Inside Track by Peter Martin
The prospect of a smoking ban has helped spotlight some of the pub industry’s less appealing habits. I’m thinking particularly of the tendency of too many operators and investors towards business short-termism. Another is the apparent lack of faith this shows in the market’s ability to act with both ingenuity and innovation to counter supposed obstacles – something it has demonstrated it can do on numerous occasions in the past. This week’s poll result in The Publican newspaper that six out of 10 licensees would consider dropping food following a government smoking ban sums up the situation. It’s an understandable reaction if prohibition was imminent, but we are talking about four or five years before implementation. Who knows what the market will be like then, or in what shape even the legislation will emerge? The best bet is that the UK eating-out market will continue to expand, smokers will become fewer (especially among the middle classes), alcohol sales will remain static at best and beer sales will probably continue to fall. So if you are making a long-term business projection, why go for declining markets? But, of course, the long term doesn’t come into it. Some industry leaders, professional investors and analysts have been no less knee-jerk, offering down-beat assessments for the sector. The Business newspaper this week cited M&B’s inability to benefit from the proposal to exempt non-food pubs from a ban as a factor that might cause its "bubble to burst". There may be any number of legitimate reasons for questioning M&B’s future performance, but that can’t honestly be one of them. There are other companies too that believe they can use a ban to their advantage – when it eventually comes – and they don’t have to look far for some inspiration of how to create a winning situation from apparent disaster. The story of the Paddy the Farmer pub in Cork is but one example. Owner Gareth Kendellen saw sales plunge 30% after the Irish ban, so cut a five square metre hole in his roof, opening up it up to the sky. It is now separated from the rest of the pub by bricks and glass. The smoking-hole as brought customers back. He says: "Takings are back to normal, although we have to keep a stoic k of free umbrellas." Irish ingenuity saves the day! When pondering how things can change in just four or five years it is worth looking back, for example at how the coffee shop market has burgeoned. People were telling us not so long ago that coffee was just a passing fad. It is now one of the fastest growing sections of the market, and shows no signs of slowing down. Martin Info’s latest figures show that Starbucks, with 414 branches, and Costa, with 359, are now among the country’s top 10 eating-out brands, while six out of the top 10 fastest growing concepts are coffee-based. Caffe Nero is also making money. Starbuck’s "third place" is now part of the British urban way of life – and the US leader is now looking to evolve the experience even more. It is installing kiosks in some of its US stores, called Media Bars, to allow customers listen to digital music and create their own compilations. The next phase will be Hear Music Coffee Houses, the first of which have opened in Santa Monica and Berkeley, California, which will be music stores first and coffee shops second. These may be seen as loss-making gimmicks at the moment. Innovation is sometimes like that. But who knows…in five years? The question for the pub industry remains the same. Why be so downbeat about the future? I suppose it depends on whether you believe uncertainty and change is a good or bad thing?