Marston’s chief executive Ralph Findlay has told MCA the group will continue to land bank sites despite revising down its growth targets for next year.
In yesterday’s interim results the company said it now planned to open 10 pubs and bars and five lodges in 2019 – a net capital reduction of £25m from the original programme.
Findlay said the revision was driven by concerns over weakening consumer confidence and over-supply in the eating out market.
He said: “On the one hand, we are seeing a lot of caution around consumer confidence but then there are more encouraging signs such as the research this week indicating a return to real wage growth. Taking into account the general uncertainty, we felt that it was sensible to stand back and see how that develops.
“We will continue to land bank sites so as and when we decide it’s appropriate we will be able to increase openings if we deem that the right thing to do.”
The first half saw contrasting trading performances, with a 1.8% like-for-like sales decline in the Destination & Premium division but Taverns up. Findlay said the disproportional impact of the poor weather on the Destination estate was at the root of this – with an estimated impact of between 1.5% and 2%.
On the broader performance of the Taverns estate Findlay said: “Unlike the food-led part of the market, the community pub sector has seen a contraction of supply rather than an increase. That has meant that the overall quality is better and the operators who have committed to the sector have invested. They have also benefited from a real explosion of interest in craft beers, spirits and generally more premium products. Gin was up something like 50% in our community pubs in the first part of this year. They have gone from being more traditional community pubs to being quite high energy environments and places where a wider group of people want to spend their time.”
The company is in the process of combining the Taverns and Leased operational teams and that in the full-year results the two segments will be merged for reporting purposes. Findlay said this provided more flexibility in transferring pubs between operating formats.
MCA reported this week on the development of the Firebrand and Accent formats within the Destination portfolio. Findlay said this work was part of a wider move away from a value-led proposition.
He said: “The background is that the level of price promotion and discounting in the sector is widespread and has become endemic and that seems to me unsustainable in a business environment where operating costs are continually rising. There has to be a greater focus on the consumer experience and less on price promoting your way to like-for-like sales growth.
“What we’re doing is all around improving that customer experience – whether that is about driving up service standards through Firebrand or making our Destination pubs, which are essentially food-led, also great places to go and socialise.”
As part of this move away from value offers, the company has so far converted c45 Two-for-One pubs with another planned for conversion over the next two years.
Accommodation has been a key growth driver for Marston’s in recent years and this year saw the group open its largest lodge to date – a 104-bed site in Ebbsfleet, Kent. Findlay said the group would consider further lodges with 100+ rooms but the typical size would be c60. The group is also developing a pub/lodge hybrid model, which is currently in the design stage.
He said the Beer Co presented further opportunities further growth alongside the expansion of the pub estate, in areas such as licensed brands and exports. In the latter category, Marston’s has doubled its scale following the Charles Wells acquisition.
