Christmas

How is Christmas 2016 shaping up for the pub sector?

By Ed Bedington

- Last updated on GMT

The Churchill Arms in Kensington, west London, is famous for its festive display
The Churchill Arms in Kensington, west London, is famous for its festive display

Related tags: Christmas, Christmas tree, Twelve days of christmas

The festive party season is, without a doubt, the key part of the UK pub industry calendar.

Consumers flock to the pub in the month of December, and operators are keen to make the most of it to help see them through the leaner month of January.

Brigid Simmonds, chief executive of the British Beer & Pub Association (BBPA), sets out the Christmas stall: “Christmas is a busy time for all of us in the beer and pub industry, and many see the great British pub as a home from home during the festive period.

“We drink some 400 million pints in pubs alone during the month of December, and in total, 260 million more pints are consumed in December versus an ordinary month. The Treasury collects an extra £137m in beer duty and VAT over the Yuletide season.”

According to figures from the BBPA, six million people will visit a pub on Christmas Day alone.

But with Brexit humming in the background, and economic uncertainty casting a shadow over the country, how is Christmas and the festive period looking to shape up for the pub sector in 2016?

Predictions from the trade remain mixed with some operators anticipating a tightening in demand, while others remain bullish.

Stonegate bosses said the outlook for them was very positive: “We are looking forward to a strong Christmas and we don’t see any evidence of Brexit influencing customer decision making,” said Simon Longbottom, chief executive.

“Christmas bookings are running well ahead of last year and our targets, with our teams doing a great job. We are particularly excited about 23 December with many of our operators planning record sales days.”

Of course, 23 December should be shaping up to be a big day for the trade, with predictions suggesting that trade could bounce upwards by 142% on the so-called “mad Friday”, compared with sales from a normal Friday.

For Oakman Inns, Christmas bookings are looking strong, but CEO Peter Borg-Neal says that is only part of the equation: “The long-term reduction in drinking out might impact negatively on Christmas, and I’m more worried about the weather than any short-term Brexit impact.”

Price rise hints

In the north of England, the Ladhar Group is also looking for a strong festive season, with director Barry Ladhar reporting strong sales and bookings. However, he points to worries with the European situation: “The main concerns with Brexit [at the moment] are the rising cost of sales. Suppliers are twitchy and price rises are beginning to be hinted at.”

Borg-Neal agrees, saying that while Brexit has yet to happen “the expected short-term currency weakness has materialised and will hurt with respect to costs”.

The BBPA also remains cautious when it comes to festive forecasts. Simmonds said that rather than predict any huge rises for Christmas, her members are hoping the market remains comparable with last year: “I think the uncertainty around Brexit means that most would say [they’re expecting] much of the same, but some are already reporting a softening of the consumer market. Increased costs because of the weakness of sterling, particularly around food, is already filtering through. So, I suppose more of the same in the run up to Christmas, but real uncertainty about what 2017 will bring.”

Simmonds remains positive in the face of Brexit, however: “I would be surprised if it affected the Christmas figures, particularly given a low pound and the increasing number of tourists as a result and an element of staying at home.”

Cautious optimism

However, others fear the increase in visitors is not enough, and while Borg-Neal says he remains “cautiously optimistic” for Christmas, he adds “the increase in tourism won’t do enough to mitigate” his increased costs in the face of the fall in currency values.

For him, a number of his worries stem from that situation: “Food and wine prices will be driven upwards by currency weakness in the new year. It’s already impacting capex items such as kitchen equipment and building materials.”

That on top of rates increases – which Borg-Neal says will punish those who invest in their businesses and have high turnover and employment cost structures – form the backdrop to his cautious approach to Christmas and he will again be urging Govern-ment to consider a VAT reduction for food sales in pubs.

For freehouse operator Jonney Cox, he’s expecting a drop compared with last year, but some of that is due to how the calendar falls: “Last year, most people took six days’ holiday, being off from 18 December to 4 January! This year, Christmas Eve is on the Saturday so a lot of people will finish work on the 23rd and go back on 3 January.”

However, for his operation, the Yew Tree in Bunbury, Cheshire, the referendum vote has already had an impact: “Sales have been flat since Brexit, with like for likes very similar, no massive gains, so I imagine this will carry on through December. The year has become much more of a cost control exercise, however, so we still gain on the bottom line.”

But he hopes previous experience might pull things through: “It could be that, like in the Christmas of 2008-09, we had a great period as people stop spending in the run-up months and ‘went mad’ with the festivities”.

His business is a community-focused one so he doesn’t benefit from the early Christmas party bookings. However, he says the key for the pub is planning ahead: “We’ve got some great events planned and there are days that will still be massive such as Christmas Eve when the Cheshire Hunt meets, or Wednesday 21 December when we hold a Christmas sing-along that gets everyone ready for Christmas.”

Falling footfall

As Borg-Neal points out, a key festive concern is the fall in numbers of people going out and according to CGA data, footfall is declining at Christmas, year on year. However, Rachel Perryman, director of client services with CGA, said: “The impact of this has been limited by people going out less but spending more.”

She says there are a number of factors that can impact trade at Christmas, with climate an important element. “Weather is a huge factor, with flooding and snow having a detrimental effect. More recently, Christmas markets have added further competition for attracting Christmas footfall to on-trade outlets and, last year, big movie releases also impacted trade.

“On a more positive note, this year will see further sales opportunities with Christmas falling on a Sunday which could have a positive impact. Last time this happened back in 2011, drinks sales were 12% higher than the average seen over the five years to 2015.”

She also points to the fact that data in the run up to Christmas indicates no impact from Brexit as of yet, with managed pub and restaurant groups reporting collective like-for-like sales up 1.8% for September.

Like Cox, she added that when it comes to the festive season, the key for most operators is creating excitement. “Undoubtedly, the challenge for outlets is attracting footfall, so it’s about creating a compelling offer at Christmas that gives consumers a reason to visit,” she said. “And once you have attracted that footfall, it is about maximising spend per head with great premium trade-ups, cocktails and hot drinks, and great food offers where possible.”

Chris Hill, chief executive of the New World Trading Company, is certainly looking forward to a bumper Christmas: “We’ve had an OK summer but we are having a really strong autumn quarter and Christmas is looking good for us.

“In the sites where we traded last Christmas we are 20% up in bookings versus this time last year, while in sites that have opened this calendar year, bookings are well ahead of targets.

“I get the sense that people are really looking forward to Christmas this year!”

So, let’s raise a glass to what potentially is shaping up to be a stand-out festive season. But with predictions of increased costs looming, it looks like the trade needs to embrace the opportunity and make the most of it.

No slowdown in spending yet

MCA’s consumer eating and drinking-out insight has shown that, post-Brexit, there has been no let-up in appetite for eating out; spending levels are at their highest and frequencies have also increased.

The macro-economic situation has provided more disposable money for consumers, more than ever before, with the Asda income tracker showing that the average household now has more than
£200 per week disposable income. As eating and drinking out has become more habitual behaviour, it is unlikely that this will drop off as long as disposable income remains high.

However, rising inflation may well reduce this, as increasing fuel and food costs start to impact; the devaluation of the pound has meant some small immediate changes, but the real impact will be felt during 2017 when currency hedges and contracted pricing run out. We have already seen menu pricing increase significantly during 2016, as operators covered the increase in national living wage costs, and consumers have taken these in their stride, but more increases in the face of rising general inflation might well be less palatable.

So, in summary, we see that consumers will continue to live it up in the run up to Christmas, making the most of the current situation, but that increased costs may well dampen the new year.
Having said that, operators will be well aware of the need to work harder to maintain traction in January, so you can expect to see far more promotional and possibly discounting activity.

- Simon Stenning, executive director, MCA

Related topics: Events & Occasions

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