With 18 pubs closing every week, what does the future hold for the 50,000 that remain? The environment seems bleak: increased tax on alcohol, a decreasing drinking culture among millennials and economic uncertainty are three headline reasons for pessimism, but is there reason to be hopeful?
2007 and 2008 were very bad years for the sector; there was already a slow decline, so a double-whammy of the smoking ban and the recession accelerated the woe. There were 60,000 pubs in 2000, now we have fewer than 50,000.
There is no single answer as to why pubs are in decline – reasons vary, depending on who and where you ask.
The smoking ban was a factor cited by many pubs for their decline; the ban removed part of the experience for pub goers and for some it devalued their visits. Supermarkets offering cheaper alcohol along with a huge array of craft beer outlets and online beer clubs have added to the pressure.
The economic environment is harsh. Not only do we have Brexit and interest rate hikes, but there is also alcohol duty and a rising minimum wage which adds to staff costs. It seems the government is doing little to support the sector.
Millennials are more focused on health and fitness than ever before; the lack of new customers is a serious concern for a sector that needs to attract younger drinkers.
In spite of the challenges, many pubs are doing well. The key to success is knowing your demographic. In some locations focusing on food may be the answer, while in others ‘wet-led’ (drink-focused) pubs are more likely to succeed. The first step is understanding the customer. The second step is being flexible enough to implement the right strategy.
According to the Coffer Peach Business Tracker, alcohol sales rose 1.8% over the last Christmas period while food revenues declined by 1.4%. Although food seemed like a great idea in the wake of the smoking ban (and for some it was), the eating out sector has become increasingly crowded and this competition is affecting many pubs that decided to focus on food. Simon Longbottom, the CEO of Stonegate, thinks focusing on “wet-led” pubs is a sensible strategy:
“I think those that are focusing time and energy on the high street pub and bar are having success. It’s a lot more difficult in the crowded area, which the food guys are finding.”
As many clients want a drink-focused atmosphere there are clear financial benefits: it requires less staff to run a bar than run a kitchen.
Innovation isn’t a word you’d normally ascribe to the pub sector, but pub owners are a shrewd bunch and they’re always looking for a way to get more punters through the door. Many pubs are riding on the back of the craft beer boom – there are now over 2,000 UK breweries. Pubs are starting to widen their offering of beers – one pub in Norwich even lets breweries ‘take over’ for a night so that people get a new experience and some new beers.
There are many unusual innovations being tried in pubs up and down the country. On-table beer taps, a range of games, regular events, creating workspaces and building a social media engagement strategy are all ideas that have been tested. Technology is more important than ever – a good TripAdvisor rating and slick Wi-Fi are important in certain pubs – a few have even dabbled with VR.
The pubs that will fare better will have a good understanding of their demographic and give them what they want. There isn’t a one-size-fits-all model, but pubs need to understand that are competing with restaurants, cinemas, bowling alleys, Netflix and Strictly Come Dancing when it comes to winning punters’ time and money – the alternative options are bigger than ever.
Having a clear offering and delivering this exceptionally will win the day; pubs of all shapes and sizes can flourish. There must be room for this flexibility and local knowledge; many pubs are tied to brewers or pub companies for their supplies which can hamper innovations (and increase cost). It’s going to be a tough sector, but there is still life in the pub industry.
Red Flag Alert
Predicting the future dynamics of any market is tough. As we can see with pubs, the permutations are countless. As a business you don’t have time to guess what will happen to your clients, but what you can do is track their financial health. Many suppliers to the pub trade have been badly burned in the past decade so whether you supply into the pub trade or any other, it’s good practice to monitor your clients.
At Red Flag Alert we track every business in the UK and update this information with 100,000 changes every day. Every business is given a detailed financial health rating so you can see if they’re experiencing difficulties, and crucially learn about them in time to do something about it.
Our software plugs directly into your CRM and provides daily updates by email. For a free trial click here.