that now."

That's entertainment​

One way of driving business that avoids taking a margin hit has been to offer more in the way of entertainment, which can encourage trade earlier in the evening.

Dhilon Solanki, marketing manager for the Orchid Group's late-night division, Ultimate Leisure, believes venues must offer increased variety if they want to win back and drive early evening business.

A radical review of the retail offer and operations across its 18-strong estate in the north, Midlands and Belfast was undertaken following Solanki's arrival from Luminar Leisure eight months ago.

Orchid has already spent more than £1m on its venues and has plans to refurbish six sites later this year.

"We are introducing more cred-ible and relevant entertainment, branded sessions, comedy nights and live bands in a bid to win back lost early evening customers or re-position venues," he says. "We are trying to avoid being over-reliant on discount-led initiatives and instead we're focusing on offering a big night experience and giving people a reason to visit."

Charging for entry on the back of such an entertainment offer has also helped boost revenue for some.

Tokyo Industries' Aaron Mellor says the company has managed to maintain its trade because people are willing to pay an entry charge for a good DJ and cutting-edge music.

"We have kept our entry charge because this traditionally pays for our DJs and entertainment as we are a music-led operation," he says. "We average about £7 for entry and with spending at about £13 per head we have retained footfall and volumes."

Mellor says that an increasing number of clubs are now having to adopt a different culture.

"They are winning business by offering something different in music and entertainment, rather than simply providing a late-night bar," he says.

"Pe