Que pasa Marston's?

Leafing through a Wolverhampton & Dudley Breweries (W&DB) annual report from 1990 triggers memories of the political climate of the time. References to the poll tax and its impact on consumer spending abound. Ah, the poll tax. Those were the days.

Anyway, aside from Margaret Thatcher's favourite levy, in 1990 W&DB also highlighted the provision of good food in its pubs, a key element in its then-retail strategy.

Fast forward 17 years and for well-publicised reasons food is even more on the minds of those running today's pub companies, especially when considering an acquisition. And Marston's - neé W&DB - is no different.

Having just about squared away his company's recent purchase of EP - the old pub arm of brewer Eldridge Pope - Marston's chief executive Ralph Findlay believes the new add-ition can bring a fresh approach to selling food throughout the Midland brewer's operations.

There's been significant growth in EP's food offer since 2004, with food sales accounting for nearly a third of the £13,000 average weekly turnover in an EP pub, says Findlay.

"We can learn a lot from its food operation, particularly on things such as its menu presentation. The designs and layouts are very good and consequently they simplify a customer's decision-making process," he explains.

Other touches, such as EP-branded chutneys and sauces and the presentation of its coffee service "showed us that a lot of thought has gone into things", he adds.

A lot of what EP has done around food can - and will - be put into Marston's existing estate, although Findlay says it's too early to go into details.

Regionally, the acquisition of EP's estate of 150-odd tenanted and managed pubs has boosted Marston's presence in the South of England, following the £44m purchase of Celtic Inns in March last year.

"It's an interesting and attractive part of the world for us to get into," Findlay says, although he won't comment on the likelihood of Marston's snapping up other operators in the region.

But Marston's recently secured a £400m finance facility to fund the EP deal. And EP cost less than half that. So, what's the rest for? Suggested bid targets are met with a smile and silence.

Acquisitive moves

Corporately the EP deal restored Marston's reputation as a dealmaker. But Findlay was well aware of the Dorchester-based company, having cast an acquisitive slide rule over it less than three years ago. Then he was pipped at the post by pub entrepreneur Michael Cannon. Did he not regret missing out on EP then, only to pay four times as much as Cannon did?

"We believe what we paid for EP [around £163m, taking into account pension commitments] was a fair price in today's market," says Findlay.

"Michael is clearly successful at creating pub ambience and Eldridge Pope was a company that needed sorting out away from a plc environment. We've bought ourselves a business that is more than merely a portfolio of good pubs in good locations."

There's EP's freetrade distribution operation, FairDeed "to push our brands into new areas". Then there's the opportunity to build up more accommodation, the one area of EP that Findlay thinks could do with being upgraded. Plus the opportunity to roll out Marston's beer brands in more than 150 new outlets.

The City, already buoyed by Marston's plans for a further £100m-worth of share buybacks announced in December, generally welcomed the acquisition.

"The company answered a lot of questions with this one," says one analyst. "One of the main challenges, though, will be to maintain the enthusiasm of those staff who move over."

Some of the drivers of that enthusiasm have gone, including EP ops director Tim Bird. But Findlay stresses key operational people have been retained and he looks forward to working with them, noting the enthusiasm of staff and managers across the business.

On the outlet front, Que Pasa (QP) will be worked into Marston's estate, "but we'll be leaving it alone for longer than we'd originally anticipated in order to assess its contribution", Findlay says. There were still a dozen or so unbranded Marston's pubs on the High Street that would suit conversion into QPs, while some QPs merited being transformed into Marston's own Pitcher & Piano brand, he adds.

Elsewhere there are plenty of things to attend to. For starters, there's the job of getting the message across that W&DB is now Marston's, with a time-consuming and not inexpensive programme of pub rebranding to complete.

Findlay says the Marston's tag will mean more to people across the wider UK than the company's old Wolves moniker, "which meant little outside its Midlands' heartland".

Attention to detail

On the group's recent operating performance Findlay points to "real organic like-for-like growth" across the business, which he says is a "product of attention to detail". Food like-for-like sales in the group's 500-odd managed pubs are up 14 per cent, he adds.

Why? "Because ours is a better offer than the competition's. And what the competition does is key because you've got to be better than them."

Findlay responds to the observation that Marston's has often been beaten to the punch in acquiring growth by stressing the group never pays what it considers to be over-the-odds prices.

He also points to his group's pub building programme. "We're still buying land to build on and we'll be constructing new pubs on 25 sites this year at a cost of £2m each," he says. "Next year we'll build more pubs in the managed sector than the competition."

And with new smoking bans approaching fast, Findlay says the group has been working on solutions for a number of years. Overall he's positive about the bans' long-term benefit for the industry, while acknowledging there will be winners and losers. "It will accelerate a trend which will see pubs becoming more about families, food and eating out. It won't be about pubs just selling beer, unless they're very good at it."

So does he see pub companies in England and Wales going under as a result of the looming bans? "It's difficult to say. Certainly it'll be yet another stress for some companies to deal with," he predicts.

On the topical question of Real Estate Investment Trusts (REITS) Findlay says Marston's is "looking at them, like everyone else is looking at them". And like everyone else, he won't be drawn on 'if' or 'when' the group might seek to make the move to become one.

The other burning industry question on everyone's lips these days concerns the likelihood of a merger between Marston's and Greene King. Or a move by one for the other? And having gotten together, who would run the combined business? On paper surely it makes sense?

Findlay is predictably - if disappointingly - diplomatic. "We're not the same businesses. Marston's has added value, as has Greene King. I can see plenty of routes going forward which will bring about improvements to our business," he says.

For a man used to running marathons in his spare time it's unlikely such a workload will prove insurmountable. Just don't go and tie his laces together when he's not looking…