Investing in the next generation of the pub sector

Last month Mark Carney the Governor of the Bank of England stated, “the fog of Brexit is creating a series of tensions for business and tensions for households”. That fog doesn’t seem to be lifting just yet and there is no getting away from the impact the current uncertainty is having on our economy and on consumer confidence. However, listening to the overriding themes from the Tenanted Pub Company Summit, perversely I am struck by the fact that I feel more confident and optimistic about the prospects and health of our sector than I have for some time.

One of the common themes that I picked up during the summit is an absolute commitment to innovation, positive evolution and a greater focus on consumers and our people. At a time when the pace of change of consumer behaviour has meant that many traditional industries are struggling to adapt their strategies, customer offers or skills to their own high-profile detriment, our ability as a sector to innovate, evolve and remain relevant is more important than ever and I believe it is underpinning the sectors more recent performance.

As a friend of mine Ian Payne MBE, chairman of Stonegate, once said (and I have repeated more than once since) “Virtually all the innovation in the market comes from the leased and tenanted sector or the independents. There is virtually no innovation in the scale managed businesses despite what they would like to tell you. We all copy what successful individuals do.” I believe that is as true and relevant today as it was when Ian said it a few years ago and our sector has and continues to be the breeding ground for some of the very best pub retailers of our generation.

So, as the consumer demands have changed leased and tenanted pubs have received increased levels of investment and operators have evolved their offers to meet these demands.

As Peter Hansen highlighted recent trends and data show that pubs are now consistently outperforming restaurants with consumers being increasingly selective as to where they spend their money. There is clear and growing evidence that people are seeking out more individual, more informal, authentic experiences, often championed and delivered by operators in our sector. This, combined with the very significant increase in investment in recent years is creating vibrant, exciting pubs in local communities helping to drive what appears to be a growing propensity for people to stay local and socialise in their community.

As we all know, wet-led pubs are seeing something of a resurgence embracing the benefits derived from a beer category that is more exciting and engaging than at any time in my career and supporting the explosion of gin and the growth of premium spirits and cocktails. In short, the industry has responded well to the desire for people to drink a little less, experience a lot more and pay a bit more with many operators in our sector being early adopters and at the forefront of embracing this change.

And, as we all know, behind every great pub is a great operator who is truly tuned in to their local market, knows their customer, is nimble and able to adapt quickly. The best owner operators within our sector have these qualities, they are entrepreneurial and are not restricted by group procurement policy or centrally generated marketing activity.

That said, the challenges and complexities of running a thriving pub business that can successfully compete in its local market have significantly increased and I am sure that you, like me, are encouraged to hear how companies are continually evolving and investing in the support that they provide to assist with these challenges. Not only are companies investing more in their support, but we are investing more into our pubs. At Admiral this year we will invest more than we have ever done before and I know that investment levels are up across most companies. This level of investment, which let’s be frank, would not have been forthcoming from banks or alternative lenders, has ensured that many more community pubs are now delivering a great experience in high quality environments.

Against this backdrop I am also encouraged at the re-emergence of people from outside of our industry who are now considering operating their own pub business, once again seeing it as an attractive career option and we are also seeing a reduction in the average age of applicant. Finding new and younger (sorry if I sound ageist) people to come into our sector who may one day follow in the shoes of the likes of Ed Martin, Hamish Stoddart and Mark Robson has got to be great news. All industries need new blood, fresh ideas, greater diversity and this is something that we need to continue to promote and encourage.

However, I do have one challenge for us all. As I look around the room and see some familiar faces many of you, like me, started your career in our industry with Bass, Whitbread, Allied Breweries or Scottish Courage. We were beneficiaries of their commitment to and investment in people and leadership development. If we are to ensure that our industry continues to evolve and respond to the challenges of the future, I believe that there is an opportunity to place a higher focus on investing in our people. Investment in our pubs has increased, the support that we provide to licensees has increased but I believe that the focus on investing in our people has perhaps lagged. It is strange that an industry that is so people centric comparatively under indexes on investment in people and I strongly believe that we need to invest not only in our pub assets but also in the future leadership of our industry.

Today we have seen some progressive strategies but as Peter Drucker once said, “culture eats strategy for breakfast” and we all know that culture is derived from our people and from great leadership.

So, in closing I have become labelled as a passionate proponent of the leased and tenanted model and I am very happy to carry that badge. I am still inspired by the thousands of individuals that operate fantastic, diverse and vibrant pub businesses up and down the country helping to ensure that pubs remain at the centre of their communities and continue to be woven into the fabric of our national culture. There is no doubt that the market is challenging but I believe that the sector is in good shape, is match fit and committed to face into these challenges.