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Property and Professional
ISSUE 214
CLHNews
JULY 2018
Pubs Set For “Resurgence” Following Years of Tough Trading
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HOTELS, RESTAURANTS, PUBS & CATERING
Pubs are set for a resurgence after years of closures as consumers develop a taste for craft beers and spirits, according to a report. High quality pubs are once again attracting the interest of investors as the booming industry in craft beer and gin particularly continues to attract consumers and create strong returns, according to accountancy and business advisory firm BDO’s Restaurants and Bars Report. Investor interest has been buoyed by consumers revelling in the prolonged hot weather and England continuing its World Cup run, BDO said. Tom Barnard director of Mergers & Acquisitions at BDO said that the last 12 months has seen pubs and wet-led concepts playing a more prominent role in sector Mergers & Acquisitions (M&A) following a numbers of years playing second fiddle to casual dining brands. Following a decade coping with a plethora of legislative, economic and competitive issues such as the smoking ban, cheap supermarket alternatives and the subsequent credit crunch, substantial capacity has exit-
ed the market. Pub numbers have been steadily decreasing from around 60,000 in the early noughties to around 40,000 today. With numbers forecast to remain relatively stable over the coming few years, demand looks to have met supply. Within the market, growth in managed pubs is forecast to continue however as the structural decline in tenanted/leased operations continues. Tom Added that Like-For-Like (LFL) growth has been difficult to come by over the last 6-12 months for many operators in the sector, with trading conditions across February & March in particular, impacted by the 'Beast from the East'. No one likes to blame the weather, but there is no doubt that the snow hurt many operators and the operational gearing of leased pubs/restaurants in particular can cause real pain to the bottom line when sales drop. A warm period across May was a welcome boost, with CGA Peach noting managed pubs delivered collective LFL growth of 3.5% Further reasons to be positive are that unlike the boom in capacity experienced in the casual dining mar-
ket, the wet-led pub sector has not witnessed such recent oversupply, presenting an opportunity for differentiated operators to deliver LFL growth. A number of wet-led managed operators such as Young’s, Fullers and City Pub Co are doing just that and have continued to deliver impressive strong LFL growth in what are still challenging conditions for the sector. These wet-led pubs have demonstrated a resilience compared to their casual dining and food led pub peers, benefitting from less competition, higher margin premium products and craft beer, the luxury of having a more flexible operating model and suffering less impact from food cost inflation. It follows a prediction in the Management Consultancies Association (MCA) Pub Market Report that the pub sector is set to return to positive outlet growth within the next five years and that turnover will outpace the wider eating-out market for the first time since 2008. (CONTINUED ON PAGE 3...)
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