Earlier this month, Caterer and Hotelkeeper, in association with Britvic Soft Drinks, revealed this year's list of the 100 most influential people in our industry. In the third of our series analysing the top people in each sector, John Porter takes a closer look at the nine pub executives who made it on to this year's list.
Given that David Cameron had plenty on his plate after becoming prime minister, it is perhaps forgivable that it was November 2010, nearly six months into his premiership, before he made an unequivocal statement in support of the pub sector. Speaking at Prime Minister's Questions in the Commons, Cameron said: "I am a big supporter of British pubs, and I want us to be a pub-friendly Government."
Fine words, and for those looking for more concrete signs of Government backing for the trade, at about the same time the PM appointed Bob Neill as community pubs minister. Bodies including beer lobby group the Campaign for Real Ale (Camra) have argued that many pubs are too important to the communities they serve for their survival to be simply left to the mercy of the economy.
However, in reality, special protection for pubs facing closure is an approach unlikely to go down too well among the free marketeers of the Conservative Party. A sign that Camra may have been hoping for more came through its partnership in June with the Sunday Mirror newspaper, not a natural ally of the government, for a campaign to save British pubs.
Calling for "urgent action needed to protect a treasured national institution", the campaign highlights issues such as rent and beer prices paid by licensees to pub companies, the sale of cheap alcohol in supermarkets, and planning laws which allow pub demolition without planning permission.
For the pub executives in the Caterer and Hotelkeeper 100, such campaigns present a dilemma. As well as ensuring that their own house is in order in term of rents and buying agreements, they have to walk the line between talking up the prospects for their own business and acknowledging the real challenges the sector faces.
JD Wetherspoon founder Tim Martin, once again the top pub operator in the listing, has never been concerned about making his views known. As well as dismissing the Cabinet as members of the dinner party set rather than pubgoers, he has been at the forefront of calls for a reduction in the VAT rate for pubs as a lifeline for the sector.
What all the top operators seem to agree on is that food is now vital to the future of the industry. Martin recently told City news service Bloomberg that "food is vital", now accounting for 30% of the company's revenue. In a new tack, he has started to focus on the fact that while supermarket ready meals are zero-rated, very similar meals served in pubs attract 20% VAT.
Rooney Anand, chief executive of Greene King, says: "One of the most significant opportunities for pubs is the eating out market, which is currently worth over £40b in the UK. Our retail business continues to spearhead our growth and we have increased our share of this market through recent acquisitions of food-led businesses such as Cloverleaf and by expanding our existing food orientated brands like Eating Inn and Hungry Horse."
At Marston's, chief executive Ralph Findlay has overseen the "F-Plan" model which has taken food to more than 41% of managed pub sales. He says: "The pub sector has seen significant improvements in service standards, but there is still room for improvement. At Marston's, we have seen the benefits of introducing full table service, for example, but we will continue to look to the restaurant sector for a lead."
Similar strategies have driven increased food sales at Mitchells & Butlers, where City and Country Restaurants managing director Kevin Todd enters the ranking this year, and at Orchid Group under chief executive Rufus Hall. At Fuller's, where chairman Michael Turner is another new entry in the Top 100 this year, food sales are now 29% of sales in managed pubs.
The eating out market is also at the forefront of consolidation in the pub sector. The highest profile deal of the past year was the takeover of Geronimo Inns by veteran London operator Young's. The deal, which has consolidated Geronimo managing director Rupert Clevely's position in the Caterer and Hotelkeeper 100, allows Young's to overlay the upmarket, food-friendly Geronimo format on many of its high footfall sites.
Add to that Greene King's recent acquisitions and Fuller's - so far - rebuffed offer for Capital Pub Company, and there is clearly a new appetite for deals among the leading pub operators.
Findlay adds: "The contraction of the pub sector has been painful, but over time the image of pubs as attractive leisure venues is improving. The smoking ban in 2007 helped, and I think there is still further to go in communicating the attractions of pubs and the extent to which the sector has developed in recent years."
1 Tim Martin
2 Rooney Anand
3 Ralph Findlay
4 Kevin Todd
5 Rufus Hall
6 Rupert Clevely
7 Michael Turner
8 Ted Tuppen
9 Mark McQuater
THE TOP THREE ON CHALLENGES FACING THE PUB SECTOR
It's no surprise that the combined impact of high input costs and low consumer confidence are the main issues of concern for the pub trade's top executives. The state of the economy has a clear influence on customer behaviour, says Ralph Findlay, chief executive of Marston's. "Rising input costs affects the price of food and drink, and we are acutely aware that consumers are looking for value."
While rising costs affect all operators, he says that "mitigation strategies will be different and future success will depend upon how effective those strategies are". He points to "the success of our new-build pub restaurants and franchise agreements" as evidence "that we are getting it right - but we are not complacent".
At Greene King, chief executive Rooney Anand agrees that the trade is in for "another challenging year as continued high inflation and the impact of Government cutbacks limit consumer spending power". Despite this, he says: "We remain confident of the prospects for Greene King as our retail expansion strategy and strong group-wide operational performance will underpin another year of growth and significant progress."
JD Wetherspoon founder Tim Martin is, characteristically, more robust, saying: "Pubs have been fighting with one hand tied behind their back for the past 20 years because of the favourable tax advantage for supermarkets, since pubs pay VAT on food sales and supermarkets don't. In addition, the fact that VAT is a value tax, so the differential between the price paid for a pint in pubs and the price paid in a supermarket is heightened."
He believes the trade needs to campaign to reduce the rate of VAT paid by the hospitality sector and to bring duty levels down to the average European level. He suggests: "Many pub group executives haven't made their voices heard effectively. The reality is that lobbying efforts haven't been successful and as a result duty levels have continued to rise."
Martin is among those trying to rally the pub trade to support the VAT Club fronted by French lobbyist Jacques Borel to campaign for lower VAT for the UK hospitality sector. "My message for the pub trade is simple - back Jacques," he adds.
ONES TO WATCH
While Mitchells & Butlers is represented in the top 100 by stalwart Kevin Todd, City and Country Restaurants managing director, the top slot at the UK's biggest managed operator remained unfilled at the time of writing. However, most industry watchers expect Jeremy Blood, who has been acting as interim chief executive since March, to take on the role permanently.
A strong indication of the way the wind is blowing came at the end of June when it was confirmed that Blood had stepped down as chairman of LT Pub Management. Blood knows the market M&B works in as well as anyone, having worked at Scottish & Newcastle (S&N) from 1988. He moved through roles in areas such as marketing and corporate communications to become managing director of leased pub business S&N Pub Enterprises.
Having left S&N in 2009, a year after the business was acquired by Heineken, Blood was a clear front runner for the interim chief executive role at M&B when CEO Adam Fowle left.
Activist shareholder Joe Lewis, who has successfully challenged the company strategy and helped bring about changes including the sale of wet-led pub and faster roll out of food-focused brands such as Harvester and the carveries, will be watching carefully.
The absence of a senior figure from Punch Taverns in this year's top 100 is another sign of the turbulence that has run through the pub sector. In the face of City questions about its strategy, the business announced the results of a strategic review in March, which will see the leased and managed operations demerged and traded separately.
Ian Dyson, currently group chief executive officer for Punch Taverns, will take on the role of chief executive of managed business Spirit Group after the demerger, expected on 1 August subject to shareholder approval. That will put him in charge of about 800 high-profile but under-invested pubs, including the Chef & Brewer brand, as well as 500-plus tenanted pubs.
Dyson has been beefing up the senior Spirit team in advance of the merger, and faces the challenge of proving that with the right direction, the pubs can deliver a similar performance to comparable operators such as M&B, Whitbread and Orchid.
Dyson's colleague Roger Whiteside will take on the chief executive role of the leased operation, Punch Taverns. There are plans to reduce the size of the business by almost half, to a core estate of about 3,000 high-quality pubs.
With Punch having been under the regulator microscope as part of an investigation by MPs into the fairness of the leased and tenanted model, Whiteside and his team will have to demonstrate that the leased business can deliver a fair deal for both licensees and shareholders.
HOW WE COMPILE THE LIST
Nominees in each of the five categories were judged by panels of industry experts.
To begin with, candidates had to meet these qualifying criteria: the personality should be based mainly in the UK; and their power and influence should be primarily in the UK market.
Shortlisted candidates were awarded marks for each of five criteria, which were averaged out to give an overall ranking in the Caterer and Hotelkeeper 100.
First consideration was the scale and scope of the operation headed by the nominees. But size isn't everything, and candidates were next judged on the power and influence they exert in the industry and the respect they command among their peers. We asked whether they were shapers of policy, leaders in their field, or inspiring and nurturing the next generation of movers and shakers.
The judges then examined whether the candidates had a proven record of financial success and whether this was reflected in the eyes of their peers and the outside world.
The candidates' reputation for innovation was next, as the judges examined to what degree they were setting standards others wanted to copy and whether their ideas would remain in fashion.
Longevity was the final hurdle for candidates, as panellists considered whether they - and their creations - would stand the test of time.
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