PUBS and brewing group Greene King’s glass is well over half full following its transformational acquisition of rival Spirit earlier this year.
On the back of that purchase, creating a beer‑dispensing behemoth with more than 3,000 outlets and a panoply of food-driven offerings, the group announced a near-50 per cent leap in first‑half profits last week to £121 million.
But several aspects of its impressive performance under chief executive Rooney Anand exemplify general changes in the wider pubs sector. The industry has been through a torrid time, with an estimated one in six British pubs closing between 2004 and 2014. The last recession, the smoking ban, rising energy costs, the VAT-disparity with supermarkets, and the minimum wage and now national living wage have all taken their toll.
Greene King is not the only big player to respond with a sharper focus on managed food-driven pubs, where companies have greater control of the offering and service than in tenanted and leased outlets.
Crucially, profit margins are superior in foodie pubs, which in Greene King’s case include brands such as Chef & Brewer, Fayre & Square, Flaming Grill, John Barras, Taylor Walker, Loch Fyne Seafood and Farmhouse Inns.
About two in three of the group’s pub estate is now managed – a so-called “retail arm” of the business – while its overall profit margin stands a little shy of 20 per cent. Clearly, pubs are not just a volume business any more. Consumers, now with a rise in real wages, will shell out for a more upmarket offering, especially when the meal still costs less than at a fully-fledged restaurant.
Other pub operators getting their food act together include Tim Martin’s JD Wetherspoon and Mitchells & Butlers – the latter’s brands including Harvester, All Bar One and Toby Carvery. Half of Wetherspoons’ sales and three-quarters of those at M&B are now food.
But they are hardly the only ones. Meanwhile, in recent years Wetherspoons has also emphasised a breakfast offering that squarely targets the likes of McDonald’s and the army of branded coffee shops in the early morning pre-loading stakes. Not that the new food-centric pubs are having it all their own way. Phil Urban, boss of M&B, said that more than half of its Harvester and Toby Carvery pub restaurants had been impacted by independent restaurants opening in their catchment areas in the past year.
Other generic trends include digitalisation and selectivity of investment. Greene King revealed it has seen an 18 per cent jump in online table reservations while it has flagged it is to halve its 20 brands and formats over the next few years.
In this, pubs are mirroring their upmarket cousins in the spirits industry, which increasingly pump money behind their “core” brands to maximise returns. The pubs industry has paid its dues in recent years, but it now seems to be operating on a fuller stomach.