Sunday 15 February 2009

A shrinking market

I have previously talked at great length about the many problems facing pubs and why they might be closing. But despite daily global bad news, we seem to be achieving some success in our own establishment, which I am very pleased about. Recent posts by Tandleman and Pub Curmudgeon strengthen my belief that we are approaching our own problems in the right way. Indeed, it is a shame that Tandleman thought I had fallen out with him, when in fact many of his suggestions for a good pub can be given a tick here. We don't get it right all the time, but we tend to know when we've failed and correct accordingly.

Curmudgeon focused a thought that I perhaps had not realised before. It is the fact that we really don't worry here about the price of drinks in the supermarket. This is because we provide a service that greatly exceeds supermarket service. A warm and comfortable place with a friendly welcome. Here is the proof, if any proof were needed. Equally, I should stop worrying about the alarming trend for economy drinking that is gaining ground in town centres as this is also far removed from the market we are aiming at.

So why do I complain so much? Well two reasons. One because we're not out of the woods yet. We still need to do more to make our pub sustainable. More importantly, I am keen to use my experiences to do what I can to communicate about common problems from within the industry. There are many experts out there telling it the way they see it. CAMRA, of course, who have a perspective from a section of customers, the breweries and pub companies, who are really only interested in financial performance, and then there is the industry press, who frankly I think tend to be slightly biased towards their big advertisers perspective. Apart from Jeff, I don't think there are many licensees who write about their experiences on a regular basis. That, really, is why I write this blog.

If we look at the wider pub industry, and this is something I think about a lot, there are many problems, as we know. The volume of beer sold generally is falling and the volume sold in pubs is falling faster. Wetherspoons has captured a grand market share, and good luck to them. Many other pubs have grown in size by adding conservatories, dining rooms, function suites and the like. But still the revenue into the industry is falling. Improving the financial turnover of one pub will reduce the market share somewhere else. 

I understand that there are about 700 Wetherspoons pubs. Many of these are actually new creations and much bigger than the average pub. Again, taking market share from an ever shrinking market. Clearly Wetherspoons provides a product that people want. That is why they grow, no other reason. If that is the style of pub that people want to patronise, then so be it.

From Wetherspoons financial report they take around £900m a year. That's over £1.2m per pub. Although I have no hard facts, I think that many marginal pubs struggle to get a tenth of that. So it could be argued that Wetherspoons have gained market share equivalent to 70,000 marginal pubs. I think, that as a result of Wetherspoons, many pubs have to close.

The industry response to Wetherspoons is generally price competition. This is causing, in my view, a drop in standards. In my experience, the UK is cheap for drinks in pubs. I have had holidays in France, Germany, Netherlands, Belgium and Switzerland. The quality of service is generally better and the prices are higher for drinks than the UK. I think we should leave Wetherspoons to their market and every other pub should look at providing something better.

I think we are in a trap if we think that we can stop pubs closing. We cannot stop outlets from eventual failure if they are not viable and trying to do so is folly. I believe that resisting the change is damaging the industry. We cannot magic revenue out of thin air, if the total value of pub trade is dropping, then it's dropping. Not only that, if we permit some pubs to close the remainder will strengthen and become better pubs. Maybe we will get more pubs who tick the boxes in Tandlemans bullet list.


Curmudgeon said...

Excellent post - the success of pubs must be mainly up to pubs doing the right thing and attracting customers.

But that doesn't detract from the message that the government, especially in a recession, should leave pubs alone, and avoid imposing further tax and regulatory burdens on them.

Tandleman said...

Dave - Echo what Curmudgeon says. More later and I didn't really think you'd fallen out with me!

Unknown said...

Curmudgeon, I agree there is too much government interference in pubs. Legislation is the biggest bug bear for me. Legislation increases the number of officious inspectors the government employ, thereby increasing the tax burden. Plus, it's a pain in the butt for me.

Tandleman, good, I'm glad you did think that.