Since its establishment in 1827, Hertfordshire-based brewer and pub operator McMullen & Sons has survived eight recessions, three depressions and two world wars, according to joint managing director Heydon Mizon. Nonetheless, he believes Boris Johnson calling last orders on its pubs on 20 March and the ongoing uncertainty surrounding the Covid-19 pandemic hit the business hard.
“Despite monitoring the spread and impact of coronavirus – including reading about the impact of SARS and Spanish Flu – the abrupt cessation of trade was brutal,” he tells The Morning Advertiser. “Business school and management training does not include a chapter on global pandemic forecasting.
“The decisions we make are with the intention to reopen, within a medium time period, albeit into lower levels of demand. If timelines vary significantly, we have made some wrong calls and that level of uncertainty is uncomfortable. A lot of people rely on each business and no one wants to let people down.”
Humbling response from tenants
Mizon’s joint managing director, Tom McMullen, has used some of his time in lockdown to delve further into the family brewer’s archives to study up on the business’s response to the Spanish Flu pandemic in 1918.
“While it provided some potentially worrying precedents, it did confirm the importance of the family’s conservative approach to a largely freehold focus, avoiding debt, high dividend cover and having a balance of the people leading the business,” Mizon says of his colleague’s findings.
Yet, while facing up to its latest challenge, the team at McMullen is determined that the business’s 193rd year won’t be its last.
One of the first steps taken to protect the operator of more than 120 venues – predominantly found across the northern Home Counties – was to take advantage of the Government’s Coronavirus Job Retention Scheme (CJRS), and move pub teams on to furlough, with top-up payments made to managers.
“The first impact was concern among our people,” Mizon explains. “Communication channels in the business are strong – we’ve been communicating daily, mostly by video, to the entire team, which we know has provided comfort.
“The pubs have been mothballed with a focus on reopening, this included the removal of all draught beer from cellars – the senior leadership and delivery teams dragged each full barrel out prior to closure.
“The finance team has worked hard on balancing the need to protect cash flow but to also pay our suppliers, who we rely on and whom rely on us.”
Mizon adds that the response to the crisis from the company’s wider team and tenants has “humbled” its board. “The main themes have been relief, gratitude and thanks,” he says.
“During closure, the team has supported the board. We didn’t have to ask twice for anything to be done. Instructions were, at times, hurried and scant on detail, but the team delivered.
“The main concerns for the board now are ensuring that we can continue to pay everyone on time and the continuance of the CJRS, into and during reopening, is vital.”
Waiving tenant rent
While McMullen has continued to brew and sell beer from its Hertfordshire home – even setting a new weekly sales record – Mizon revealed that the closure of its pubs has presented the group with a host of on-trade obstacles.
In addition to necessitating use of the Government’s furlough scheme as mentioned, and a capex pause – which means McMullen has put the brakes on several acquisitions and investments including a new-build pub and two London openings – the shutdown has yielded questions over cash flow.
“While McMullen has a strong balance sheet, a lot of stakeholders rely on us and we have to pay what we owe,” Mizon explains. “Determining how we do this has been tricky because cash flow forecasting has been volatile as Government interventions help or hinder us in turn.”
What’s more, non-payment of commercial rent by larger businesses has had a sizeable impact, according to Mizon.
“We are in this together with our smaller, licensed tenants, and [we] are waiving commercial rent where businesses are closed,” he says.
“However, our future pub pipeline includes licensed and non-licensed assets, where we are the freehold owner but not yet in occupation.
“The unilateral non-payment of any rent by some businesses much bigger than us seeking to protect their business at the cost of our ability to support our pub teams and pay suppliers was disappointing. We continue to pay rent to our landlords when due.”
Doing good when possible
Before the end of April, McMullen is on track to provide a contactless pre-order shop for NHS staff and key workers at one in 10 of its managed houses, in order to offer them fresh produce via the pubco’s suppliers.
According to Mizon, the brewer and operator is looking to roll out the concept into as many towns in its core trading area as possible.
“We decided early on to do good things where we could,” he says. “Our teams have supported the community that we serve, this has included donating all fresh food to local worthy causes, including NHS and key workers.
“All of our teams have been encouraged to volunteer and their daily sharing of good deeds, big and small, has inspired us, from litter picking to food banks, collecting medical supplies, shopping and cutting gardens for the local elderly.
“We now have daily cooking lessons, keep-fit classes, quizzes, music appreciation and a photography course is coming online too. People will remember how we acted during this time, when we reflect, we want to be proud of every decision we made.”
Flexibility will be important
Discussing the post-pandemic landscape in the UK on-trade and the impact on McMullen, Mizon explains: “The immediate impact will be a significant profit drop, something we haven’t seen for quite some years.
“Flexibility of thought, a willingness to adapt and a focus on efficiencies will be important in a subdued trading environment, with the inevitable nervousness around close contact. People will remain vital to the pub experience.
“We may take some of our pub pipeline into our own trading division sooner than expected and will look for other freehold opportunities – possibly taking on a small level of debt to help drive reopening growth.
“Our future will be in quality, freehold pubs, growing with little or no debt. Our focus on growth, both of our people and the business, will continue. Recent weeks have shown that we have some talented and valuable individuals that can play a larger role in our future, I look forward to that.”