Live and let die

There are too many pubs and bars and only the market can decide which will survive

The father of free-market economics, Adam Smith set out in his classic work, The Wealth of Nations, that the market, while often appearing chaotic, has an invisible hand that will guide producers, suppliers and consumers to a point where all can be satisfied.

Too little profit for retailers and they will leave the market, too much profit and more entrants will arrive.

Well, it does not take a genius to tell you were we are in the economic development of the pub industry at this moment in time.

Any form of regulation inevitably distorts the market mechanism creating artificial conditions from which some operators benefit while others lose out. Smoking restrictions are good for business if your pub has a developed food offer and pleasant beer garden.

The 1964 Licensing Act created a monopoly for many small-town nightclubs post-11pm (that monopoly has, of course, now gone taking hundreds of small nightclubs with it).

The current perceived chaos in

the on-trade is exacerbated by the

global economic downturn, in-creased levels of competition from the off-trade and changing societal behaviour patterns.

The working man that was the core beer drinker in the '60s and '70s is now quite possibly female, drives to work, has childcare duties at home, does not know his/her neighbours and is happy to finish the day slumped on the sofa staring at a

Sony widescreen, eating a Marks & Spencer's fish pie washed down

with a glass of Sainsbury's finest Viognier.

The market will out. The current reduction in pub, club and bar numbers is the inevitable correction required to bring supply back in line with demand. For too long, particularly on the high street, we have had too many bars chasing after too few customers, often compounding the problem by limiting the potential customer base to 18 to 25-year-old markets. Savvy operators are moving on, divesting themselves of the bottom end of their estate (through ever more creative methods) and strengthening and diversifying their offer in the remainder.

High-street operators have long recognised that this, admittedly painful, process was all too necessary. The outcome should be that we will have a smaller, but stronger, late-night market, with truly differentiated bars and nightclubs, providing the sort of high-energy customer experience you simply cannot get in any other form of venue. There were 2,416 nightclubs in Great Britain in 1997; despite the recent spate of closures, we still have 2,779 trading today — further closures are inevitable. Similarly, there are still more than 13,000 high-street bars aimed at young people trading today, compared to fewer than 10,000 in 1997. No wonder many operators not only expect, but will welcome, a further correction.

And yet, it seems to me that pub operators are not able to be quite so dispassionate about things. Does the strong emotional pull of the pub and its place in Great British society cloud our judgement when it comes to closures? The fact is our pub sector needs to contract, shed the worst units and evolve to provide customers with an experience they want.

That does not mean all pubs should start offering food, strip out the carpet, become more female friendly and boost their wine offer. We can already see signs of over-

supply in that particular market segment.

It does mean operators should look long and hard at their business and ask themselves a series of questions: What am I good at? What do my customers want? What is the competition doing? Should I close?

Honest answers to those questions will give operators a clear view as to how to proceed. It could mean opting for food. It could lead them to gear up for live music. It might mean selling the building for residential development.

As the son of an independent licensee in Liverpool, I appreciate it is difficult to be so dispassionate about such a "people" business but, ultimately, that is how the future of our sector will be shaped.

Jon Collins is chief executive of CGA Strategy and chairman of trade group Noctis