Competition from supermarkets and the rise of eating out as a pastime have changed the pub trade dramatically. How are three traditional North West brewers responding to the challenge? Neil Tague paid a visit to the bar to find out.
Are these good times for pubs and brewing, or not? British brewing in itself is in rude health, with over 1,300 breweries now operational across the UK, according to the Campaign for Real Ale. The rise of the craft microbrewers has been the big story, with different styles and better presentation of ale finding favour with punters, particularly in metropolitan areas.
Dining out in the UK also continues to rise. An OpenTable survey in August 2015 showed that the average Briton eats out 1.5 times a week. Demographic shifts are playing a part – 18-24 year olds eat out twice as much as the 55-plus group that out-earns them by 30%.
But times change and the low-cost booze offered by supermarkets is weighty competition. CAMRA said in July 2015 that 29 pubs are closing every week. There’s not much wriggle room on price – between 2008 and 2013, beer duty increased by 42%, and although measures such as George Osborne’s scrapping of the beer duty escalator have helped, the British Beer & Pub Association still reckons the British drinker overpays. In 2013, Britons paid almost 40% of EU beer duty (it consumes 12% of EU beer). The National Living Wage will make it harder still on the industry.
What does all this mean for the brewers? Three traditional North West brewers, each with a significant pub estate and historical reputation, show how times have changed. They’ve smartened up: their pubs, their branding and their beer range.
Brewers with large estates now have to make every square foot pay its way. Start-ups might be able to thrive by turning a Chorlton shop unit into a micropub, but breweries saddled with cavernous multi-room pubs face a battle. As William Lees-Jones, managing director of JW Lees, says:
“Big boozers have struggled – the smoking ban and supermarket pricing made it tough. It’s easy to say ‘it’s all about food now’ but that brings its own pressure – 60 restaurants have opened in Manchester in 12 months. In the city centre, you’ve got a lot to think about – ‘what’s [Spinningfields developer] Mike Ingall going to do next?’ is always a question worth asking.”
Demographic shifts in pub-going have influenced the Lees strategy. Lees-Jones says: “The craft movement has given the drinker more choice, but 75% of what’s drunk in the UK is still lager. Because it’s so much cheaper to buy from supermarkets, Britons are drinking less beer in pubs, and paying more for it. Drinking in pubs is an increasingly middle class thing.”
Several years ago, Lees-Jones, with refreshing honesty, said that the future lay not in the brewer’s traditional heartland of town centre pubs in towns such as Oldham, Rochdale and Heywood, but in places with wealthier customers. Lees closed 49 pubs in the past five years.
The new direction is clear. Pubs such as the Plough & Flail in Mobberley and the Rope & Anchor in Dunham Massey are hugely food-led, and very successful, while opportunities to pick up community pubs, like the Farmers Arms on Chapel Lane Wilmslow, a former Boddies house, have been smartly taken.
“We follow the money – places like Rochdale are tough places to be. Anybody involved in leisure and hospitality needs to be inspired by locations – look at what Nick Johnson’s done with Altrincham [reviving the town’s market hall as a trendy food and drink hotspot]. It’s a genuinely different place now, and people will want to be a part of it.” Lees has several interests close by.
In June 2015, the brewer reported a record year, with turnover of £64m in the year to 31 March 2015, paying a profit share of £440,942 to 439 qualifying team members (£1,004 per head). Turnover was only up 2%, but profit by 23%, so something’s working. Lees has 35 managed houses, and a further 115 tenanted. The stated aim on the release of these figures was to hit £100m sales by 2020, principally by acquiring and developing new pubs. So what might the plan involve?
Lees-Jones says they’ll “only buy stuff if it’s right” and the firm continues to tidy up the estate. Lees will spend “around £750,000” on the London Bridge in Stockton Heath. It’s also looking at other city centres to transport the Duttons model – with coffees, breakfast and express lunch menus to the fore – beyond Manchester and Chester. It is adding 24 bedrooms to the Boarhouse in the Chester, a market it views as under-served by hotels.
Hydes has had its problems. In 2012 it underwent a thorough restructure, which included the closure of the historic Queens brewery in Moss Side and a move to smaller, modern premises in Salford Quays. Having taken those tough decisions – and having made a £1.3m loss in 2010 after the value of its then 74-strong estate was written down – the business is now forging ahead.
In the year to 29 March 2015, pre-tax profit climbed from £1.6m to £1.7m, with turnover increasing 20.4% to £22.3m. Over the course of that year, Hydes spent £6.2m on three strategic acquisitions of freehold sites: most tellingly a three-story unit in Manchester’s Northern Quarter where it created the Abel Heywood, a quality pub, with decent food and 15 bedrooms, in the heart of the city’s hottest district. In September, Hydes acquired Woodward & Falconer, a four-strong chain of high turnover food-led pubs (three around Chester, one in Parkgate).
Investment in pubs is ongoing, with Gatley’s Horse & Farrier reopening to the public on the last Friday of January after a £100,000-plus refurbishment. Hydes now has 56 operational pubs, evenly split between tenanted and managed houses. Over the next year, it plans four further six-figure investments and six at a lower cost to keep improving the estate.
The beers are also changing. Managing director Chris Hopkins says that the fragmentation of the cask market, coupled with the move to Salford, has allowed Hydes more scope to woo beer fans without having to over-do selling guest (ie other brewers’) ales:
“We’re now able to brew bespoke beers in relatively small quantities, so we can offer over 50 different beers a year – a tremendous choice even though the vast majority of beers on our bars are brewed in-house.” Alongside the core range are 24 “Beer Studio” beers, offering distinctive styles. 12 “Provenance” beers using hops from around the world and 12 Hydes Heritage (more traditional, with classic pub names).
As to the future, Hopkins says: “We are trying to broaden the base of the business to include more food and accommodation and also more wedding and function trade. We’re still very committed to wet-led sites but we do feel we now have a better balanced business than a few years back with food representing 33% of turnover and accommodation a further 5%.”
When it comes to pub estates, Stockport brewer Robinson’s is one of the last of the old school, with an empire stretching far and wide, particularly thick on the ground across Cheshire, North Wales and the High Peak.
It is scoring well with the younger crowd – the Castle on Manchester’s Oldham Street is a constantly-packed Northern Quarter favourite, the Bakers Vaults has given Stockport’s pub trail a funky edge. Collaboration beers with bands Elbow and Iron Maiden have done well, adding to a reputation built on award-winning ales including the superstrength Old Tom, 8.5% ABV.
Despite increasing sales in Robinsons’ latest reported figures, operating profit dipped to £1m, from £1.3m. But you have to consider that Robinsons has over 300 pubs – even this is reduced from the 400-plus pubs it was operating in 2009 according to industry bible The Morning Advertiser.
Twin managing directors Oliver and William Robinson, the sixth generation of the family to head the business, have a vision to convert non-ale drinkers, matching beer with food, well-refurbished pubs, well-branded beers. It has never wavered – bravely committing even amid the general gloom of 2009 to spending more than £4m on a new brewhouse rather than £1.5m on improvements. Implementing the vision across such a large estate takes time, though.
In 2014 Robinson’s spent a record £8.6m on ‘repairs and capital’ on its pubs, which was up £3.6m on the 2013 total, and undertook a company-wide full rebrand.
Peter Robinson’s chairman’s report in the latest filed accounts states that “we have started to invest more in managed houses, this will allow us to broaden the income streams… to include the growing areas of food and accommodation.”
He added that in 2014, the group had completed 25 “smaller” refurbishment projects at pubs, alongside “transformations” such as the award-winning Foundry Arms in Llangefni, all designed and project managed in-house.
Along with the brewhouse, the new visitor centre has won a Visit England award. Oliver Robinson said in July 2015 that the long-term plan meant the group would accelerate its investment, pouring £23m into 179 schemes. Basically – where they refurb pubs, they start making more money.
Robinson’s chairman’s statement said that “we have evolved our business… investing to become a more sales-focused company. We have developed our five-year strategic plan to deliver broader investment in our pub estate.”
Traditionally conservative, family businesses have adapted to a profoundly different marketplace by getting tough with their estates and entrepreneurial in planning new products. And it’s working.
Cheers to that.