Future looks bright as pub closures slow

Every cloud, as the old adage goes, has a silver lining. Despite the trade still losing around 21 pubs a week (CGA Strategy 2016), the number of weekly closures has started to fall and new openings have become more frequent, helped by the many multiple operators eagerly searching for new sites.

Figures published by the Campaign for Real Ale (CAMRA) last year, showed the biggest reduction in site closures in recent years, making the fact the UK has lost a fifth of its pub estate in a decade a little more bearable.

And here’s that silver lining: giants such as Marston’s are adding increasing numbers of pubs (mainly new builds) to its estate. In 2016, for example, the pubco and brewer opened 22 new pubs and bars, creating 1,000 jobs.

What’s more, Marston’s recently told The Morning Advertiser (MA) it was likely to open more than 30 new pubs this year, some of which will be wet-led.

This particular Burton-on-Trent-based group is not alone in its mission to expand its empire, the trend is spreading through multiple operators big and small.

Last month, Seafood Pub Company founder Joycelyn Neve pushed her young company across the Roses’ border into Yorkshire for the first time with the acquisition of the Red Lion in Harrogate​.

She says: “We have been looking at entering Yorkshire for some time and, as a striking and well-located site, it was exactly the sort of property we were looking for.”

Neve, whose company won The Publican Awards Best Food Offer award two years on the trot, in both 2015 and 2016, says the group is always actively looking for the right sites to aid expansion.

Another growing business, New World Trading Company, is no stranger to launching new sites and CEO Chris Hill has never been secretive about his ambitions to develop his group’s estate.

Following a £23m investment from NatWest, Hill tells MA​: "We are in no rush to open new sites, but doing them properly, making sure we get them in the right locations and with the right teams, is more important than the number of sites we do.”

While many pubs are opening, these figures are still outweighed by the closures. Suburban areas are worse off, with 317 pubs closing in 2016, compared with 231 in rural areas, according to CAMRA.

Pubs staying as pubs

Yet, the industry and even the public, are working harder than ever to further reduce these closures – action that CAMRA chairman Colin Valentine extols, although he adds: “The rate of pub closures is still alarming and unacceptably high.

“Most of these lost pubs will have been precious to the people who used them regularly.”

However, managing director Paul Pavli of Punch’s Mercury division, previously the pubco’s Turnaround department, disputes the closure figures.

Pavli says: “The number of pubs closing is reducing, but it is whether you believe the number. For Punch, as a business, very few pubs close never to reopen.

“We do sell pubs. Every year we will sell roughly 100 from the current business and that is the plan for the next three years. From those 100 pubs, most, I would say, we sell as pubs.”

The business also invests significantly in its sites – about £57m a year – he adds. “This means pubs do close all the time, but they are closing for refurbs or because somebody has left.

“When this happens, we have to find an operator who has got the vision we have for that pub and then we invest in it with them and reopen it.”

Property agent Christie & Co’s figures echo Pavli’s thoughts, stating 83% of the pubs sold in 2016 remained as pubs​, with just 6% converted into non-licensed premises, such as houses.

The company’s managing director for pubs and restaurants Neil Morgan says the legislation protecting community pubs plays a big part in the number of sites remaining as pubs.

“There are cases where pubs sold for residential use did still have life in them as a viable pub business,” says Morgan.

“On the other hand, I’ve seen unsupported pubs that have really lost their way [and remain open].”

British Beer & Pub Association chief executive Brigid Simmonds celebrates the number of managed sites rising over the past couple of years and praises the innovative operators behind them. She says: “We have seen a welcome slowing in the rate of pub closures."

She adds: “There is still tremendous diversity of business models in the sector, both in terms of ownership and business size.

“I think that is good for the industry, and for customers, because it creates great diversity in venues.”

Adversity breeds innovation

This is all relatively good news, but there are still challenges to be faced in the years ahead, as Association of Licensed Multiple Retailers chief executive Kate Nicholls outlines: “A restrictive legislative environment and fierce competition in the form of very cheap off-trade alcohol have made trading tight for many operators.”

Back to that silver lining, though, Nicholls adds: “Adversity breeds innovation and many businesses in the sector have reacted incredibly well to a challenging marketplace and evolved their offers accordingly.

“Since the financial crisis, one in eight of all new jobs created in the UK have been in pubs, bars and restaurants.

“In recent years, we have seen something of a renaissance in high-street dining with the boom in casual-dining brands and a shift among younger customers towards eating out.

“Costs for businesses are continuing to increase but there is a chance for operators to make a real success of themselves and we are seeing innovative brands do a great job in reacting to difficult conditions and continuing
to grow.”

In short, the challenges have created a number of maverick pubcos with specific identities and unique selling points that has, in turn, also created a new type of customer.

This new punter is more easily catered for by independent businesses, according to Charlie McVeigh, founder of maverick pub group Draft House, who succinctly describes what is going on: “Customers’ expectations of quality, consistency, cleanliness, standards of maintenance, standards of service, standards of training and standards of product knowledge have gone up to such an extent that, as a group, it’s much more straightforward to invest in all those things,” he says.

He concedes that Draft House doesn’t always get it right, but says the business is agile and reactive, allowing it to work towards getting it right as much as possible.

That ability to flex the business to cater for different needs is something on which McVeigh pins some of his company’s successes. For example, while his 10 sites are mainly wet-led, there is a food offer that plays a pivotal role, especially at lunchtimes in busy London City sites.

He says: “It’s really about being able to flex between the two things (food and drink), because of market demand changes.”

There are many negative things to be said about the pub trade. Some are true, but it isn’t as dark as the majority on the outside believe it is. The silver lining is much thicker now than, say, five or more years ago.

Whatever the future has to throw at the sector, pubs have had to deal with far worse in the early months and years after the smoking ban and the financial crisis. Now the trade is moving back to being on a more even keel.