The traditional pub may be dying but a dynamic breed of drinkeries is springing up, from branded food pubs to micropubs. Wholesalers must understand the DNA of these new businesses to help develop their potential, says PHIL MELLOWS
By themselves, the latest figures for pub closures covering the second half of 2015 confirm a steady decline. Each week, another 27 are being lost to UK drinkers and diners, and it’s been like that for a number of years.
Getting to grips with exactly what’s going on isn’t easy, but there remain 53,000-odd pubs out there, more than one for every 1,000 people. It’s still a massively important market for wholesalers, and one that’s worth understanding in as much complexity as you can manage.
The first thing to note about the closure figure, compiled by research company CGA Strategy, is that it’s a net figure. There are, in fact, 42 pubs lost each week, which makes it sound even worse – but when you realise that 15 new ones are opening, too, you can start thinking about the opportunities.
Some of those will be reopenings – pubs brought back to life, often by entrepreneurs who have seen how they might work with a different offer and the right investment.
Some will be new-builds, others will be developments of existing buildings in town centres, such as JD Wetherspoon’s spectacular conversions of cinemas and churches.
Food is, of course, an important theme running through this change.
The latest Market Growth Monitor, issued by Alix Partners and CGA Peach, confirms that in recent years, the increase in branded restaurants has more than made up for the decline in pubs, but notes that their growth is slowing, as is the shrinkage in drinks-led premises.
It’s true that 20 of those 27 lost pubs are defined by CGA as ‘community/wet-led/local’; you only have to take a wander around the backstreets of any town or city to see that for yourself. In contrast, the ‘branded food pub’ is increasing at the rate of two or three a month.
Food is a part of the mix at this new generation of locals but it works in synergy with drink. Operators find that increasing their food sales gives their drinks sales a boost, too.
Then there are a couple of emerging pub and bar types that are driven specifically by the growing interest in beer.
Micropubs, typically found in former shops, are based on a very simple business model in which predominantly cask ale and real cider are sold during limited opening hours. Craft beer bars offer high margin brews on keg and in bottles and cans, as well as on handpump.
These target rather different age groups (though beards are common to both) but both are very much drinks-led. If food is sold at all, it’s usually quality snacks or a stripped-down menu frequently focused on burgers.
From another angle, a recent survey by the booking service OpenTable revealed many restaurants are paying fresh attention to the bar area because today’s customers are looking for more informal dining.
Similarly, gastropubs are successful because they are charged with a buzzing pub atmosphere. They remove bar drinking at their peril.
Pubs may even have a couple of advantages over chain restaurants when it comes to attracting an evolving eating-out market. They are, almost by definition, informal, and they are arguably better able to adapt to a 21st century consumer base that is constantly seeking something novel and interesting from a night out or a lunch.
It’s an edge that might well be sharpened by changes in the ownership and management of pubs. The ‘market rent’ option gives pub tenants the chance to free themselves of the tie in return for a higher rent. This will have to be included in lease and tenancy agreements, so is helping to focus the strategic minds of larger pubcos.
Most dramatically, Enterprise, the country’s largest pub owner, is diversifying out of tied tenancies and leases into directly managed pubs and commercial property businesses. With the former, it’s seeking to replicate the innovation of independent multiples, with concepts like the already mentioned Craft Union.
A striking statistic from new research by commercial lender Ortus Secured Finance shows that over the past five years, SME pub groups have grown their total turnover by 29% – twice as fast as large chains.
We should also see a continued growth in the kind of independent operator that is already demonstrating they can take a pub that’s on its last legs and transform it into a thriving business – if, and it may be a big if, they can find the finance.
Understanding the DNA of such businesses is key if wholesalers are to build relationships with the healthiest sections of the pub industry and take a positive role in developing their potential.
The prize will be pubs that can offer customers more excitement and variety than ever before, and those that supply them will feel proud to have played their part in that.
