Duncan Garrood, chief executive of Punch Taverns talks to M&C about his first few months in charge and his vision for the future. He explains why he is ‘furious’ at some criticism levelled at the company, why the pubs code has already had unintended consequences, sets out his view on a VAT cut and explains why the company would consider carrying out its own sensitive redevelopments of surplus land around pubs.
Duncan Garrood joined Punch in June after spending six years with Middle East based retail franchise operator MH Alshaya, where he was President of Food. Speaking to M&C at the latest of the company’s roadshows in Romford, Essex, he said he had spent his first few months immersing himself in the pub sector.
Asked for his initial thoughts on the scale of the challenge presented to him, Garrood said: “A lot of good work has been done and I have seen some fantastic investments. Unfortunately that is still only a moderate proportion of our business. There is a lot that remains uninvested. We are not alone in that in the industry. One of my absolute commitments is to keep the level of investment going. We need to make sure it’s appropriate but pubs that have received investment are in a much better position to compete – not just with other pubs but with casual dining, coffee shops, supermarkets.
“There’s a lot still to do but I’m very encouraged by the work that has been done so far.”
On his vision for the future, he said: “For me the individuality of the pub and its ability to cater in a very specific way to its particular community is one of its great strengths. Where we differ from chains is that each of our pubs is tailored to its community and reflects the character of that individual licensee. The Great British pub has survived throughout the centuries because it has been at the heart and soul of its community and its future is in doing exactly that.
“What does it require to do that? Continual refreshment – what the community wants from its local pub will change over time and we have to be ready to adapt to that.
“We know that alcohol consumption is going down so we need to continue to innovate in our non-alcoholic offering and make sure we are offering an environment that people want to spend time in even if they are not drinking. We have to find ways of getting transport for people going to and from pubs so that if they do want a drink they can get home safely. We have to provide an environment that works for a broad spectrum of people – from families to business people to students. It is about segmented pubs giving appropriate offers depending on what the local demographic wants.”
Criticism
Garrood admitted that one of his biggest challenges coming into the business had been taking on board some vocal criticism from some licensees and campaigners for pubco reform.
He said: “I think the word I would use is bemused.
“The Punch Taverns I joined is made up of a very passionate, committed, capable group of people who are committed to the continual improvement of our pubs and to serving the communities we are in. Yet anyone looking at a lot of the stuff that is written about us would be forgiven for thinking that we are actively willing our licensees to fail and are only interested in seeing our pubs turned into convenience stores. I find that idea absolutely absurd. Why would I want our licensees to fail? Quite apart from the fact that it costs me £50,000 every time a publican fails, why on earth would it be in my best interests for a pub to be unsuccessful?
“Some of it is steeped in history, some of it probably comes from a bit of self-interest but all of it seems to me to be misdirected anger. We all have the same goal – to create the best pubs we possibly can – and that is what should unite us. We should all be pulling together to promote the positives.
“I’m furious that it doesn’t reflect the reality of what I have seen so far in this industry.
Pubs code
Garrood said he was keen to keep up a dialogue with the Government over the implementation of legislation governing the relationship between pubcos and tenants. He confirmed that Andy Slee would continue to represent the company in discussions over the pubs code, on a freelance basis.
He said expected discussions to resume and formal consultation to begin from mid-October.
On the company’s response to the pubs code, he said: “We have to approach this from the starting point that we should be offering such a good service and support system to our partners that they wish to remain with Punch –that the value they get from the partnership means it simply doesn’t make sense to leave that behind.
“I recognise there will be people that will want to try the alternative but until we see how that will come about we can’t say how we will manage that.”
Garrood said the legislation in its current form, and specifically the inclusion of the Market Rent Only option, was “in danger of discouraging investment”.
He said: “At the moment any investment that is going to pay back in more than five years cannot be guaranteed to make a return therefore it makes no commercial sense to make that investment. Our responsibilities go far beyond the commercial but we are a business and we need to know that our investments make sound financial sense. In fact 80% of our investments take longer than five years so that puts us in a very difficult position.
“We support the pubs code and have supported the voluntary framework for many years – in fact going above and beyond that. All we ask is that before any parts of the legislation are enshrined in law people understand the potential unintended consequences and that they are thought through.
“As someone coming in from the outside and looking at this I think there are unintended consequences already in terms of the discouragement of investment.”
NewRiver Retail
Last month Punch announced it would sell 158 pubs (150 from the non-core estate and eight core pubs) to NewRiver Retail.
Garrood said he was disappointed at the misconception that these pubs were being sold to be converted into convenience stores insisting that each one had been sold as a going concern.
He said: “As I understand it NewRiver was pleased with the performance of the Marston’s estate and wanted to make further in-roads into the pub sector. They have said publicly that they are keen to keep these pubs as pubs and that they are committed to the sector.
“They have also been perfectly upfront about their intention to look at those sites and see if there is scope to develop surplus land. But the emphasis in terms of adding retail or residential development to that lad was very much on the ‘and’ not the ‘or’.
Asked if Punch had considered developing surplus land on some pub sites itself, Garrood said: “Where it makes sense we would consider it. And it’s not just about retail. One of the things I wanted to take my time to review was what we do for communities. We know that community facilities have changed, whether that be post offices, community centres or local shops. I believe pubs have a role to play in that. Are there opportunities for us to offer facilities of whatever nature is right for that community in a way that makes commercial sense for both us and the publican? If there are then we will look at that.”
Managed
Punch currently operates seven sites under the Champs sports bar banner as well as 12 under the Mighty Local wet-led community pub model. It will also launch its Brewed & Baked licensed coffee shop concept in East Lothian next month.
Garrood said the company was keen to look at different operating models and said he was pleased with the performance of both Champs and Mighty Local and was eager to gauge the response to Brewed & Baked.
He said: “We are still reviewing all the various options we have and what we have to be very mindful of is that we are growing in line with the capability and capacity we have within the company. We will only make any commitments on what is appropriate and what we have the ability to achieve.”
Restructuring team
Earlier this month Garrood unveiled a series of changes to the responsibilities of his senior management team.
These included chief operating officer Neil Griffiths becoming chief strategy officer and Steve Dando moving from finance director to chief financial officer. Andy Crump, formerly of McDonald’s, who has headed up the group’s core business in the north west since 2012 became operations director for new division Falcon.
Paul Pavli, who has been operations director overseeing the group’s new business division, was appointed to the role of operations director (South), whilst Giles Kendall became operations director (North). It is thought that Pavli will veer more toward overseeing the core estate and Kendall the non-core one.
Garrood said: “Any CEO coming into a business will want to look at the focus of the company. What I have done is change some of those focuses. I have split my team into three areas – those focused on driving results, those looking specifically at support and those helping shape the future of the business. They are the same people but with a revised focus.
“Will there be further changes in the future? Inevitably yes but the changes I have made so far will take some time to bed in. We are having a look at what approach we take to the market and the intention is that at some time in November we will be in a position to talk to people about how we are going to approach a whole variety of challenges that face the business. My belief is that that management team we have in place is absolutely the right set of people to take this company forward.”
VAT cuts
Garrood said: “There is a lot of talk about VAT cuts and I can certainly see the attraction of that but on the other hand I can understand the Government’s reluctance to lose that tax revenue. All I ask for is a level playing field. Why would you not want to encourage people to come together in communities to use something wonderfully unique as the Great British pub is? We hear MPs talk about the need to avoid pub closures – why would you penalise an industry through taxation when you could support it?
“All we are asking for is the support to continue what we have been doing – continue to improve hospitality, continue to invest in the quality of the products and the environment in which they are offered. If we can do that then I genuinely think we can match the growth our friends in casual dining are seeing.”
Message to licensees
Asked for his message to Punch publicans on his vision for the company, Garrood said: “I sincerely believe the Great British pub has a bright future and that future is going to be achieved by offering the very best experiences in hospitality that we can. What we have at the heart of Punch is a really powerful partnership – we can offer the support through our variety of packages and our knowledge of the industry to help entrepreneurial licensees who know their communities inside out, create a great pub.”
