Consolidation becoming a dirty word

It is just about two years ago that Tim Clarke announced the planned demerger of the SixContinents’ pubs and hotels divisions. With it came the assertion that the soon to be independent pubs and restaurants half of the business, which he was to head, would be at the forefront of the then expected consolidation of the licensed retail sector. So, what happened? OK, Enterprise and Punch have carved up much of the leased and tenanted market between them, but in the managed pub sector the move to consolidate has been fitful at best. Spirit’s mega takeover of S&N Retail, a year ago, was supposed to be catalyst for a wave of deals. True, Greene King and Wolves & Dudley have continued to grow, but the likes of Wetherspoons and Yates have remained intact and Regent and SFI, despite knocked-down valuations, have stayed steadfastly on the shelf. Meanwhile, two of the destined consolidators, Laurel and Noble House, have begun to disintegrate. During this time, Mitchells & Butlers, Tim Clarke’s company, has continued to sit on its hands, rejecting all big purchases that have passed its way. Anticipation of coming big deals seems to have got the better of everyone. The only sure result of all the hype about consolidation seems to have been a side-lining of any meaningful innovation in the pub sector. The obsession with financial manoeuvring appears to have diverted resource and effort from retail advance. We now have the situation on the high street where there is an over-supply of me-too operations and price is just about the only retail weapon. Hardly inspiring stuff. The latest chastening sight for pub players should be the arrival of restaurant chains such as Wagamama, Carluccios and La Tasca taking over struggling bar sites and overnight trebling or quadrupling sales. So it is all-the-more worrying to hear the "consolidation" word now being muttered in restaurant group circles. Talk now is of bringing more restaurant names together. The economies of creating bigger companies with more brands under one umbrella is seductive, and there are going to be plenty of restaurant brands available as private equity players want exits from their investments of four or five years ago. Tragus, the owners of Bella Italia and Café Rouge, is now on the market and with the existing management team ready to depart. It would seem tailor-made for a trade sale or consolidation deal with another player. But will that produce the best outcome for the brands and their further development? Ask and PizzaExpress have already come together with Nando’s owners, but so far to what result? MWB this week paid £66m for Hotel du Vin to go alongside its Malmaison hotel chain, but will it be able to replace the creative input of founders Robin Hutson and Gerard Basset, particularly in its restaurant operation? Before writing down "industry consolidator" as a corporate objective, a few operators might want to ponder the effect that might have on their innovation and day-to-day business. The shadow of consolidation has done little for pubs. M&B, for one, might now be pleased that it has so far failed to live up to that label.