Premium pubs: a fine balance

Near where I live there is what I suppose you might call a fairly well-heeled suburb of London — a pocket of Twickenham that estate agents like to call ‘St Margarets Village’. Young professionals rub shoulders with Bugaboo buggy-pushing yummy mummies.

Dads congregate at the local park every Saturday to watch their Boden-clad offspring playing rugby, while nursing a latte with a copy of The Guardian tucked safely under their arm. The stuff of Nick Hornby novels, it’s the sort of place where little boys’ names are interchangeable with those of their pedigree pet dogs, such as Oscar, Felix and Max. Tottenham it ain’t.

Anyway, about seven or eight years ago Scottish & Newcastle (S&N) Retail, as it was then, finally got round to doing something with its local managed house — the St Margarets Tavern — that sat in the middle of this middle-class suburb.

Given the location, the way the St Margarets had been run hereto was an abomination. It was a barren place with the car park serving as a safe haven for a handful of white vans, and consequently it was coveted by those in the know, such as Geronimo Inns, Fuller’s, Young’s, Peter Linacre, and Capital Pub Company, who appreciated its latent potential.

Under the auspices of Steve Richards, S&N Retail spent a whopping £750,000 constructing a huge ex-tension that served to more than double the pub’s trading space.

This addition paved the way for the introduction of a ‘proper’ kitchen and facilitated a transition to the
finest interpretation of a modern premium pub, replete with flock wallpaper, leather chairs and open fires, whilst retaining the best of its Victorian charm.

Having generally gentrified the pub to suit local demand, trade rocketed, propelled by a great bar featuring emerging European lager brands, eight different cask ales and good wines; food that was fresh and appealing (not gastro grub but not de-skilled fare either); plus table service and fantastic standards, all supported by a range of activity such as live music and quizzes that good community pubs up and down the land leverage to prize people out of their homes on darker nights.

Role model​

The development was an unqual-ified triumph. Sales went from £4,000 per week pre-investment to peak at more than £50,000 (net) with annual EBITDA not far off £500,000. Richards, now CEO of Novus Leisure, says it remains one
of the projects he is most proud of.

It was in many respects an example of what I love about this business: somebody has the vision to spot an opportunity in the market (whether it’s a one-off pub such as the St Mags, or Côte or Crown Carveries) and then the skill and wherewithal to execute it brilliantly.

Sadly the ability of S&N to pull off a classic triumph of hope over expectation — successfully running that sort of pub — has not been replicated by the ensuing owners of the St Mags. I have watched with a mixture of frustration and bemusement as first Spirit, then Punch, then Greene King, came in and conspired to muck it up.

One of the reasons the pub was successful was because S&N, having spent the money, recruited a very talented and charismatic general manager in Oisin Rogers — and then gave him his head (plus a whacking great performance-related bonus).

To my eye, subsequent owners have sought to heap back control and a one-size-fits-300-pubs ap-proach. Anecdotal examples to illustrate the muddled thinking: Spirit scrapped the pub’s table service, presumably because labour ratios threw up a red flag at head office and someone at Burton failed to appreciate that it was part of the DNA of such a high-take pub; Punch installed Sky and put up plastic bunting flags for the football World Cup; Greene King imposed all eight of its own cask-ale brands on the bar, and started advertising two meals for a tenner.

The proof is apparently in the numbers. Aside from international rugby weeks, sales at the pub are (I’m told) now less than half of what they were.

So, apart from a rather self-indulgent lament about my local boozer, where am I going? A huge question remains as to whether the big managed groups can, when the market demands it, ‘do premium’ — the instinct for control and central process combined with a tethered supply chain gets in the way. This seems particularly pertinent given Greene King’s recent acquisition of Realpubs and Capital Pub Company.

Don’t get me wrong — Greene King is a good mainstream managed-house operator. The re-invention of Hungry Horse is impressive, and Rooney Anand, the company’s ambitious chief executive, seems determined to establish the company as a dominant pub-retailing powerhouse. Few would bet against him.

Relinquishing control​

Around the same time as the original capex project at the St Margarets’ Tavern, Mitchells & Butlers (M&B) started to work on some ‘premium’ concepts of its own.

Except M&B recognised that it needed help in pulling off this type of format and sought out hired help in the form of pub entrepreneurs whose own handiwork had caught its eye.

The most famous partnership — and still going strong — was with Lovely Pubs’ Paul Salisbury. Loosely based on the Boot at Lapworth in leafy Warwickshire, the venture saw the creation of Project Orange, now known as Premium Country Dining Group, which has gone on to spawn more than 70 openings.

The brains-meets-bricks collaboration that appears to have served M&B so well — allowing it to play in that upmarket space while making the two Pauls very wealthy — is yet to really be replicated by other big pub groups. The model — relinquishing control of the front-of-house intel-lectual property (to an appropriate degree) and paying out a decent percentage of profits — seems to fry managed groups’ brains.

Stars on the horizon​

But now a couple of sector companies, Young’s and Greene King, have the opportunity through acquisition to form formidable alliances with some of the pub sector’s brightest stars, namely Jo and Rupert Clevely of Geronimo Inns, now part of the Young’s stable, and Nick Pring and Malcolm Heap of Realpubs, now part of Greene King. These two partnerships are, on paper, the stuff that premium pub dreams are made of — talented operators with the Midas touch backed by powerful organisations with a wealth of property.

With Rupert Clevely safely ensconced on Young’s board and Heap and Pring now on the Greene King payroll, it remains to be seen whether these are the beginnings of long-term, lucrative partnerships or merely earn-out-driven orderly handovers.

Surely there is an opportunity to build relationships of substance, especially given that in the case of Greene King it has in fairly short order acquired around 50 top-level London pub stock.

At a time when lines are blurring between what is managed, tenanted, leased and franchised in a period of innovation, it remains to be seen whether a new model for operating high-turnover premium pubs within large managed estates will emerge.

So far the big players are really yet to capitalise on the wealth of talent that populates the MA250 — a group of multiple operators that have in recent years made hay in taking on and transforming the cast-offs of larger rivals.

The question is, will the likes of Greene King really grasp the opportunity? For the moment, it’s good news, at least in the short term: early next year, Greene King is giving the keys of the St Margarets Tavern — and some capex cash — to Realpubs. Roll on January.

Mark Stretton is a former editor of M&C Report and managing director of Fleet Street Communications. Email znex@sfp.hx.pbz​​