The right stuff?

The sale of Hertford-based McMullen's old brewery site to supermarket giant Sainsbury's at the beginning of last month signalled the end of a chapter in a saga that at one stage nearly witnessed the demise of the company.

Peter Furness-Smith, McMullen's managing director, said at the time of the divestment that the unspecified proceeds would go towards debt reduction and investment in the group's estate. A sale of the doubtless valuable property had been expected for some time and McMullen's had already been brewing from a newer, smaller production facility since the beginning of this year.

The fact that it was still brewing - indeed, that the company itself was still in existence at all - was a minor miracle, for in 2002 McMullen's was staring into a corporate abyss. A row over cash tied up in the business - an all-too-familiar scenario for many family-run brewing operations - threatened the very future of the company.

The dispute deepened and the banks were called in to value McMullen's operations, with some reports suggesting it was worth £200m if broken up and sold off. A mere four years later that sum for a Home Counties-based brewery and 180-plus-pub estate might look relatively cheap but for certain factions of the family it represented pay dirt. The 'separatists' finally lost the day after months of wrangling, but concessions were offered to the disaffected, such as downscaling the brewery's capacity and releasing cash by selling off property assets deemed as surplus to requirements.

Against this rather stressful background the brewer had been forging ahead with a new concept called Baroosh, which first saw the light of day in April 2000 when the inaugural style/café bar under the brand opened in McMullen's home town.

This strategy was pursued then as now by Furness-Smith, who had assumed full managerial control after chairman and joint managing director David McMullen retired in the wake of the family schism.

Subsequent progress in opening new Baroosh sites has been measured, to say the least, but earlier this month McMullen's threw open the doors to its seventh site, this time located in the main pedestrianised thoroughfare of Chelmsford, in Essex.

The pace of openings suits McMullen's, says Furness-Smith. "We're looking at acquiring one or two sites a year. That's all we need," he notes. "We have a very demanding criteria when it comes to this operation; prime location, freehold, decentsized gross floorage, and so on."

The new venue, housed in what was once a large retail unit - as a number of Baroosh bars are - has all the style bar/restaurant trappings of the brand. And despite the well-publicised travails of the High Street, the group says all the trading signs are positive.

A key element to the trading success of Baroosh, which is led by operations manager Duncan Zvonek-Little, is its customer profile, believes Furness-Smith. "It's easy to target the Friday night/Saturday night markets with this sort of venue," he says. "For some that's seen as easy money to make more over those two sessions than in the rest of the week put tog-ether. But we've aggressively gone for the rest of the week, building business throughout the day, and Fridays and Saturdays have to complement that."

Customers looking for two-for-one offers on drinks in a Baroosh will be disappointed, he says. "We're not interested in taking an extra £1,000 on a Friday night just for the sake of it. The quality of the customer experience should be the same throughout the week."

Part of the Baroosh philosophy is based round the notion of consumer quality, as well as the quality of the service and products the brand offers, says Furness-Smith. "There is no point in spending a lot of money acquiring a site and bringing it to this level, only to blow it all by getting the wrong people in."

With only seven sites in total, and with the Chelmsford branch yet to register a sales contribution, the fact that the concept already accounts for more than 12 per cent of the brewer's overall sales is an indication of what the future might hold for the concept within the McMullen's estate. It's not been without its own set of risks.

The strategy of 'discouraging' customers who might be prepared to part with their cash just because you don't like the 'cut of their jib' is a brave one, particularly on the country's high streets, where business is tough enough already and where one's operation might trade alongside venues that have a less-than-polished reputation when it comes to cheap drink deals and happy hours.

But Furness-Smith is relaxed about sticking to a strategy of subtly dissuading 'less desirable' drinkers from frequenting Baroosh and the smarter image of the place acts almost as a deterrent to those who might prefer something a little more...robust.

Customer expectations can vary too. Banning smoking in the Chelmsford site was not much of a problem, since the venue was a 'from-scratch' affair, but the conversion of a traditional pub to a Baroosh site in St Albans and the implementation of a smoking ban to boot, had the effect of hitting trade where it hurts for a few months.

"The turnaround took longer there than we'd expected," acknowledges Furness-Smith, "but you have to hang in there, and we can afford to do that."

On paper Furness-Smith's comments about the kind of customer he prefers smack of being somewhat elitist, but he says he simply wants Baroosh to have a certain kudos.

"We want to maintain certain standards. You can be careful about who you encourage in to a place like this and it is possible to set out a clientele focus and judge who will be interested. You could lose your reputation for a brand such as this by having the traditional Friday/Saturday night crowd in here. We're wanting consistency after all."

So much for Baroosh, but what of McMullen's bread-and-butter operations, its pubs? "We want to buy more," says Furness-Smith, who notes prices for many good-quality sites are proving increasingly difficult to justify. "If we could have bought more food-led pubs we would have and with hindsight maybe we should have

been more adventurous with our acquisitions policy." So has McMullen's missed the boat in a number of instances? "That's possibly a valid criticism," he says. "But we believed Baroosh was a stylish alternative and it has worked exceptionally well for us."

McMullen's has an estate that takes in back-street community boozers through to children-friendly pubs and food-led houses.

Furness-Smith says evolving things such as the Baroosh concept affords the company the chance to drive growth in ways other than bolt-on acquisitions. Which, given the group's resources, and the availability of good sites at what it deems reasonable prices is just as well.

The 'hot market' right now means that McMullen's progress will largely be driven by operational activity, he says. "Acquisition strategy has worked out for some of our competitors who've done very well with some of their deals, but we aren't really in the position to be able to do those sorts of deals, so our focus has to be different."

Where and how does McMullen's go now? The mantra of quality over quantity is as familiar to the brewer as to any of its competitors. "We don't necessarily have to go bigger," says Furness-Smith.

"We're constantly looking at the quality and range of our offer, no less in Baroosh than anywhere else in our estate, and we strive to reflect the evolution of consumer tastes. You have to do that to survive.

"Six years ago we made a decision to start the Baroosh journey. It's contributed an enormous amount and we still haven't arrived at our destination with the concept."