Pubs are an intrinsic part of the London landscape. There can be few foreign visitors to the capital who don’t, at least, pop their head around the door of these iconic watering holes.
Of course, with the proliferation of so many other places to eat and drink, the pub’s place in the leisure scene has come under pressure. In the period 2001-2016, the number of pubs and bars in London fell by 25% from 4,835 to 3,615. At one point, substantially more than one pub a week was closing.
So, it’s good to see from the latest figures from the major UK brewers and pub companies that there is a clear recent trend of ‘wet-led’ offers which focus primarily on drinking have been outperforming food-led businesses.
Whilst a number of food operators, particularly in the casual dining segment, continue to make the headlines for all the wrong reasons, the major wet-led pubcos are reporting a different picture; Ei group has reported 0.6% growth in revenues from is leased and tenanted estate; JD Wetherspoon has also witnessed 5.2% like-for-like increases in sales; and Marston’s saw sales in its leased and tenanted division grow by 2.9%.
There’s a number of reasons why I think this happening. Consumers are being more cautious with their discretionary spend, and are more likely to spend £20 on a round of drinks than £40 or £50 on dinner in a restaurant.
A cheaper pound also means that tourists wishing to try ‘your English beer’ are more likely to have a second pint.
From a property perspective, whereas the relationship between landowners and the food-led operators is usually a straightforward commercial contract, with periodic upwards-only rent reviews, based on a rate per square foot, the relationship between a brewer/pubco and its tenants is much more closely linked to turnover. Part of the landlord’s income is often directly linked to the volumes of tied drinks sold at the pub, and the landlord is able to help its tenants with direct interventions including marketing support, discounted wholesale prices and, in extreme cases, rebasing of rents.
A ‘wet-led’ pub can swiftly increase or decrease staff numbers, adapt its opening times, introduce or discontinue promotional activities, or change its pricing policies. And, of course, the craft beer trend together with the increased popularity of gin and cider has brought a new focus to the recreation of drinking.
So, although it seemed at one point that the future for pubs lay in simply becoming restaurants-in-a-skin, there is clearly now still a place for the good, old fashioned – and profitable – boozer.
James Shorthouse | Head of Alternative Markets
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