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Pubs market overview

12 May 2006

The market

There were estimated by the British Beer & Pub Association (BBPA) to be some 200,000 licensed premises in the UK in 2005, a figure that includes around 51,000 off-licenses and 29,000 clubs, making a total of 120,000.

The BBPA's figure by and large tallies with Government statistics, which put the figure for England and Wales at 113,370, with 19,913 clubs.

The industry, according to the BBPA, has a turnover in excess of £28.6b, with food and drink sales in 2004 accounting for £5.2b, according to the British Hospitality Association (BHA).

The sector employs around 368,394 people, the vast majority in the 20-29 age bracket, followed by 30-49 and then 16-19.

While Britons continue to be the booziest in Western Europe, they are drinking less in pubs, clubs, hotels and restaurants, downing the equivalent of 2.2 pints of booze on each pub visit in 2005, 5ml less than in 2000, says market researcher Datamonitor.

Yet more than 80% of adults are estimated to go the pub on average three times a month.

Key players
Enterprise Inns, with some 8,727 outlets, remains the dominant player in the UK pub market, according to the BHA, closely followed by Punch Taverns on 8,157, Pitcher & Piano owner Wolverhampton & Dudley (2,627), Greene King (2,419) and Mitchells & Butler (1,760), owner of the O'Neills, All Bar One and Edwards brands.

Spirit Group, with 1,193, and Scottish & Newcastle Pub Enterprises (1,137) are also significant players.

Growth prospects

The industry is "flourishing" at the moment, says Mark Hastings of the BBPA, particularly as it is much less vulnerable to economic ups and downs than many parts of the hospitality trade.

"It is as popular as it has been for the past 20 years, and is still by and large the favourite way for people to spend their leisure time," he says.

When it comes to property, pub prices rose some 5.2% during 2005, according to agent Christie and Co, down on the 9.2% reported the year before.

This decline was largely because of the decline in the residential housing market leaving people less able to sell their houses and invest in pubs, argues director Colin Wellstead.

Freehold properties remain scarce on the market at the moment and generally there is still a lot of activity, he says.

Key trends

The uncertainty over the changing of the licensing laws is now largely, but not completely, out of the way, says Mike Coughtrey, head of pubs and restaurants at KPMG.

"The Armageddon that was predicted in many quarters in the media has not happened and, in fact, there is evidence that the opposite is happening, and that many town centres are now much quieter, which is encouraging," he says.

"The change has opened the door to more flexibility, with pubs looking at how they can develop their customer base and their business," agrees the BBPA's Hastings. "In the medium term I think it will prove a major boost to the sector, not necessarily in direct cash terms but certainly in opening opportunities for perhaps more segmented pubs."

But replacing that uncertainty is the smoking ban in England from 2007. While most evidence from abroad (and Scotland) does point to the pub sector bouncing back, there is nervousness over the possibility of a short-term dip and the fact that it is still not clear exactly how far the ban will go.

"We do not know exactly, for instance, what constitutes an 'enclosed space'," says Coughtrey. "The danger is that if it is resolved too late, it will not leave pubs enough time to prepare."

Pubs with good outdoor areas are likely to become more attractive, he argues, and pub food may become even more important

When it comes to ownership, private equity will continue to have an interest in the sector, with players such as property investor and Laurel Pub Company owner Robert Tchenguiz, who has been eyeing up Mitchells & Butlers, very much in the frame.

Whitbread's decision to sell a sizeable chunk of its Brewers Fayre and Beefeater pub restaurants could also bring in new investors and, certainly, will shake things up.

The challenge for proprietors and investors is, are they thinking broadly enough about ways to expand their revenue streams, and prepared to invest enough, Coughtrey questions.

Skills and workforce planning remain an issue, too, and there is a trend towards a more professionalised, career-based approach, argues Hastings, with more operators, particularly the larger ones looking at career and professional development.

Future prospects

The biggest challenge facing the sector going forward is undoubtedly smoking, echoes Christie and Co's Wellstead.

"Licensing was the big issue a year ago but now it is smoking. The pubs that will suffer will be the back-street boozers, but a lot of pubs will benefit from being smoke-free. I am sure the industry will survive and go forward," he says.

The combination of the changed licensing laws and smoking ban are likely over time to mean we see more "chameleon" operators, argues the BBPA's Hastings.

"It will be an evolution where you might have a pub serving breakfast in the morning, more formal lunches for the business market, being more drinks-based in the early evening for after-work, then switching more back into food later on and even then to late night music and entertainment," he says.

Even more so than now, publicans will need to take a long, hard look at how they operate, predicts Coughtrey.

"Particularly if they are looking to target younger drinkers, many pubs will have to tighten up their act on age," he says.

"They are going to have to look more at what they are doing with their surplus space, is it just being used for storage or could it be put to better use?"

One option might be to expand into the coffee shop market, he argues. "You could end up with a café that serves alcohol, although that is a different concept, it is not a pub, it is not too far away. People are going to have to be more adventurous."

- Pub food and drink sales (£m)Number of meals served (m)
20014,9841,064
20025,1191,070
20035,1791,081
20045,2631,095

Top pub groups

OwnerOutletsBrands
Enterprise Inns8,727 -
Punch Taverns8,157 -
Wolverhampton & Dudley2,627Pitcher & Piano
Mitchells & Butler1,760O'Neills, All Bar One, Edwards
Greene King2,419 -
Spirit Group1,193 Chef & Brewer
S&N Pub Enterprises1,137 -
Wellington Pub Co838 -
London & Edinburgh Inns810 -
Pubfolio800 -
Admiral Taverns797 -
County Estate Management650 -
Whitbread643 -
Laurel Pub Company594 -
JD Wetherspoon586 -
Trust Inns515 -
Daniel Thwaites433 -
Pyramid Pub Co433 -
Frederick Robinson394 -
Shepherd Neame368 -

Source: BHA Trends & Statistics 2005

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