Pubs face £1bn drink sales shortfall
Pub drink sales are set to fall by a massive £1bn this year with a similar drop also expected next year.
A new report from market analysts Horizons, How Can Food Fill a £1bn Gap?, reveals the devastating effect caused by the long-term decline in drink sales. The decline has been accentuated in recent years by cheap off-trade deals and the smoking ban.
In order to fill the £1bn shortfall, food sales would have to rise by a further 20% across the sector. Figures from Horizons show that total pub sector sales (both wet and dry) were worth £22.5bn in 2007, with food (and associated drinks) representing around 28% of that turnover — £6.21bn.
"A more realistic figure is that the UK pub sector could improve turnover from meals by £400m, which still leaves a shortfall of £600m," commented Horizons' managing director Peter Backman.
"Food has a lower margin than drinks so pubs would have to sell more of it to make the same amount of profit. The additional problem for pubs is that their kitchens and layout often make it difficult for them to grow their food sales without a major investment. The current prediction that 1,500 pub will close per year could be under estimating reality."
He added: "While the pub sector has been able to offset a 20-year fall in beer sales with rising sales of other drinks categories, in 2007 for the first time, these drink and food-related efforts were insufficient to overcome the hydra-headed effect of the smoking ban coupled with low price off-trade beer offers. The result was a decline in overall sales — not only in inflation-adjusted prices but, for the first time, in current prices too.
"As pubs compete more fiercely for declining food sales we are likely to see prices lower, and therefore margins reduce. This puts further pressure not only on the pub sector, but on restaurants and quick service outlets too."
