Tenanted pubs: more pressure

In two short years the game has changed immeasurably.

Managed pubs have been gobbling up food sales market share — the recession followed by this period of austerity has prompted customers to search for better value.

Food market-research company Horizons points to "dramatic" change in two years, with managed pubs boosting food sales by 20.7% since 2009. The tenanted market has lost around 9.9% of its food sales in the same period, although the figure will be skewed by pub closures and sites moving into the independent sector.

But this is set to continue as the managed sector expands. Greene King's Cloverleaf purchase involved prime examples of the managed super-pub phenomenon — food sales of about £28,000 per week per pub. Many more will open — and the food sales will be snatched away from the tenanted and independent pubs sector in part.

The problem this presents for operators of managed and tenanted estates is likely to become more acute. It was clear this week at Marston's Nag's Head in Newbold, Derbyshire, where customers organised a petition to complain that prices were so much lower at the local Marston's managed pub.

Companies are working on their own solutions. Marston's plans to cross-transfer 600 tenanted pubs into a semi-managed estate under its Retail Agreement where formerly tenanted pubs are run with managed pub price-points.

Ironically, the plan will succeed if these pubs suck trade out of competing tenanted pubs owned by others. Meanwhile, it's had the sense to delay price rises for tenants until after the Budget.

Over at Greene King, a new training course was launched this week that tries to arm tenants with the retail skills needed to maintain a price-premium position over managed pubs.

Essentially, a price-premium at tenanted pubs will be accepted to an extent by customers if the right level of service, amenity and food/drink quality is on offer. Lots of tenanted pubs are already in this position; many more will need to move up the curve.

The giant tenanted pubcos, Punch and Enterprise, have just increased wholesale prices. Punch commendably held prices at 1% last year but, facing its own cash pinch, has moved wholesale beer prices up 3.3% this year. The total rise of 4.3% over two years is still more palatable than at Enterprise, where 7.3% has been added to wholesale beer prices over two years.

For those on RPI rent increases in the tenanted sector (more than half the total number of tenants), the pressure in this year of a VAT increase and a duty escalator rise that stands to be around 7% has taken another ratchet up.

Is it any wonder beer sales are in steep decline when there's so much logic in prioritising other categories?