The pub sector is emerging from a period of significant transition with difficult decisions taken by some of the biggest players in the sector on the fundamental nature of their businesses. The work on the training ground has now been completed and it is time for the sector to deliver results. In June MCA introduces a brand new event – THE Pub Conference – in which these themes will be discussed by the Pubco Galacticos – Greene King’s Rooney Anand; Enterprise Inns’ Simon Townsend; Punch’s Duncan Garrood and Marston’s Ralph Findlay. Here MCA examines the opportunities and challenges facing each, and what it means for the eating and drinking out sector.
We also look back at two key updates from last week – JD Wetherspoon and The Restaurant Group and discuss who is showing more momentum for the future.
The past 12 months has been a transformative time for the pub sector with the biggest players in the game reinventing their mojo and seizing every opportunity to exploit new business opportunities.
For years the narrative of the eating and drinking out sector has been of growth in casual dining and coffee shops while pubs continue to close. Recent data appears to be showing some stabilisation in pub closures while operators are increasingly closing the gap on the third space of all-day dining. As the casual dining market continues to eat its own lunch in terms of fierce competition for key sites is now the time for pubs to wrestle the momentum back from its rivals?
On 15 June, at London’s Banking Hall the leading lights of the sector – the Pubco Galacticos - will examine these themes and many others.
Our keynote speaker is Rooney Anand will talk about the Greene King journey and how, with the acquisition of Spirit Pub Company, it has created the country’s biggest managed pub operator and third largest pubco.
Anand has been candid about the key task for Greene King going forward – a relentless focus on sharpening its core brands while consolidating those that do not have a future. Anand has already said that he sees the number of brands across the combined estate being halved over the next couple of years. Crucially he does not exclude pre-merger GK brands from the cull and is open to the need to reinvigorate core brands such as Hungry Horse.
Simon Townsend at Enterprise Inns has so far remained cautious on his attitude towards brands in the Enterprise estate. Asked last year how quickly the company’s fledgling managed estate would begin to introduce brands to stimulate growth he said: ““There will be concepts and those will be developed with characteristics that are common so you could say trading styles rather than brands. But over time as it gets scale we are bound to look to cross market activity between pubs. If there are sufficient numbers of pubs in locations which can benefit from marketing activity that would be even more impactful if they had some form of common features then that would be something we would look to do.”
The task for Townsend is to manage these rapid growth ambitions while at all times guiding the continued evolution of the company’s tenanted and leased estate in the face of the introduction of the pubs code and its key market rent only option. The company will undoubtedly gain great insight into the art of running a pub day to day and from its partnerships with managed experts such as Rupert Clevely. What effect this will have on its relationship with tenants and lessees and the offers across their pubs remains to be seen.
Partnerships are also key for Punch’s Duncan Garrood. The tie-up with Harry Ramsden’s announced last year and officially launched this month with Harry Ramsden’s at the Wingerworth, in Chesterfield, was an unexpected but powerful response to the audacious statement of intent made by Enterprise earlier in 2015. Punch was already one step ahead of its pubco stablemate in that its Might Local and Champs brands were already well established, with its licensed café concept Brewed & Baked already primed for rollout. Garrood’s experience in franchising will no doubt be key for the company going forward as it too tries to diversify its offer.
To say 2015 was less transformative for Ralph Findlay than the other Pubco Galacticos is no insult. Martson’s was transforming its own offer when MRO was no more than a glint in Greg Mulholland’s eye and confidently predicts it will be suitably unexposed to the leased and tenanted market when the pubs code is introduced that it will not be affected. However, the journey is not over for Marston’s and Findlay is clearly still hungry to wrestle back market share from the casual dining brands and coffee shops whose growth has dominated the market over the past few years. In this regard its fledgling Generous George and Ebb & Flow models could be key for the future.
The inaugural Pub Conference will not only feature these four giants of the pub sector on the same stage for the first time. We will also hear from Amber Taverns co-founder James Baer on the operator agreement model that has become an increasing important tool for pubcos over the last few years. Toby Smith of Novuis Leisure will discuss the evolving nature of the late-night sector. And from a Galactico of the future – Chris Hill of New World Trading Company will discuss secrets behind his award-winning and rapidly expanding company.
Other speakers will be announced in coming weeks. For more information, including early bird ticket rates – contact Sophie Barber on sophie.barber@mca-insight.com or 01293 846578.
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Last week saw much anticipated updates from both The Restaurant Group (TRG) and JD Wetherspoon (JDW). Both received mixed reactions but who is showing more momentum?
JDW has often been lambasted for poor performance when it comes to their margin, however its recent results, showing 2.9% like-for-like sales growth, shows that the company has a longstanding ability to outperform the competition.
Whilst a 1 ppt difference between like-for-like sales growth could be seen as negligible, a simple comparison between JDW and TRG shows some significant differences, including the main one that JDW has always played to and performs best at – delivering value.
JDW’s sales growth demonstrates its ability as a business to appeal to consumers regardless of the competition or the wider economic conditions. Current consumer confidence is high, the company has more disposable income given the low rate of CPI and increasing wage inflation, yet it still searches for great value. We see the outcome of this not just in JDW, but also with Greggs, which continues to perform well.
TRG has an admirable estate, with some strong brands, but its positioning often requires other factors to drive sales, whether that be cinemas or shopping; JDW, on the other hand, is positioned in the heart of the high street and in communities and attracts consumers by delivering extraordinary value. When analysing menu pricing, MCA’s tracking of pricing every six months showed that JDW increased its Entry Mains price by 8.7% (but only to £4.99), whilst their Typical Mains price came down by 2.6% to £7.10, so it is not gaining sales by simply pushing up pricing, although JDW’s latest menu shows some slightly bigger price rises, notably with the Breakfast Club items.
So Margins might be under pressure, but JDW is in a strong position with consumers who appreciate the value that it delivers, and with a consumer base which is not affected by any other factors. If the economy continues to perform well it is unlikely that JDW’s consumers will switch their behaviour and start going elsewhere. The only challenge for JDW now is how to continue growing overall sales, as sites become that much harder to find – a challenge that TRG may find easier to rise to.
