McMullen's: Seeking silver linings

Given the economic clouds hanging over the UK consumer, silver linings might be in short supply in the coming months.

But despite fears of what impact the government's spending cuts - and tax plans - might have on pub-goers, Peter Furness-Smith, chief executive of Hertford-based brewer McMullen's, is putting a resilient face on things.

"Public expenditure is merely going back to the level it was at in 2007," he says. "Yes, the cuts will be painful, but once the situation has settled down the majority of existing consumers will relax and return to spending again."

Feeling the impact

One aspect of the economic malaise - call it a silver lining if you will - appears to be that McMullen's customers, fed up to the back teeth of the recession and its aftermath, are determined to have a good Christmas. "Bookings are well up on 2009," says Furness-Smith. "We're putting a lot of effort into selling Christmas this year."

Acknowledging the impact of the imminent rise in VAT and a potential rise in duty in the next full Budget, Furness-Smith nevertheless says he is looking beyond such painful - and one might argue regressive - steps.

"There will be structural changes to the industry. Our own brewed beer volumes are marginally up at this point in the year, versus being down two per cent this time last year," he says.

"But generally beer volumes are declining. The on-trade is in decline. We want to look at new distribution channels, like supermarkets, rather than try to increase like-for-like volumes in our pubs."

The subject of supermarket pricing then crops up. "Yes, pricing in supermarkets can be irresponsible," says Furness-Smith, "but the government, while seeming to 'get it' a bit more, still seems happy to clobber the pub and brewing sectors with more taxes. Volumes are down in pubs, yet we're the ones being hit. We all face challenges, one of those is ensuring we get the very best people running our pubs. We're putting a lot of effort and investment into ensuring this happens."

McMullen's owns and operates 85 managed pubs, including two iconic sites in London - the Nags Head in Covent Garden and the Spice of Life in Soho - and 49 tenanted outlets. While Furness-Smith says sales in its destination food pubs are currently running at plus three per cent year-

on-year and its London sites have seen an eight per cent rise in turnover, he admits a number of those wet-led community pubs are suffering.

"But where you've got an exceptionally good licensee things go better," he adds.

Site support

While he acknowledges McMullen's pub estate will remain predominantly managed, Furness-Smith stresses it is not about "managed versus tenanted; it's about good and not-so-good sites".

"Managed pubs have more support in the way of systems and practices from head office, although we help tenants who are in need of it," he explains. "We are not interested in making a quick buck.

"Tenants face greater challenges but we will discourage those in difficulty from doing just anything to keep going, such as buying out of the tie or taking the pub to a position we feel is unacceptable. Controlling the market position of any given pub is crucial."

With a view to attracting the right kind of tenant McMullen's earlier this year introduced a 'try before you buy' programme, allowing people to have a go at running a McMullen's pub and opting out within the first 12 months if it doesn't suit them.

"We've had around eight to 10 come through the scheme, with two deciding to stay on," says Furness-Smith.

On the property front, McMullen's - like every other operator - is constantly on the lookout for new pubs.

"As always the issue is price," says Furness-Smith. "We've got a strong balance sheet but we won't buy just because sites become available. Plus we don't want to overburden ourselves with sites that are on an earnings decline."

Two new outlets are due to open in Hertfordshire before Christmas; a new-build in Welwyn Garden City and a new Baroosh bar in Bishop's Stortford, taking the number of that concept to eight sites.

And what of the future, bedevilled as it will doubtless be - in the short term - by those dark clouds?

"We've been around for 180 years and we plan on being around for another 180," says Furness-Smith. "We just want to focus on running our business better and

attracting more customers into our pubs and buying our beers."

You can't ask for much more than that…