Barracuda has bucked the high street trend with annual sales of £83m. Mark Stretton reports.
There are still some good high street stories out there despite the public pain of managed operators. One company leaving others in its wake is Barracuda.
In just three years it has gone from zero to 147 pubs with annual sales of £83m and 3,500 staff. It operates in town centres but has steered clear of glossy, entertainment-led bars that have saturated the market.
"It's easy to do something flash but harder to sustain," says boss Mark McQuater. "It is still possible to grow if you do it right. The business we are building is sustainable in the long term."
While others batton down the hatches, Barracuda is one of the few operators with a goal of 20 to 25 per cent growth each year to 2005. "It's a great time to be growing because everybody else has run out of gun powder," said Mr McQuater. "We are heading towards 200 pubs and next year our sales will be well north of £100m."
Stripping out all investments and pub improvements, Barracuda is improving like-for-like sales by 3.6 per cent. In the current market only JD Wetherspoon is delivering close to that.
The faith that private equity backers have in the Barracuda management is demonstrated by the fact that £700m was offered up to go after a chunk of Scottish & Newcastle Retail.
"We wanted the middle layer of wet-led high volume pubs," said Mr McQuater. "But S&N were not interested in breaking it up and clearly quite a few people were after it." Given that funds were available it is safe to assume the business has all the fire power it needs for another target.
But Barracuda has in the main grown organically in 2003 and its most recent bolt-on acquisition was eight large-scale sites from the collapsed Old Monk Company for £8.3m.
Mr McQuater intends to capitalise on others pain, negotiating down rents of other people's failed pubs. "There are many good concepts and offers out there on the high street," he said. "But what is killing them are the ridiculous rents of £150,000 or more.
"We are ready to go in and offer sensible rents for these sites."
This gives a clue as to why was the company is named after a big scary tropical fish - barracuda feed on other fishes. Barracuda was formed through four deals. It acquired 35 pubs from Enterprise for £50m in July 2000, then three months later bought the 61-strong Ambishus for £36.5m and a year later bought 50 pubs from W&DB for £37.25m, including the 23-strong student brand Varsity. Then last year it bought eight from Old Monk. The long-term target is 500 pubs. As well as operating three concepts (see below) the company also has a clutch of unbranded pubs.
It focuses on the "upper half" of the pub-going public, but in secondary towns - like Bolton, Dartford and Sunderland.
"We are a buzzed up company," said Mr McQuater. "We are growing faster than anyone else but not in a madcap way. We are very careful because it is very easy to screw up. People think that pubs are easy to run but they are not. They are very hard."
Evidence of that sentiment litters the high street in the form of failed managed house companies and boarded up sites. But there is still good news out there, not least in the shape of Barracuda.
Barracuda brands
Barracuda Bars:
- Sport-led with light South African theme
- Early week and day trade balance a late licence
- City centre and large demographic locations
- Net sales per unit of over £20k per week
Smith & Jones
- Mid-sized pub with net weekly sales of between £12k and £15k
- Found in secondary towns and city suburbs
- Tight expenditure. Typical fit out cost circa £90k to £150k.
- Relatively affluent customer. Service, not price, led
- Estate size = 60 outlets
Varsity
- Clear customer target group: one of two national student brands
- Located in student cities and communities
- Customer loyalty card
- Net weekly sales of £17k net.