The pub sector of tomorrow?
It's 2020. The introduction of the smoking ban seems a distant memory, and even Lewis Hamilton has retired from Formula 1, having beaten Michael Schumacher's all-time record of world championships. How have pubs coped?
After the smoking ban in enclosed public spaces, politicians went further and banned smoking in all public places. And drinking alcohol in unlicensed public spaces too, after lobbying by the medical profession. Drinks promotions, loss- leading and alcohol advertising were banned across the board.
Local political involvement in licensing administration led to significant policy variations between the English counties and cross-border between Scotland, England and Wales, creating hard and softer trading areas with resultant red tape.
Costs continued to rise, with energy remaining a key issue, while waste disposal became a significant cost too. The retail multiples entered the on-trade, using their buying power and retail skills.
The major brewers, cited by some as being complicit in the off-trade row of the early years of the 21st century, consolidated their activities as a consequence of the concentrated buying power from the multiples in both the off and the on-trade. This left the free trade with less choice over distribution.
Luckily, the rejection of ubiquitous brands by the consumer meant smaller brewers flourished.
The traditional, cosy, wet-led pub is now a novelty and hard to find.
Thousands of obsolete and marginal pubs closed and, while a large number of licensees suffered financially after 2007, so did their landlords. Property values fell as rental yields softened, reflecting the profit squeeze that enveloped the smaller operators.
Tied leases are now much less common after landlords suffered reduced wet rent and realised they needed to attract the best quality operators to secure their own rental streams. The multiples had prepared well and traded through strongly, but many high street pub sites are now operated by the old restaurant chains.
Significant investment followed in the wake of the ban, as operators explored alternative sources of income. Good sites prospered as they entered food, café and coffee trades, while many others became community and tourist hubs. Some sites now host post offices and village shops and others are boutique hotels.
Where local politicians and bureaucrats created licensing and planning black spots, redundant pub sites are currently boarded up and derelict while they await decisions, while away from these areas obsolete sites have been de-licensed and are in alternative commercial and residential use.
Those pubs and operators that survived focused on their niche. Food, as many suspected, was not the panacea and salvation of all; indeed it was the death of the under-prepared and under-invested, who weren't ready for the changes prompted by the bans.
Many new sites have been built and for the old, the façades may look the same, but internally they reflect the modern age with technology and professionalism.
Professionalism because a tough market, rising costs, sophisticated competition, ever-increasing customer expectations, a need to drive sales and more red tape than you can shake a stick at required a host of new skills from the licensee operator. There is choice in the market; look hard and you will still find the locals' pub you could find in 2007, but as for the high street sites, only the old bars will tell you they were once pubs.
Mike Coughtrey is a chartered accountant and partner at KPMG LLP, which advises a number of the country's leading pub groups. He is also a member of the BII and runs a pub in Bedfordshire with his wife.
