Business Opinion
Greene King treads two different paths
Last week's re-organisation of Greene King's managed division into two segments suggests the company believes there are two very different types of managed pub.
It's worth remembering that Greene King is now the UK's second-largest managed player with 790 pubs, second only to Mitchells & Butlers (M&B). In deciding to appoint a different boss for its 510 wet-led and 280 food-led pubs it is aping the structure of M&B. Greene King insists that axing Mark Angela and replacing him with Jonathan Lawson and Jonathan Webster is cost neutral.
On the face of it, the company benefits from more focused management that is free to take a different approach to each of the two main types of managed pub. Hopefully, Greene King will begin to report the like-for-like results of the two segments separately, allowing shareholders to compare results with Mitchells & Butlers.
The challenge, therefore, for Jonathan Lawson, arriving from Sainsbury's to run the wet-led pubs, will be to try to match the sales growth Jonathan Webster is likely to enjoy running Greene King's foodier pubs in the forthcoming smoke-free world. It's almost a given that his division will lag behind Webster's division.
Lawson has a reputation for working closely with store managers and backing their entrepreneurial instincts. It would be a surprise if Greene King's business development managers have been acting as a block on pub managers who can see ways of boosting turnover with local initiatives. But Lawson arrives without preconceived ideas and the hope must be that he can create a new and more fluid approach to unleashing managers entrepreneurial flair.
This bottom-up approach should not distract from the need to carry on driving food sales at these wet-led pubs. This requires as much central organisation and strategy as at the food-led pubs if Greene King is to derive the full benefits to be gained from making further inroads into the booming eating-out market.
Research published this week by City analyst Geof Collyer of Deutsche Bank is a reminder of just how important food-driven sales already are. He calculates that, counting food sales and drink sales that result from eating occasions, Greene King sees more than 50% of its managed sales coming from eating out.
Last year, Greene King's super-regional rival Marston's transferred 90 of its managed division to tenancy on the basis that these pubs did not offer much opportunity to develop food sales. It's clear that Marston's, with a 558-strong managed division, has been extremely busy in the past two years segmenting much of its managed estate into value-driven food brands. The extent of the work behind the scenes only became clear in December last year when it began to talk more openly about Marston's Tavern Table, Two for One and Taverner's Carvery, which between them already account for around 100 pubs within the estate.
Taverner's Carvery, now at 12 sites and due to rise to 30 by the end of next year, is classic pub food retailing. Sites double sales to £18,000 a week after conversion thanks to an offer that provides customers with terrific value on the time-honoured favourite of the roast dinner. Last week, food sales at Marston's for the 24 weeks to 17 March leapt ahead by a remarkable 13.9%. At both companies, there is a hell of a lot to play for in the food market. This is the key battleground that will determine their relative success.
