Despite the recession officially being over, business is still tough, but canny licensees are joining buying groups to make their budgets go further. Phil Mellows reports
United we stand, divided we fall, as the Brotherhood of Man once sang, and as trading gets tough once more, licensees are finding there's a ring of truth to the cheesy anthem as they turn to the power of buying groups to help them through.
The principle is simple: buy more stuff and you get it cheaper. If you can buy only so much on your own, why not get together with others to bump up the order?
Of course, you'll quickly find there's an additional cost in organising and administering all that, which is exactly where the buying groups come in.
Among pub tenants and lessees, Leisure Supply Group (LSG) is the biggest of them. It serves 11,000 members, who last year spent more than £21m with 40-plus selected suppliers. They saved more than £4.5m on food and snacks through to washroom services, glassware, cleaning products, catering equipment, EPoS and payment technology.
Managing director Simon Durkin started the business in 1995 to supply health clubs. A deal with Greene King Pub Partners brought him into the pub industry in 1997, and while Greene King has now taken group purchasing for tenants in-house, LSG has recruited other pubcos.
St Austell, Charles Wells, Hall & Woodhouse and Wadworth all joined together, before Enterprise Inns became the dominant group. And as the number of Enterprise pubs has slipped to 7,000, this year McMullen, Palmer's, Hook Norton and Batemans have swelled the ranks.
"It's a strength-in-numbers ap-proach," says Durkin. "Since the economic downturn more people are turning to us, because they want a cheaper deal. But if you want cheap and cheerful, we're not for you. We only go with quality products. You can get cheaper products on the market, but they're lower quality."
Nor are the benefits of belonging to a buying group merely measured on the prices you pay. Durkin sets great store in service and relationships.
"If a pub has an issue with a supplier we'll take it up at the right level. That means a huge amount to a licensee. We can make sure they're listened to.
"We're also a one-stop shop. There's only one number to call to order and that's a great benefit, especially for new licensees.
"We also offer regular promotions, end-of-line deals and special pricing, for instance on a basket of goods for £100, or through our curry club. We're always looking for ways to enhance a licensee's business."
In some ways, he adds, it was easier for LSG when it started out. "Volumes were growing significantly at that time, and discount off the list price was king. Times have changed. Now it's line-by-line pricing and it's harder to sell.
"A scheme like ours has got to benefit the licensees on the ground. That's fundamental, and we spend a lot of time working with suppliers to make sure that happens."
Fergus McMullen, production & sales director at McMullen, which recently signed up its 50 pubs to the scheme, says it's key for independent family brewers to live up to their caring image in hard economic times and they want to do as much as possible to help tenants financially.
"We know our tenants are all working hard to come through this difficult time, and we want to work hard too, to support them," he says. "Free LSG membership is another string to our bow. Anything you can do to reduce costs, and, therefore, boost your profit potential, is absolutely vital."
Meanwhile, for the past decade, BII (British Institute of Innkeeping) members have been enjoying the fruits of Pelican Buying Company. Everyone gets a free business price check on a wide range of goods and services, and for a subsidised fee they can have access to more than 80 suppliers and savings on business banking, frozen, chilled and grocery products, wines, spirits and soft drinks, a BOC mixed-gas blending system and cleaning and hygiene supplies.
Some 200 BII members a year sign up to full membership and, according to BII assistant membership services manager Coralie Andrea, the big attraction at the moment is the banking discounts. Licensees have saved £600 or more through reduced credit and debit card processing rates and banking fees alone.
"Buying companies are particularly attractive to members, not only because of the savings they can make, but also for handling all their purchasing queries," says Andrea. "They can get impartial purchasing advice, central billing systems, and other support, whether it's a new or an established business."
The latest buying group to target the pub trade is PalMak, a partnership between two wholesalers, Palmer & Harvey and Makro, set up in April and cleared by the Office of Fair Trading on the grounds that it's "of benefit to the wider industry".
A number of major suppliers across a broad portfolio of products have signed up with PalMak and the two companies are looking to get their licensee customers on board.
Case study: how to look out for the best deals
The Golden Cross, Saunderton, High Wycombe
What: The Golden Cross, the only pub in the village of Saunderton, Buckinghamshire, is an Enterprise Inns leasehold that's a hub of community life, attracting everyone from families at weekends to older folk and business people during the week.
Why: This year a major outdoor project has added a new children's play area that has been pulling them in through the summer.
But it hasn't been plain sailing. The big investment in the garden, the rising cost of gas and electricity, and customer numbers dropping off due to the tough winter means money has been tight, and licensee Mark Malin is always on the lookout for the best deals and ways of making savings.
He even shopped around different buying groups before sticking with the LSG membership that came with his lease. "I felt LSG had the biggest range of suppliers and products," he says. "Whatever it is, there is usually a supplier that can meet my needs."
An active member of LSG for about eight years, Malin has certainly made the most of it. He has purchased vending machine supplies, frozen food, bar and kitchen sundries, two tills and a credit-card terminal. Overall, he estimates that he makes about £2,000 a year in savings from it, including £600 on the card terminal alone.
He feels the service goes beyond saving money on products, though.
"As part of our membership we are assigned an account manager who comes to see us to run through our account face to face. He knows our pub so I don't have start from scratch to explain my situation."
Case study: signing up helped us tap into new products
The Wheatsheaf, Waltham Cross, Hertfordshire
What: One of more than 50 pubs owned by McMullen & Sons, the Wheatsheaf is a popular local at the centre of its community.
Why: Licensee David Martin is already seeing the benefits of being part of a buying group.
"When McMullen signed up with LSG it sent out an introductory pack on how it works and how it could help us save money. My initial reaction looking through it was the great range of suppliers and products I could tap into.
"It was just what I needed. My time is precious and having everything together in one place where I could see exactly what was available without having to wade through a lot of different bits of paperwork was perfect.
"I've already had a reduction in my rates and levies on card transactions with Streamline, and my next step is to try and reduce the costs that I have in the washrooms. I have a meeting already set up with Initial to talk through my needs and to see what they may be able to offer over my current supplier.
"I didn't realise how beneficial working with LSG would be," he continues. "Even mentioning the name has opened doors and discussions I couldn't have achieved on my own."