Marston’s chief executive Ralph Findlay speaks to MCA following the company’s results for the six months to 2 April. He reveals that the company’s ambitious new-build programme will now centre around three core brands, including its fledlgling Generous George brand. He discusses the growing momentum in Marston’s Inns and why after a 12% increase in like-for-like room income, there is still scope for more growth. He also says that he sees signs that demand for sites will cool in 2017 and warns that even moderate price rises need to be earned.
Market conditions
Findlay said that in 2016 to date the market had been “pretty buoyant with fairly strong competition” but did not necessarily expect to see that continue.
He said: “I do think that what we are beginning to see is a slight cooling of the market and we expect, based on that, demand and competition should abate somewhat in 2017. I’ve based that assumption on seeing who is bidding on what sites, who we’re coming up against, how many sites we’re winning and losing and how that changes over time. It’s also based on what’s happening in terms of rents in town centres and how flexible landlords are. Based on all that it does seem like the market is becoming a little easier, which is encouraging.”
He reiterated the Marston’s strategy to invest in less competitive areas of the market, adding: “We are mainly regional and suburban and in markets where there isn’t an enormous amount of investment and competition from casual dining and the restaurant sector. That will continue to be our focus.”
Consumer outlook
Findlay said it seemed discretionary spending was holding up in the current climate and that the pub sector continued to be in a good place, in terms of the value it can offer.
He added: “I would make the point that price increases are still pretty hard to get and if you’re going to do it, it has to be linked to something pretty fundamental in terms of service, food quality or ambience.”
National Living Wage
Findlay said the introduction of NLW had not unduly impacted on the company’s forecasts as it had been expecting increases in the minimum wage. He also stressed that there had been no discrimination against workers under 25, who are eligible for the NLW, providing they are in a development plan.He added: “We are also very clear that there has not been and will not be any of the removal of benefits, which some companies have used to mitigate the living wage.
Tipping legislation
Findlay confirmed that he saw no reason for an adverse impact from any legislation on tipping, adding: “For the avoidance of doubt, employees get 100% of tips. We don’t make deductions and we don’t tend to add on service charges.”
MRO
On the debate over the transition period for the pubs code, Findlay said: “Any rational individual would say that if you are introducing new legislation it would be helpful to have an implementation window but we are not currently seeing that in this legislation.”
Premiumisation
In the Destination & Premium arm, premium beer accounts for over 56% of beer sold but Findlay stressed that customers still see pubs as venues for “affordable treats”.
He said: “It is possible to premiumise your offer and increase spend per head by improving products on offer and menu items but what’s really hard is to get away with price rises that isn’t matched by anything tangible.
“Premiumisation is pretty important to Marston’s. We have seen cost increases, including the minimum wage, and we have to manage those and at the same time improve the offer so we’re able to make a good financial performance and give customers what they want.”
Operating formats and food trends
Marston’s has continued to trial a number of formats and food offerings within its estate, often inspired by trends within casual dining.
Findlay said: “We now have fresh pizza ovens in 60 pub restaurants and we’ve been doing that for about three years now. We have also been extending our better burger offer across the rest of the estate.
“Rotisserie chicken is something that we’ve been working on for several years. We now have 40 pub restaurants with rotisserie ovens.
“Generous George is a concept which we started talking about 18 months ago and we’re now up to 14. It’s a much more modern take on the pub with a certain American look and feel to it.”
He added that burrito bars and ice cream bars were both still in trial mode but going well.
One of the key areas of focus going forward will be the non-alcohol category, which Findlay stressed was becoming increasingly important.
New-builds
On the strategy for new-builds, with a target of 20 a year, Findlay said: “Our new-builds are likely to fall into three categories: Generous George, Rotisserie or Two-for-One probably with pizza or carvery. It will depend on the demographics of the area but we see a lot of opportunities in those formats. We’ve been really pleased with the initial performance from Generous George.
Ebb & Flow
Marston’s launched its café-bar concept, Ebb & Flow, in 2014 and currently has three sites.
Asked about its potential, Findlay said: “It’s fair to say that at the moment Ebb & Flow is not something at the moment we’re looking at extending . The three sites we have opened are performing ok but at the moment we’re not looking to extend it.”
Accommodation
“We have to be realistic about growth going forward because 12% lfl growth is quite a high number to achieve. That’s been encouraging and has been driven by occupancy and revpar going up. There are some reasons to suggest we are likely to see further growth in like-for-like income. As we do more the Marston’s Inn brand should achieve more salience with customers and we’re also doing more with our online presence.
“I would expect at least five lodges this year.”
