Whitbread Pub Partnerships' 'race against time'

Whitbread Pub Partnerships is pushing its lessees towards retailing in a bid to beat the economic slide.

With fears of an economic slowdown on the horizon, Stewart Miller believes it is a "race against time" for community pubs.

At Whitbread Pub Partnerships (WPP) he has headed up a drive to encourage lessees to follow the retailing path.

Over the past 18 months it has disposed of 446 outlets which were judged to be more vulnerable to changes in the market.

"Pub numbers are going down and over the next few years I think we're going to see about 5,000 close," Miller predicted.

"If that's the way the market is going, you have to make sure that you are not going to have some of those 5,000."

Nearly half of WPP's pubs are firmly in the community sector, which has traditionally been the most dependent on beer.

"Beer volumes are declining so that's where most of the pubs will fall out," he said.

"If you have a pub that still relies on the male beer-drinker, you have to have the best that there is, because those are the sorts of pubs which will be shaved off.

"We are investing quite heavily in our community pubs because to some degree it's a race against time."

This has been achieved by helping lessees to broaden the appeal of their pubs, offering food and trying to attract more women.

Most of its disposals helped to create Buckinghamshire-based Avebury Taverns which is bringing its own entrepreneurial flair to boosting the community pub.

Miller said: "Those were a lower-returning part of the estate and, in our judgment, they were not pubs that were capable of growing in the future."

But he said that, after a period of restructuring and consolidation, WPP was now expanding again.

With 1,714 partially tied pubs, it is due to make its first major acquisition early next year with 26 outlets bought from Whitbread Inns.

It has also developed itself into a corporate brand, with a radically new logo, aimed at changing its image within the trade.

The revamp was put in the hands of Richard Ellis who arrived as marketing and commercial director two years ago from Carlsberg-Tetley where he was trade and consumer marketing controller.

Ellis said: "When I came in there was a lot of good activity going on but there was a lot of fragmentation and not enough awareness among lessee customers about what was available for them.

"The brand new identity shows we are a more marketing-led company as opposed to just coming from a brewer."

He dumped the old-fashioned logo which merely had the name Pub Partnerships tacked on to the group's logo.

"If we are going to maintain our industry leadership, we have to be seen to be innovative and contemporary rather than relying on the past."

He has developed tighter retail-style segmentation into the estate, helping lessees to be better at targeting their customer base.

"In the early 90s the experience of going into some pubs was horrible but the industry is now getting its act together," Ellis said.

With the investment in catering, the number of food-led outlets — known as "Food Taverns" — has grown to about a third of the estate.

"People are more used to eating out than they were in the early 90s and I don't think that growth is going to go into reverse," Ellis said.

Only about one in 10 WPP pubs now offer no food at all, especially after the introduction of a user-friendly package of microwaveable snacks.

Training has also been stepped up, with 1,500 people going on Whitbread's tailor-made training courses a year.

The leased pub division was created in 1990 when it had about 4,600 pubs. Two years later it launched the 20-year lease which has become the norm across the estate.

Many of its lessees have expanded to operate two sites but WPP has also attracted multiples. They range from Oxfordshire-based Oak Taverns and Norfolk's MacLennan Inns to Thorley Taverns and Inn Business.

Other lessees include Ann and Peter Goddard of the Fleet Inn, Twyning, Gloucestershire, who won the title of Small Business of the Year in the 1998 Publican Awards.

Miller has been managing director of WPP for two-and-a-half years but his own background is also in marketing. He has been at Whitbread for 18 years, working on the Pizza Hut and Beefeater brands before becoming marketing director of Whitbread Inns.

He said there were currently no plans to follow Greenalls or Greene King to go deeper down the path of segmentation by franchising brands.

"There is a place in the market for good branded operations but in the lease business the key is the individuality of the pubs," he said.

WPP pioneered joint investments and is halfway through a year-long programme worth £14m.

With 150 major schemes and 350 smaller ones, an average of 25 per cent will be spent by the lessees on top of this total.

Over the past three years 150 lessees sold their leases, currently gaining an average premium of £61,200.

Many of the lessees have also benefited from the group's buying power, most recently saving a total of £1m on a Brake Brothers catering contract.

Miller is adamant about referring to lessees as customers because they are "like an intermediary to the final consumer".

"If you don't have it as a partnership of mutual respect and trust, it doesn't work."

Less than one per cent forfeit their leases each year because of the successful selection of good lessees and the support packages. There is one business development manager to 40 outlets, better than the industry average.

Last month WPP maintained its growth by increasing its operating profit to £31.9m for the six months to August, despite having 331 fewer pubs.

Miller clearly believes that his company's estate is in a position of strength if the economy continues to slow down.

"There's definitely still a big role for community pubs. We think it's a market that still has opportunities," he said.

"If there's a slowdown, consumers become more value-conscious and turn to pub food rather than restaurants.

"A good community pub will continue to do well but it will put more pressure on the ones that are not so good."