Brexit has 'raised the stakes' for pubs in 2019, says Clive Watson

As reported by The Morning Advertiser, ​City Pub Group’s latest trading statement revealed total turnover of £45.6m for the 52-week period to 30 December 2018 – a year-on-year increase of approximately 22%​.

Following another positive result and just over a year on from City Pub Group’s IPO in November 2017​ - when the group operated 33 pubs - Watson is confident the company is on course to hit site number 50 by autumn.

“With the sites that are going to open during the course of the year, by September, at the latest, we'll have 50,” he explains.

“So in the space of less than two years we'll have increased the size of the estate in a very managed expansion, not buying other companies, as we set out to achieve.

“If you said to me 'what pleases you most?' it's the fact we're expanding the estate and controlling it's expansion."

Expansion plans on track

As previously covered by The Morning Advertiser​, City Pub Group harboured ambitions to reach 65 sites by mid-2021​, a figure Watson now believes the company can surpass.

“I think by mid-2021 we should be around the 75 mark. The only caveat is the whole political uncertainty," he says.

“We're acquiring at the moment on an opportunistic basis. Obviously if things go badly, we will consider things at the time, but we've got very low bank debt and we've got big headroom for expansion.

“We've got the fiscal firepower to get to 75, we've got the head office systems and everything in place to expand to 75. But obviously we're adopting a cautious approach at the same time just in case things go belly up - hopefully that won't be the case."

Brexit has raised the stakes

Discussing the potential impact of a no-deal Brexit on both his company and the broader pub trade, Watson – an outspoken Remainer - adds: "I think the stakes have been raised and I think we're probably going to end up with a no deal, or something very close to remain.

“If it's a no deal, regardless of what people say, there will be massive disruption to things like the food supply chain and clearly that's going to affect not just our sector.

"That's the no-deal doomsday scenario, but I just cannot believe we could get to that stage and I think we're going to row back to remain, which would mean a stronger pound, cheaper food imports, cheaper drink imports, cheaper oil, cheaper energy, cheaper holidays, more investment.

“I'm more confident than I've been since 23 June 2016 that we're going to end up keeping the deal we've got rather than trying to conjure up some mishmash of a deal which is worse.

“People voted to leave for a better deal, they didn't vote to leave for a 'mongrel' type deal.”

Move back to ‘authentic pubs’​

Forecasting broader challenges that lie ahead for the pub trade, Watson opines that it has already demonstrated its resilience in overcoming a host of challenges in 2018.

"I think a lot of the challenges, higher rates for example, are already in the system so in that sense the sector has overcome a lot of the challenges.

“I still think there will disruption in the casual dining sector. Nobody wants people to have bad times but I think there has been a move back to authentic pubs - the branded casual dining sector is in decline and customers are moving back to pubs.

“The pub sector is probably quite well placed to grow it's share of the leisure cake because of the demise of casual dining. 

"Less competition for sites as well - I think there's going to be a shake-out of the overall hospitality sector and pubs will benefit."

Vegan influence on City pubs​

Approaching the first anniversary of City Pub Group’s first dedicated vegan venue, Tell Your Friends, in Parsons Green, west London, opened by Watson’s daughters Lucy and Tiffany of Made in Chelsea​ fame​, he says the site has had a positive impact on the group’s wider estate.

"If you'd asked me three months ago, I would have said it's gone off well but that vegans don't drink,” he says.

“Three months on, that particular site is getting more traction and more local support - remember Parsons Green is a very middle class and privileged area, not necessarily fertile ground for vegans, but consumer habits are changing there.

"If we can crack that I think it'll give us a lot of confidence to do something in an edgier area where there are younger people - target a location where we know there are vegans or flexitarians who are quite happy to have vegan food during the course of the week.

“I think we've had a very good start to Tell Your Friends. This whole Veganuary is kicking in and we've been a beneficiary of that, but I think it's just the way forward and it's definitely got legs to open two or three more sites.

"We've also taken dishes off the vegan menu and put them into our pub menus, so we've improved our range of vegan offers in our pubs - which I think has been good as well."