Writer's Block...

I don't know why I've not been able to summon the will to put digit to keyboard much recently, maybe it's my growing cynicism about the state of the world in general and the British pub industry in particular... but fear not it would appear the muse has returned and like the little devil that perches on Tom or Jerry's shoulder from time to time, she has started whispering in my ear again...

This from an industry newsletter, Propel Information:

"Diageo to “reframe” Guinness brand: New premium Guinness taps and glassware are being installed in 8,000 pubs in the UK as part of owner Diageo’s “massive overhaul” of the brand in response to slowing sales. John O’Keefe, global head of innovation, beer and Baileys at Diageo, told the company’s annual investor’s conference in Dublin: “Slow sales have been driven by worsening macroeconomic conditions in Western Europe, particularly in Ireland. The last six months of our last financial year, we really felt the austerity programs biting in.” The company is now targeting its three key markets in Ireland, the UK and Africa, to “reframe” the brand. O’Keefe said: “We’re massively overhauling what this brand is about, in terms of our pack through to how we show up in bar through to a new global positioning, and how we’re going to regionally bring that to life in a way that’s culturally relevant and resonant for the next generation."

I wonder how much this latest exercise in pointless rebranding is going to cost Diageo, its shareholders and ultimately its customers (wholesale, retail and drinker) ? At a conservative estimate of, say, £500 a pub (new font, fitter to replace fonts, new POS. new glassware) that's got to be some  £4 millions, add on another for marketing, advertising, social media campaigns etc ant that' s a cool £5 million.

Apart from an exercise in vanity on the part of the likes of O'Keefe and a classic example of how now to use semiotics what's the point? After all the Guinness "brand" is so well known, not the harp or the gold lettering, but the bloody beer in the glass you dolt, so why does it need to be "massively overhauled"? In the first instance I bet they end up still using the harp and the lettering and in the second, unless they're going to have a Coke Zero moment, the beer will remain it's usual bitter/sweet unctuous black and whiteness, then this would appear to be a massive waste of time and money.

O'Keefe and the other fools at Diageo need to realise Guinness' dominant brand position within the UK and other markets for stout is virtually unassailable, hence the long-standing "tradition" of charging through the nose for it. 

So, here's an idea for you Mr O'Keefe, scrap the new fonts, the new glassware and all the marketing hype and just drop the bloody price of your beer! I feel sure this would reverse your company's declining beer sales and would make it "culturally relevant and resonant for the next generation" ...it would also go down quite well with the current generation.

Funny isn't it? When the muse lands, I always need my meds? Nursey? Where are you?

Market Intelligence Report

New research into Pub Food gives some insight into price points for publicans in my latest Market Intelligence Report : Pub Food Price Points March 2013

New Market Intelligence Report

New advice about food pricing for pubs on the Market Intelligence Reports page

Sauce for the goose ...

So once the Olympic flame is extinguished, the fireworks have disappeared into the ether and TV schedules return to normal, what next for pubs? 

One area of significant growth in both the off and on-trades, bucking the trends in falling sales is Premium Bottled Ales (see the BBPA statistics for sales declines). Marston's have just published their Premium Bottled Ales Report 2012 and huge like for like, year on year growth.

 

So what lies beneath this rare success story in the age of double (or is it triple) dip recession? Well the first thing to note about the report is that it is aimed primarily at the off-trade and the growth in this sector is 11% in the UK (16.4% in Scotland and 80% for flavoured beers), which the authors say is due to Premium Bottled Ale (PBA) satisfying "consumer demand for authentic, crafted products" :

The greater consumer appeal for PBAs has been driven by a higher perceived level of product quality and value delivering an ‘affordable treat’, with appeal based on:

·        More taste and flavour than other beers (63%*)

·        Authentic crafted product, rather than manufactured commodity (37%*)

·        Produced by regional and local brewers rather than  multi-nationals (36%*)

*Source: Marston’s Drinker Survey Nov 2011

This has led to some 455,000 extra customers to the PBA off-trade market and a loss of 160,000 customers from the standard ale off-trade market. Surely if supermarket shoppers are switching in such great numbers it only behoves the pub trade to capitalise on these changing tastes and ensure a wide range of PBAs are available when supermarket shoppers go out for a drink, in this case familiarity does not breed contempt.

It recommends that in order to further grow the off-trade market that retailers should adopt some key strategies, which, if savvy on-trade operators were to adopt (or at least adapt) could deliver significant returns not only in terms of PBA sales but increased customer foot-fall.

The Marston's report reckons that there are £20millions of lost sales in the off-trade due to "out of stocks" - so a key recommendation pubs could adopt is to ensure that stocks reflect customer demands (although any competent on-trade operator knows this already). 

The report goes on to say that there are 10 "drive brands" that deliver 45% of total space yet only use 20% of shelf space. It recommends single facings - something a pub may not be able to do if the demand is for chilled beer - but attractive, back of bar displays of single facings might work. A pricing policy of "multi-packs" on a selected range increase the "weight of purchase" (i.e. these shoppers spend more overall)... something pubs can definitely do.

The report recommends that more shoppers (in the case of pubs customers) can be encouraged by concentrating on " flavoured and lighter, golden beer styles" that are attractive to a younger and female biased clientele. According to the report flavoured beer sales grew 57%  and golden beers grew by over 20% in 2011.

It goes on to talk about dual sited displays and such but seems to indicate that stocking key brands will "signpost" this for customers and the use of cross category linked promotions. In the case of pubs this could easily be food-matching opportunities. (The report lists the top 20 selling PBAs, including the average off-trade price to help you assess where your pricing might comfortably sit to make then sufficiently attractive to your pub customers,)

Something pubs have known about for a long time is how important engaging with customers by having staff well-trained in product knowledge and able to recommend products to customers (food matching and for the "experimenter" type customers) is to building sales. At the very least, if you don't run to a full printed PBA menu, make sure your team know what they are selling, the style of beer, the taste, the origin and use some chalk-board space to create some tasting notes/beer of the week etc.

Lastly Marston's is recommending to its off-trade retailers that they, in effect, ditch poorer performing categories and products to make way for an expected growth in the PBA market. The report's authors are of the opinion that legislative change (such as the mooted Minimum Pricing for alcohol) and tax policy (the continuance of the duty escalator) will see brewers reducing ABVs and concentrating on flavour. (The report cites market research that 40% of consumers would choose a weaker beer in the afternoons and weekday evenings.) So dig out those stock reports and make some intelligent choices about what isn't selling, have a "sale" to get rid of it and replace it with what consumers seem to want i.e. PBAs.

The supermarkets are often blamed for the decline of the pub trade, so why not cash in on all the hard work and expense the off-trade and brewers are committing to growing this sector by making sure you have a wide range of PBAs available?

The full report can be found here

Pots, Kettles, Carbonisation and NuMPties ...

Cover image of the Report of the Health Select Committee Report -July 19th 2012

I am grateful to the former group editor of the Publican's Morning Advertiser, Paul Charity, for reminding me of the on-going hypocrisy of the nu-MP-ties in Westminster.


In his most informative daily Propel Newsletter, he reports that:

"Midlands MP condemns booze culture in the House of Commons: MP Aidan Burley has called for an end to the “boozing, alcoholic culture” of the House of Commons. He claimed excessive drinking was encouraged by late working hours that meant MPs had to sit around waiting to take part in votes. He told The Commons: “We have a problem: the late-night, boozing, alcoholic culture of this place. That is something that is made worse by having to wait around until ten o’clock to vote.”

... and opines thus:

"It’s an irony that Health Select Committee MPs are set to condemn progress by the alcohol industry in reducing excessive drinking when there’s clearly such a problem with excessive drinking among MPs themselves. Perhaps this has blinded them to the realty – drinking is reducing year-by-year in the UK but cultural norms, including a tendency to rapid drinking in this country, take a long time to re-shape, not least among middle class types working long hours in Westminster."

Surely this can't still be the case after the Speaker, John Bercow, who chairs the House of Commons Commission, the body that runs the facilities of the Commons, promulgated this at the end of April in the wake of the Eric Joyce debacle (remember the hard-drinking, Tory-head-butting nu-MP-ty for Falkirk?) : 

Alcohol policy

The Commission takes its responsibility for the welfare of those who work on the Commons Estate very seriously. Following careful consideration of the issues around alcohol consumption it agreed the following actions to promote responsible alcohol use:

· a wider range of non-alcoholic drinks and lower strength beers will be provided in catering outlets

· staff serving alcohol would receive further training and support in refusing to serve customers when necessary

· at receptions and events where alcohol was served, glasses would be topped up less frequently

· further promotion of the support available to Members and House staff by the occupational health service and the Speaker's Chaplain

· consultation to take place with the Administration Committee, the House of Lords and the Sports and Social club on the opening hours of bars on the Parliamentary Estate

... and that, folks, is what passes as a "policy" ... "further training for staff" - what, like publicans have to undertake on the basic principles of licensing law (oh, forgot Parliament only makes laws for the rest of us not themselves) ... "topped up less" - bet they'd put their hands over their collective glasses if they really had to pay for it ... which brings me on to pricing, the Commission noted that significant price increases had occurred in recent years and that bar prices were now comparable to high street pubs, not that there was much evidence of this in January when prices certainly seemed to be "deeply discounted" but perhaps things have changed since then ...

This hand-wringing, cringe-worthy display of two-faced-ness by the nuMPties puts me in mind of Grandma's admonition to us when we questioned some of her more illogical promulgations : "Do as I say, not do as I do".

This, of course, from the members-only club that brought you financial melt-downs, nose-in-the-trough expenses scandals, any number of "omni-shambles", Olympic-gate, the beer-duty escalator ... who continue to refuse to get tough with the off-trade by means of existing licensing law but will no doubt introduce minimum pricing as part of their continued tax-raids on the hospitality industry ... whilst axing august bodies such as the Alcohol Education Research Council that inform and educate on responsible drinking -get real purleeeeese!

(Today's piece has been brought to you by The Hyphen Corporation - bringing you "Joined - Up - Thinking",  for the 21st Century, a sub-division of Ellipsis plc ... "Need We Say More?")

Parliament's 7 year itch

So after seven years of parliamentary scrutiny and investigation into the role of pub companies in the pub industry the Business, Innovation and Skills Committee of the House of Commons has published its latest report into the state of the British pub trade.

Unsurprisingly for anyone who has followed the progress of this committee’s work on this issue the pub companies and breweries get comprehensively slated in pretty strong language.

The 60 page report, with another 104 pages of oral and written evidence from all sides of the industry (the pub companies, brewers, pub landlord organisations, CAMRA, surveyors etc) is unequivocal in its criticism of the activities of pub companies and their refusal to self-regulate and reform.

Prevarication, obfuscation, downright false testimony, distortion and utter contempt for Parliament by the pub companies is the common theme. MPs have come in for a rough ride recently, however, this committee has doggedly pursued the truth much to the credit of its chair, members and staff. Having viewed some of the TV coverage of the committee meetings I found it as compelling as the Media committee’s interrogation of the News International mob.

The pub companies attempts to stave off regulatory control now look to finally have been in vain, some of this has been going on since 2004. The recommendations and conclusions of the committee mean that government intervention in the pub industry is now, all but, inevitable.

Let’s hope that they are able to do something about the worst excesses of some of the pub companies (rents, terms and conditions of business, gaming machine tie, disclosure and transparency, pub company area managers, Codes of Practice, the beer tie) and do it soon.

Far too many hard-working, honest and capable publicans have been forced into penury by the rapacious activities of some of these companies for the status quo to remain. The chair’s final conclusion “…we are firmly of the view that statutory regulation should only be used as a last resort. However, are hand has been forced and we see no other alternative for an industry which has for too long failed to put its own house in order”  results in swift action to bring our much loved industry back into balance where the publican and the brewer/pub company both get a fair share.

I, for one, look forward to some furious back-pedalling and strident protest from the pub companies and trust that Parliament will not be hood-winked again and push on with statutory reform with alacrity.

It’s not only the publicans who are, in some cases, the indentured servants of the pub companies, who will benefit; the consumer will be much better served by increased competition and investment that will flow from reform. For instance the GMB union has calculated that the effect of the pub companies and the beer tie has been to artificially inflate the price of beer by as much as 80p a pint – no wonder the average price of a pint has now shot up to over £3.

Next we need to tackle HMG’s tax raids on the pub industry (duty increases beyond inflation don’t help) and persuade them to support the Thrive on Five Campaign – to reduce VAT in the hospitality industry to 5%. Other countries have taken the lead by reducing VAT for the leisure sector and it has resulted in more jobs, more tax revenues and increased  investment in the industry.

If you’d like to see a reduction in the price you pay for food and drink in your pub then sign the petition here

To read or download a copy of the BISC report click this link

The landlord giveth and the landlord taketh away ...

With ever decreasing sales and greater pressure on margin, all too often publicans will be advised to offer price reductions in the form of promotions ... BOGOFs, meal deals, happy hours etc.

But who pays? Certainly not the pubcos or suppliers so there has to be some balance in the system ... this is exactly what big business does ... and they do it through as mechanism called "Dynamic Pricing".

They sometimes squeeze as much as 25% extra margin out of their goods and services ... if you'd like to know more see the article on my website by following this link: How To Run A Pub - Dynamic Pricing

Lies, damned lies and statistics ... Part 2

“Annual income twenty pounds, annual expenditure nineteen six, result happiness.

 
Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”

Charles Dickens, in his 1849 novel David Copperfield, provides us all with an apt Profit and Loss Statement, income and expenditure recorded and the result analysed.

Your pub business is like any other it will make a profit or a loss depending on two factors – income and expenditure.

I have provided many examples on this website on how to improve sales and control costs (and many others will provide similar information) but for many pub businesses knowing what targets you should aim for in cost control is less clear.

On July 4^th 2011 the Association of Licensed Multiple Retailers (ALMR) announced the publishing of its annual Benchmark Survey Report in which it details its findings on such things as sales, costs, capital expenditure etc amongst its members. The survey taken in October 2010 coincides quite nicely with a report from a well known licensed trade accountancy firm.

Between them they provide an insight into what pubs in certain sectors are achieving in terms of profitability based on the profit and loss information on a virtually identical number of sites so comparisons (whilst usually odious) should be valid.

The ALMR report suggests that the average cost of running a pub (out of the 699 pubs surveyed) is 47.1% of annual turnover in freeholds and 44.9% in tenancies and leasehold pubs (excluding rent and cost of sales). Add the 11.4% of turnover that represents rent and this means non-freehold pubs have to give over 55% of their turnover to running the pub (although this includes a figure of 7.2% for tenant’s drawings), which nets out to 47.8%.

The accountancy firm gives the following analysis of some 701 pubs (no detail is given of whether they are tied or free of tie) for three levels of trading, under £3,000 per week, £3,000 to £5,999 per week and those over £6,000 per week. Average cost of running these pubs is 46.8%, including rent at 9.22%.

Analysing their results using an average of all their averages (i.e. different levels of turnovers etc) the results would appear quite encouraging:

Detail	weekly		Annual		% of sales
Wet	£     4,219		£219,388		70.16%
Dry	£     1,319		£  68,605		21.94%
Accommodation	£        475		£  24,700		7.90%
Total	£     6,013		£312,693
Cost Wet Sales	£     1,715		£  89,162
Cost Dry Sales	£        535		£  27,812
Total Costs of Sales	£     2,249		£116,974
Gross Margin					Gross Margin %
GP Wet	£     2,504		£130,226		59.36%
GP Dry	£        784		£  40,794		59.46%
Total Margin	£     3,289		£171,019		59.38%
Gross Profit	£     3,764		£195,719		62.59%
Overheads					% of t/over
Rent	£        620		£  32,245		10.31%
Electric	£        123		£    6,420		2.05%
Gas	£         87		£    4,513		1.44%
Wages	£     1,051		£  54,667		17.48%
Other	£     1,219		£  63,404		20.28%
Total overhead	£     3,101		£161,248		51.57%
Profit/Loss	£        663		£  34,472		11.02%

Assuming that the draught/bottled beers represent 70% of wet sales and an average price per pint of £2.70 this would be a MAT (Moving Annualised Total) barrelage of approximately 197.5.

Making the same assumptions as above the cost to tenant of a barrel of beer would be £338.60 or £206.92 for an 11 gallon keg.

Does any of this sound realistic, in terms of tied tenancies and leases? Is it really possible to make over £34,000 profit from a 200 barrel pub?

The answer is yes if the divisible profit is equitably split – the landlord charging rent at 10% and selling beer to tenants at £338 a barrel. This would mean somewhere in the region of £100 per barrel discount earned by the landlord being passed on to the tenant.

Yes, that is, if you also accept the premise that the provision of accommodation is akin to “getting money in for changing some sheets”. If this income is treated as “cost free” in these accounts then it accounts for 72% of the net profit of the business. For those pubs not able to provide this service it means net profit would be reduced to £9,772.

Put in the real price of beer, as evinced by contributors to the Publican’s Morning Advertiser forum, that beer is nearer £256 for a 22 gallon, this means the averaqe of all average pubs from these samples of the trade universe are making a loss of £6,735 a year … I bet that rings true!

Whilst these “benchmarks” may be of use in setting targets or as comparitors for your business you must remember that your business is unique and the trick is to closely examine all areas of income (to maximise them) and all areas of expenditure (to minimise them) in order to make the greatest profit from your endeavour.

"There is no such thing as a good tax" - Winston Churchill

Fair enough - there will always be some who view tax, per se, as an evil, I for one realise that taxation (with representation) pays for all the social good a developed society offers (health, policing, education, care for the elderly etc) and as such is a "necessary evil". I partake of the benefits so should contribute my fair share for the costs thereof.


However, what Churchill also went on to say was “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”  Had he been around today his words would have fallen on deaf ears.


What the Coalitionistas (HMG) and their predecessors have done is to target alcohol, more specifically beer, as the cash-cow that will sustain their other policies. The great democratic drink, beer, that has been a part of this country's heritage and culture  (drunk when the water was too foul to consume and now as part of a developed social structure) and its brewers and drinkers have been continually abused by rapacious chancellors.


We now pay more than nine times the amount of duty than France and Germany for the "privilege" of supping our national tipple and contribute an estimated 40% of all duty collected within the EU - a staggering £3.1 billion.


When will this Tory led administration take heed of one of its greatest figures and realise that the common man and woman in this country who enjoy a few beers are fed up with being the ones to pay for their other priorities, such as protecting their political allies and financial backers from paying their fair share of tax ( to wit, off shore status and the ridiculous minimum pricing they propose for alcohol) or benefitting from the largesse of the tax purse with bail-outs to corrupt banking institutions?


"My rule of life prescribed as an absolutely sacred rite smoking cigars and also the drinking of alcohol before, after and if need be during all meals and in the intervals between them ..." it would appear that this was good enough for Winnie but not the proletariat ... nuff said!

BII Business Magazine

Just got my January 2011 edition ... as promised full of great stuff for the pub trade ... until you look at it in detail.


I shan't go into all the detail of the BII's work on codes of practice for pubcos, training etc.


What irks me is that for a professional body, the BII (or its copywriters/editor) gives some pretty rum advice ... or in the case of Phil Dixon, opinion. His 20 ways to improve trade are generally sound advice until you get to point 18.


Here he recommends that a drinks offer at the end of a match (25-50p off a pint) be run for 15 minutes after the final whistle, after a particular team loses ... the BBPA guidance on running responsible drinks promotions specifically indicates that one shouldn't run a promotion that is linked to unpredictable events - e.g. ‘Free drinks for five minutes after every England goal’ or are an incentive to speed drinking"


I would venture that the advice Mr Dixon is giving in his article is in direct conflict with this guidance. This is just symptomatic of the mixed message industry bodies give out and they really should get their act together.


My advice ... don't run this promotion (save your profit to reward customers in a more meaningful way, say, on some extra channel blocks for the urinals when all those footie fans take their half/full - time pees!)


And as for the article on The Martin's Arms in Colston Basset - what on earth is representative about that? 2 hunts meet for their stirrup cups, the Prince of Wales occasionally pops in for a pint and it has a Michelin Star - not exactly run of the mill is it? 


Spend more time on highlighting extraordinary pubs that real people frequent (not the "well heeled residents" featured in this Horse and Hound piece) ... the only good things about the article are the sound advice to spend some money on flowers (although who can afford £90 a week and £25 a week for a flower arranger?) and the advice on only putting prices up once (at budget time if you can afford to absorb the VAT and suppliers' price increases in the interim).


Oh, OK then .... they have been there 21 years and have undoubtedly worked their collective arses off to make the place a success and the industry needs to champion its best and brightest ... just feel this was a missed opportunity for the BII and the owners of the Martin's Arms to pass on some really useful hints, tips and advice to the less well placed.  


Rant over ... and as it's less than 15 miles from Nottingham might just have to save my pennies and pay it a visit and see if it's all it's cracked up to be ... good job I don't like Peroni (at £4.30 a pint before the VAT and budget!)

Alcohol Education and Research Council’s symposium on home drinking

It would appear that some discussion not motivated by political dogma of the issue of home drinking has been going on ... there are some great statistics from the symposium from a research report in Addiction journal, based on interviews with ‘ill drinkers’ in Edinburgh. As reported in the Morning Advertiser.

"The report’s aim is to support the case for minimum pricing by trying to demonstrate that it will have a significant effect among heavy drinkers in reducing their consumption. I’m not sure it succeeds — and neither, for that matter, are its authors — but some fascinating stuff is thrown up in the process.

The interviewees, patients at two hospitals in the city, were very heavy drinkers indeed, sinking an average of nearly 200 units a week, equivalent to 100 pints of cooking bitter or, more realistically but no less frighteningly, a bottle of vodka a day.

Quite a number exceeded 300 units. One managed 800 units. That’s what I call a drink problem. They were paying an average of 43p a unit, comfortably below the 50p a unit touted as a minimum – and that’s only the average. Cheapest unit price paid was 9p – for two-litre bottles of white cider in the supermarket.

Compared with the general Scottish population the patients were paying 29p less per unit and there was a clear inverse correlation between the amount consumed and the price paid for it, right down the line.

If it’s just the ethanol you’re after that’s rational behaviour, of course. And if the report demonstrates anything, it is that drinking at these undoubtedly dangerous levels is largely an off-trade issue.

Only a quarter of respondents bought any drink at all in the pub or club, and on-trade purchases account for a mere 7.4% of total units consumed.

“Our clinical experience,” say the researchers, “acquired unsystematically from drinkers’ self-reports, suggests that it is sometimes preferable for a dependent drinker to drink in a pub or club where there are external controls on the amount consumed and the level of intoxication and also possible mental health benefits of social interaction.”

Intuitively, this has to be correct, but you crave something more scientific to back it up and, as yet, it doesn’t seem to exist. Which is what makes the AERC symposium interesting, and I look forward to reading the briefing paper that comes out of it, to see what I missed.

As for whether minimum pricing, or any other price constraint, can reduce consumption, the report is honest enough to say that we can’t know until we try it. Charging 9p a unit can’t be right. But price is only one factor in a "multiplicity of determinants that cause people to drink like this."

How can HMG ignore such findings and refuse to do something about the reckless behaviour of supermarkets? Still an administration that keeps putting off scrapping Trident (cost estimated to be £25 billion) whilst imposing the biggest cuts in living history to other public services (if you can call Trident a public service) is hardly surprising!