The Pub
Market
Report 2013
Compiled by
6
Top trends
The winners and the losers Here we analyse the trade’s performance over the past year as part of an in-depth survey looking at profits, cost pressures and industry trends
Taking the survey results as a whole, the pub trade has moved slightly ahead in the past year with 44% of respondents declaring turnover is up, against 32% reporting it down. But a more realistic picture might perhaps see things in terms of winners and losers – the 12% for whom takings are substantially up and the similar number who say they’re substantially down. And like bikes and sharks, businesses have to keep moving forward. Especially when margins are squeezed. To keep customers coming back, many
pubs have had to hold prices down, at their own cost, and this is reflected in the stats. While profitability is up for 36%, 40% have taken a hit. As for the reasons why a pub might struggle, most are clear: it’s the economy, stupid. But it looks like cheap booze from the supermarket is another major factor, while the Government’s beer-duty escalator is, surprisingly, only third on the list. While only 11% blame the tie, that doesn’t affect around half of survey respondents at all, so it’s likely that lessees and tenants really are feeling the
What category of licensee are you? Leaseholder Managed
35.5%
Tenant
Freeholder
36.7%
8.2%
19.1%
A franchise holder
0.6%
How would you describe your pub’s turnover this year? Up a bit
32.2% Flat
24.2%
Down a bit
19.5% Up substantially
11.8% How would you describe profitability this year? Up a bit
29.5% Flat
24.1%
Down a bit
23.5%
Down substantially
16.7% Up substantially
6.3%
Down substantially
12.4%
The Pub
7
Market
Report 2013
followed by an investment in the pub. It’s a good sign for the future that profits are being ploughed back into the business. Beer festivals have played their part, reflecting the growing interest in cask ales, but – despite the hype – last summer’s Olympic Games made a difference for only 8.5% of pubs. When it comes to marketing, pubs finally seem to be embracing social media. Facebook is now a favoured channel for 64%, slightly ahead of
higher prices they have to pay. Across the whole survey, the biggest increase in costs last year, ahead of rising drink prices, came from utility bills. It suggests that there’s scope for smarter purchasing. It’s fair bet, though, that most licensees will agree it’s the combination of factors that drags them down. On the bright side, what’s working? For licensees who have managed to increase their trade, food has been key, closely
If your turnover has declined in the past 12 months, which ONE factor from the list below would you say has had the biggest impact? Beer duty hikes
If your trade has increased in the past 12 months, which ONE factor has had the biggest impact Improved food offer Pub 39.2% investment
Supermarket pricing
12.4%
25.9%
Competition from other pubs
3.5% Better home entertainment
the pub’s own website. And Twitter is catching up. Use of the local press still scores well, as do guides, online and offline, such as TripAdvisor and the Good Beer Guide, while one in five pubs makes good use of direct mail and flyers. It’s nice to see, though, that oldfashioned word-of-mouth still tops the list – and it’s how you use the channels in combination that marks out the best marketing strategies.
33.8%
Beer/cider festival
Olympics & sports
12.3%
8.5%
2.5%
Economic climate
The beer tie
44.3%
11.4%
6.2%
Please choose your top THREE marketing channels
Where have you seen the biggest cost increases over the past year?
Pub website
Utilities
34.6%
The weather
56.3%
Drinks prices
64.1% Twitter
27.1%
15.9%
Local press
Business rates Rent
6.5%
Wages
7.5%
13.1%
25.6%
Food costs
11.2%
TripAdvisor Qype
12.9%
1%
Good Pub Guide
13.9%
Direct mail/flyers
19.7%
Word of mouth
76.4%
8
Food and drink
There’s still life in the boozer On these pages we explore the latest industry trends in food and drink and their effect on turnover in the pub trade
It might surprise those observing the pub trade from a distance, but it’s not all about food. True, solids have become an increasingly important part of the mix for most pubs. But going gastro and making it work requires space and a hefty investment, both in equipment and staff. It’s not an option for the majority. Fewer than one in five of the pubs surveyed are, by the strict definition, food-led, where food contributes more than 50% to turnover. By a less strict definition it’s probable that a whole lot more rely on their food offer to attract people to the pub. For 30%, food accounts for between 25% and 50% of take. What’s notable, though, is that around one in five pubs continues to survive with
no food income at all. The traditional boozer is not dead yet. Another surprise is the number of pubs now serving breakfast — 15% of the survey. Much of this will be accounted for by houses with letting accommodation, but some are seizing the opportunity to compete with coffee shops and cafés in town centres too. The largest proportion, 48%, restrict food service to lunchtimes and evenings, but nearly a fifth serve right through. Unless or until the pub industry becomes food-led, it remains beer-led. More than half say beer accounts for at least half their turnover. With the UK beer market overall in long-term decline, pubs are proving robust outlets for brewers.
What percentage of turnover is accounted for by beer Do you serve food at the following times of the day?
60% or more
Lunch and evenings only
42.1%
41.8%
All day excluding breakfast
Breakfast and other periods during the day
I don’t serve food
20.9%
17%
13.1%
51%-60% Lunch only
3.9%
Lunch and afternoons
8.8%
3.3% 41%-50%
9.7%
The Pub
9
Market
Report 2013
What percentage of turnover is accounted for by food? 0% Over the past couple of decades, Britain has undoubtedly become more of a wine-drinking nation, though in the on-trade sales are in decline. Spirits have increased their share, as have ciders. And while the soft-drinks offer these days has to be right, for around three-quarters of licensees they contribute 10% or less to turnover. Against the decline in beer, cask ale, a product unique to pubs, has been revitalised thanks to improvements in quality and a growing interest in different styles, fuelled by an explosion in microbreweries. And with so-called ‘craft keg’ gaining a following on the fringes, the future for beer in pubs looks very encouraging.
20.4%
26%-40% 11%-25%
16.9%
18.2%
1%-10%
13.4%
41%-50%
11.8%
51%-60%
11.2% 61% or more
8%
What percentage of turnover is accounted for by soft drinks? 6%-10%
45.5% 0%
1.3% 1%-10%
3.8% 0-5%
27.9%
11%-15%
17.2% 11%-25%
12.3% 16%-20%
6.6%
21% or more
2.8% 26%-40%
22%
10 Staff and tenants
It’s a people business The PMA team examines staffing levels in the industry and focuses on tenants and their business relationships
small team. Roughly six in 10 pubs have 10 or fewer staff, a third have five or under. Only 11% employ more than 20 people, reaching the kind of staffing levels you need for a large managed house. Wages are often the biggest cost in a hospitality business, and it’s good to see that two-thirds of licensees value quality barstaff enough to pay them at rates above the minimum wage (£6.19 an hour). More than one in 10 pay in excess of £7 an hour, but it seems as if £7.50 is the ceiling. Very few pay more than that. Nearly two-thirds of publicans who responded to the survey are lessees or tenants, meaning the relationship with their landlord, be it pubco or brewer, is vital. Nearly half of those described that relationship as ‘good’ or ‘very good’, but for more than a quarter it
It’s a people business, as they often say about the pub trade. But it’s not just those found on the drinking side of the bar, it’s the ones serving them that are so important. Few licensees can get away with doing all the work themselves and employment issues have become a major part of being a publican. Still, the survey shows most rely on a
How many people do you employ?
was ‘poor’ or ‘very poor’. This is one of those questions on which it’s hard to generalise, but there is clearly a substantial minority with a problem. Another measure is how frequently lessees and tenants meet their business development manager. For a third it’s at least monthly, but for nearly the same number, 28%, there is a gap of at least six months between visits. Of course, this might suit some licensees who just want to be left to get on with it. Very few look to a union for support, but more will join a professional association, and 44% are members of the BII (British Institute of Innkeeping). Social responsibility is seen as something worth banding together for, and 64% of those surveyed have joined their local Pubwatch scheme.
What do you pay barstaff per hour on average? Adult minimum wage (£6.19) 33.8%
0
2.5% 1-5
£6.20-£6.50
33.1%
30% £6.51-£7
6-10
25.6%
25.6% £7.01-£7.50
11-15
6.3%
15.8% 16-20
11.7% 21-25
4.1% 26-30
2.8% 31-35
0.3% 36-40
0.6% Over 40
3.5%
£7.51-£8
2.5%
£8.01-£8.50
0.9%
£8.51-£9
0.6%
£9.01-£9.50
0%
£9.51-£10
0%
over £10
0.3%
The Pub
Sport and accommodation
Market
Report 2013
Is Sky the limit for licensees? We take a look at the latest developments in accommodation and sport across the pub trade
develop letting accommodation. Not only have rooms been added on upstairs floors and in outbuildings, but standards have risen as pubs try to compete with hotels, while continuing to offer a more personal, informal service to guests. We have even seen the emergence of the boutique inn, targeting the top end of the market. For most pubs, though, the survey suggests accommodation is a modest addition to the business. Of the 22% that have rooms, 58% have five or fewer, which probably means they can manage without hiring extra staff. Another 23% have between six and 10 rooms. Only 6.5% boast more than 20 rooms, putting them firmly in the category of the pub-hotel.
Sky subscription remains a dilemma for many. According to the survey, 22.5% of pubs have Sky and 30% of them pay between £500 and £1,000 a month for the privilege, with another 30% forking out upwards of £1,000. Perhaps it’s not surprising that a substantial number – 13% of this survey – turn to foreign satellite systems and take the risk of running the gauntlet through what remains a grey area of the law. For nine in 10 of these licensees, the fee comes in at under £500 a month. A different sort of pub might take another route to improve its income. In recent years the old concept of the inn has been revived as operators seek to
Last year’s summer of sport provided a welcome boost for many pub businesses. Community locals and high-street pubs alike were able to enhance the excitement with a sociable atmosphere and a big screen or two, not to mention food and drink. Yet the question of whether the audience it attracts justifies investing in a
Do you offer accommodation?
Do you have a Sky subscription?
Yes
22.3% No
No
77.5% Yes
77.7%
22.5%
If you offer rooms, how many do you have?
Do you use a foreign satellite system to screen Premier League football?
1-5
58.4% Yes
13% 6-10
No
87%
23.4% More than 20
11-15
10.4%
16-20
1.3%
6.5%
11
12 The future
Plotting the way ahead The PMA gauges the mood among licensees and examines the concerns they have and what plans they are making for 2013
Business confidence among publicans might best be described as ‘cautiously optimistic’. Some 47% of the survey expect trade to be up in 2013, though only ‘a bit’ for most. And 33% anticipate trade will be flat. It’s encouraging, though, that only 19% predict a downturn considering that the overall answer to the question ‘what concerns you for the future’ appears to be ‘just about everything’.
How do you predict your turnover will change in the next 12 months? Up a bit
41.6% Flat
33.4%
Down a bit
12.5%
Up substantially
Down substantially
6.9%
5.6%
Do you intend to invest in your pub in the coming year?
Despite the uncertainties, many are confident enough to consider investing in their pub. Nearly one in six intend to plough money back into the business, most of them on a budget of between £1,000 and £10,000. Modest, perhaps, but enough to give a place a sparkle that can make a difference. It’s not just a lick of paint and some new upholstery that pubs will be looking at either. According to the survey, many will be upgrading their drinks offer. Much of the focus will be on introducing more locally-sourced drinks, be it cask ale, cider or juices, and on niche products that can help their pub stand out. In fact, just the kind of offering that can turn on the modern consumer. Four in 10 respondents will also be revamping and extending their wine list — a reflection, of course, of the rising standards in pub food, but also that it’s a category where there’s scope for improvement and imagination. The same goes for soft drinks, where pubs are often criticised for not stocking an interesting range. Nearly 28% will be exploring the options. Others will be tapping into the trend towards world beers and premium spirits while cocktail lists are set for a shake-up. Festivals and other events, such as tastings and ‘meet the brewer’ nights, have been important over the past few
Roughly how much will you invest? £1,000£5,000
34.2% £5,000 – £10,000
28.1%
Maybe
25.8% Yes
No
14.8%
59.4% Under £1,000
6.8%
£10,000 – £15,000 – £20,000 – £50,000 £50,000 – £15,000 £20,000 9.1% £100,000 8% 8%
5.7%
The Pub
13
Market
Report 2013
years in stimulating customers to drink more cask beer, and 50% of the survey are planning an activity in the year ahead. Thanks to such positive approaches to building business, most licensees surveyed see their future as long term, with more than six in 10 saying they’ll stay in the trade for at least another five years. A third are even planning to take on another pub, and another third won’t rule it out. So there must still be something rewarding about running a pub.
From the list below, what ONE area have you spent most of the investment on in the past year? General fabric
51.1% Toilets
11%
What changes do you anticipate making in the next 12 months to your drinking offering? (respondents chose up to four changes they would like to make) Adding a range of packaged beers from around the world 22.4% Offering an increased premium spirit selection 22.7% Organising festivals and events around cask beer 50% Creating a greater focus on cocktails 18.2% Encompassing more locally-produced drinks such as ciders, cask, juices etc 37.1% Adding organic and fair trade products 7.3% Differentiating with a speciality and niche range (going away from high street brands) 31.8% Offering more variation on wine lists 39.2% Giving people a better choice of soft drinks 27.6%
Kitchen
18.1% Conservatory
How much of the following are a concern to you for the future?
1.4%
(one being of very little concern to five being of major concern)
Interior restructuring
Economic climate 4
18.4%
Would you like to take on another pub?
Changes to the beer tie 2.5 Beer-duty hikes 4.3
Maybe
Yes
32.4%
33.3% No
34.3%
Supermarket prices 3.8 Increases to business running costs 4.3 Competition from other pubs 2.7 Drop in trade
4
Red tape
3.6