In a busy year for M&A activity in the sector, Greene King’s acquisition of Spirit Pub Company was one of the standout deals – creating the country’s largest managed estate and third biggest collection of tenanted and leased pubs. Publican’s Morning Advertiser editor Ed Bedington talks to chief executive Rooney Anand about the challenge of assessing which of the combined brands have a future, his philosophy on recruitment and the challenges of coping with an increasingly disloyal customer base.
Greene King might be off the beaten track in the sleepy Suffolk town of Bury St Edmonds, but that has not stopped it from making waves throughout the wider UK market.
All eyes have been turned on to this somewhat publicity-shy operator since it announced it was making a play to buy rival operation Spirit Pub Company, a move that would transform both businesses and a fair swathe of the wider pub sector, with the newly merged businesses now accounting for more than 42,000 staff, and more than 3,000 pubs.
Greene King is something of an anomaly in the trade — a family-style brewer which is, in actual fact, a PLC business — but while its traditional cousins have stuck to their family roots, Greene King has moved beyond being a regional powerhouse and embraced the opportunity to step on to the national stage through an acquisitive strategy that has seen it gobble up rivals over the years. The acquisition of Spirit, its largest to date, cements its position as a major player.
The architect behind the growth of the company in recent times has been CEO Rooney Anand.
No stranger to the corporate world of acquisitions, mergers and consolidation, Anand started his career in the FMCG (fast-moving consumer goods) sector, stepping on to the ladder with a junior management role with what was then United Biscuits.
Having worked his way through the world of confectionary and cakes, latterly with Sara Lee, Anand made the shift into the pub sector in 2001, taking on the role of managing director of Greene King’s brewing division, before taking on the top job in 2005.
Despite spending the past 14 years in the trade, he still feels like a new arrival. “It’s such a wonderful industry and so many people in it have worked there most of their careers. I’ve been in the trade for 14 years, but it’s like reverse dog years, I’ve just finished two years.”
Turning his back on the opportunity to work internationally following the sale of Sara Lee (“I had fairly clear signals from my partner that she didn’t want to be an ex-pat wife”), Rooney embraced the move to Suffolk and also the opportunity to work within the PLC environment.
“It wasn’t the most obvious choice,” he said, “but I came to Bury St Edmonds and met the board. This was a PLC and that was part of the attraction, my first PLC role.”
Despite the more corporate structure, the company hasn’t lost the sense of its roots as a family business, he insists: “I always smile when people talk about GK as a big company because I never feel like I’m working for a big company and I’m passionate about trying to maintain this small-company entrepreneurial family ethos that I felt when I joined.”
That ethos and emphasis on people is something Anand is keen to focus on, not to mention a strong grounding be-tween the guys at the top. “It’s something we talk about a lot, how many levels there are between top management and the people running a pub — how connected we are to the real world.”
He’s keen to run a very egalitarian operation, one where opportunity is open to all.
“We now have 42,000 colleagues. You can take the view that it’s your single biggest item of variable cost, or one of your biggest sources of value. I and my team very much take the latter view.”
He says that it’s vital for companies in the hospitality sector to not only recruit the most talented people, retain them and develop them, but also to instil a belief that they can rise from the “shop floor all the way to my job”.
It’s not something, he says candidly, that really exists in the sector at the moment. “It is something that great British retailers have been good at doing, and that’s one of the things I would be seeking to emulate.”
Passion plays a big part in that staff motivation, but while passion helps fuel the industry, he stresses the need to remain objective.
“I see it as a strength that it engenders so much loyalty, passion and commitment, but one of the challenges is recognising how that can affect your judgment. I’ve tried to find ways to get close, but stand back.”
He says the suggestion that you need to be hard-nosed in a PLC is overplayed: “People running their own businesses in this industry have to be pretty hard-nosed as well. They need to have more of a velvet exterior, but they have to be pretty steely to survive, particularly if you think about the challenges everyone has faced in the past 10 years.”
And it’s those challenges that have shaped the industry to where it is today he says, pointing to the recent recession, which — while it hit the pub sector earliest and, perhaps, hardest — has been the creator of some positives.
He says the changes that have been wrought since that recession have created a whole new world of consumer behaviour, with technology aligning to create a completely new beast — the savvy shopper, which has turned them into, almost, professional buyers.
“A marketing man’s job is bloody hard now,” he says. “The level of promiscuity, the loyalty levels are at lowest of all time, it’s quite scary.
“However, the great news is, if you’re ready to compete on the right platform and in the right way, you can take anyone’s business — the customer will give you a chance and try you. If it’s good, they’ll come again and tell others. It’s very exciting time to be in our industry.”
These are exciting times for Greene King, as it seeks to bed-in its latest acquisition, yet Anand stresses the company is taking a cautious approach. “I’ve always sought to bring a business together by combining and having a plan, but constantly adapting, refining and checking it with the people who know the business best, which are the people who run it and built it, and made it the success that it is.”
Since this interview, Greene King has subsequently announced plans to halve the number of brands, from 20 to 10, within the combined businesses. It has identified five growth brands between the Greene King and Spirit brands: Hungry Horse, Flaming Grill, Farmhouse Inns, Chef & Brewer and Metropolitan.
He says they’ve been deliberately dispassionate when it comes to looking at the brands: “One always thinks one’s children are better, so to make sure we don’t fall into that trap, we’ve used outsiders to help us and done a lot of research, analysis and diagnostic work with customers and teams.”
He says the driving force behind the Spirit acquisition wasn’t just about size and scale: “What we’re hoping to do is to get better by combining the best of both businesses, the brands, the pubs, the people and the ways of working.”
It’s not just about saving costs either, he stresses: “Cost synergies are very important. We understand our obligations to the shareholders, but we won’t be suffocated by that and miss the opportunity to do some things that will build a much more exciting future for the combined business.”
Those synergies, and Greene King’s healthy balance sheet will also be brought to bear on the Spirit estate, says Anand. “We’ll be able to invest that capital expenditure into those pubs to bring the true potential of those assets up where we think they should be.”
And despite announcing plans to reduce its tenanted and leased operations, Anand still believes in a future for that model. “It’s definitely going to survive, it’s the oldest model and most resilient part of the market. The issue around that model is that two people are trying to make a return out of one pub.
“In buoyant conditions, there was enough for everyone, but even post recession, there’s a strong future for certain pubs run by really talented and great licensees. But you need both to be in play, a great licensee in a pub that isn’t long-term sustainable won’t be viable, and a great pub that isn’t being run as well as it could be will have more security but, put it with a great licensee and everyone does well.”
So it’s interesting times for Greene King, and the once reticent company now finds itself centre stage and the focus on industry attention. But like any good business, it’s adapting and evolving and, if Anand maintains the focus on people, the business looks set to go from strength to strength.
