Lawson Mountstevens: conduit for innovation

Heineken UK recently completed a restructure that brought tied pubs and freetrade under the same boss — Lawson Mountstevens. He talks to Phil Mellows about the impact of the change.

Early doors at the Mitre in Holland Park, the late lunchers and the afternoon idlers are slowly giving ground to the after-work drinkers. As the place fills you can imagine them, on a warmer evening, spilling out of the French windows that run the whole length of the pub, onto the terrace in front.

True, this is a part of London where the money is never likely to run out, but it shows what the new breed of entrepreneurial pub operators, in this case Realpubs, are able to achieve, and what can be done with a tied lease, in this case with Scottish & Newcastle Pub Company (S&NPC).

"This place used to be a shocker," says Lawson Mountstevens, as he looks around approvingly at the unmistakable evidence of a successful pub.

As Heineken UK's on-trade managing director he straddles the 1,300 tied houses in S&NPC and the international brewer's extensive freetrade business. These two parts of the company were integrated in a major restructure that saw the departure of some 60 people and marked a significant change of approach to an estate that has also been slimmed down from a peak of some 2,500 houses.

"The restructure is bedding down and we're going back to business as normal," he says. "What we have done is brought the pubco into our core structure. If we hadn't done that it could have got lost. It's not helpful to have such barriers within an organisation."

Two dozen business development managers (BDMs), under three operations sales directors, have been charged with working more closely with lessees.

"It means the number of pubs per BDM is up, but the integration enables us to take away from them a clutch of things that are better done by others — admin, point-of-sale, various queries. The BDM role should be about building a relationship with the tenant, about doing the real business-building stuff."

Day-to-day​

The more day-to-day issues involved in running a pub are now handled by the 220 people at First Point in Livingston, near Edinburgh, originally a telesales operation that's been expanded into account management and telemarketing.

"Such a change is not going to happen overnight," concedes Mountstevens. "Licensees are still going to ring their BDM and expect them to solve all the problems. But Livingston represents a new conception of what can be done over the phone."

Integration with the freetrade business should bring other advantages, too, as S&N lessees gain access to the expertise and knowledge of the wider organisation — and Heineken UK learns from having its own estate.

"Heineken understands the pub business," says Mountstevens. "The on-trade is, of course, a shop window for its brands, but it doesn't stop there. Being a pub owner as well as a brand owner enables us to take our understanding further.

"We know, for instance, that cider is the most impulsive purchase in the on-trade, but if we want to understand why that is we can go into our pubs and find out."

As a global brewer, there may be initiatives that can be introduced from other markets, too.

"There are common threads across Europe when it comes to what we do at point of purchase. What does the consumer look at when they go into a bar? Where do we choose to invest?

"But we have to be careful. The ice font works in Holland, but not here."

Mountstevens is also someone who understands pubs. His first job for Grand Met, 20 years ago, found him calling on Inntrepreneur lessees in south-east London during a recession, perhaps the toughest imaginable training ground.

Evolving​

"It taught me about pubs — and dealing with the people who run them," he says.

Looking at the leased model now, and being in a better position to do something about it, he's conscious that evolution is necessary.

"There has been a lot of focus on the tie in the industry, but we mustn't miss the good news. Broadly, I think the tie works. Like any business, it has to change, and we've seen the big pubcos do that.

"The relationship with lessees has got to evolve. The tenancy model has got to evolve. We have to innovate, and you're seeing that now. We have got to make our pubs attractive to entrepreneurs.

"Part of the plan for our tied operation is to simplify things and to be more of an operational company rather than a property management company.

"Getting consumers back into pubs is a huge challenge. We need to get better at deciding what can work at a particular pub and where it sits with the retailer, and we're getting down to a core of pubs in which lessees are open to change and thinking about things differently.

"We inherited a hugely complex pub estate," he adds. "There were a myriad different agreements. Now we have a number of core agreements we can innovate off.

"We're at the right size. We're mildly outperforming the market and our cap-ex investments — we've spent £2.5m on our pubs already this year — are working for us."

Like many, Mountstevens sees the good side of the wave of pub closures the industry is experiencing.

"The brutal fact is that the world's changed and we're over-pubbed. A certain number will close and that's not necessarily a bad thing. We'll be left with well-invested pubs, and that's good news for the on-trade.

"I don't find what's happening depressing. The pub is, and will remain, part of the fabric of British society, and consumer experience in pubs is getting better and better. Look at this place. It's a great example of how the on-trade can rejuvenate itself.

"What is good is that there are opportunities for entrepreneurs and they will do things big companies will never do.

"Pub closures have grabbed the headlines, but people aren't picking up on the innovation, the entrepreneurs that are coming into the industry. There are great pubs across the broadest spectrum. And it's not just about food, there are community pubs that are getting stronger."

Mountstevens even feels we may be entering "a golden period", the 2012 Olympics being "bigger than all of us imagine — although we've yet to work out exactly how pubs can activate that opportunity".

Brewers like Heineken are, however, reaching a better understanding of what works in pubs, and how they should be targeting their support. These days it's more about the bigger activities that improve the consumer experience and much, much less about beer mats.

"We have got to connect with a very savvy consumer and understand how brands relate to that, how we can use a brand to get people into the pub. With Foster's, for instance, we got too functional, we relied too much on it being super-chilled. Now we're back with the comedy and the banter.

"As a brewer we know that it's the on-trade where you make a brand, where the brand experience comes to life," he continues.

"Now the challenge is to really drive footfall, and we haven't got there yet.

"We have got to recognise that people are changing. They're more impulsive, they are using their smartphones to decide where to go. They have new ways of living.

"They don't go down the local every night and they no longer accept poor quality. We have to make their experience a good one.

"So many great pubs are already doing that, though — and it is often missed."

My kind of pub​

"It's got to have the right brands on the bar, obviously, and it has to be a nice, safe environment, the kind of place where you'll find the whole kaleidoscope of life.

"If I have to pick one, the Wyndham Arms in Kentisbeare, Devon, is a pub I always enjoy going to. It's an Enterprise Inns lease and the community has got hold of it and made it

into something.

"It's one example of a pub that could have closed and disappeared, and there are a myriad examples of that at the moment."

Key dates​

• 1990 — Lawson Mountstevens joins Grand Metropolitan as a graduate trainee, going on to sell beer to Inntrepreneur lessees in south-ea