Drink sales drop at smoke-free JDWs

by The PMA Team

JD Wetherspoon will review its non-smoking pub experiment in the new year after a 7% drop in sales in August at the first 36 pubs to go smoke-free.

The company will convert one pub a week to non-smoking up to Christmas. Analysts believe early conversions have seen a 10% increase in food sales but a 10% drop in drink sales and fruit machine turnover.

Seven non-smoking openings are seeing better sales than 29 converted pubs, which each cost around £60,000 to adapt.

Chief executive John Hutson said the company was building up a 'bank of experience on non-smoking pubs and would be able to expand the number of conversions quickly once it understood all the lessons.

He said: 'We've been doing the conversions one at a time because you have to invest in the kitchen and give each pub a lick of paint. We will not be in a position to review our experience properly until the year-end.

Hutson admitted margin had been hit at non-smoking pubs, not least because more labour was required for the increased food trade. He indicated there was no difference in performance between non-smoking Wetherspoon outlets and sites of Lloyds No 1, the music-playing brand aimed at a younger clientele.

Hutson added that the sales drop was broadly in line with what happened in Irish pubs. He admitted 'some smokers leave immediately on conversion, but said he believed trade would build over time.

Chairman Tim Martin said: 'A ban on smoking, most commentators agree, is inevitable and we feel it is important to learn as early as possible about the nature of the impact and the types of marketing and other policies that can be adopted to minimise the impact. Offering an expanded menu and food deals individual to each non-smoking pub is key to the marketing push, Hutson said.

Analyst Mark Brumby, of Oriel Securities, thinks non-smoking pubs could have seen a 20% drop in profits because of company operational gearing. 'Little wonder JD Wetherspoon would give no guidance on this figure, he said.

Overall, profit before tax was down 15% to £46.1m in the 12 months to 24 July.