When asked what made the Craft Union Pub Company an attractive element to the acquisition of Ei Group, operations director Frazer Grimbleby has a simple answer to a seemingly complex question.
According to him, its simplicity is what made it particularly appealing to Stonegate. And with 500 pubs and counting – only seven years after its launch – simplicity is no mean feat.
“We deliver an unrivalled community engagement proposition,” he tells MCA. “The model is simple: self-employed and incentivised. Why wouldn’t they be attracted to that?”
Before and after Stonegate
Despite exponential growth, an acquisition, and a pandemic, Craft Union has always kept its model uncomplicated, according to Grimbleby. A food offer was quietly and briefly trialled some years ago and ended with the conclusion that the estate of wet-led community pubs required little more than what they already offered.
“There’s no requirement for food in our proposition,” he says. “We’re entirely focused on the wet-led experience, which is what makes us so successful.
“It changes the complexity of the model, and simplicity is what helps us deliver the business at pace and scale.”
The remainder of Stonegate’s estate has pubs more focused on food, and “therefore we leave it to them.”
“We have a sense of union and togetherness developed with our operators and teams, not just customers,” he says.
“The philosophy, value, and proposition has not changed at all post-Stonegate – what has changed is the amount of support, structure, and experience around us.”
Stonegate’s ownership has helped run a business with scale, owing to investment in the operating structure and continued confidence despite the pandemic – which allowed for a period of consolidation and reflection, he says.
“It added immense value and put us in great shape to get those foundations and structure absolutely right.”
The core offer will remain the same as the business grows, despite moves to premiumise the drinks range and amp up the marketing strategy.
“The sense of quality and value will maintain as we scale…we think big but act small.”
A strategy of growing the estate combined with a cycle of reinvestment has allowed Craft Union to be “a driving force in the recovery of Stonegate,” Grimbleby says. With double-digit sales growth over the past year, the company has invested in 65 pubs within its estate, while implementing further segmentation over the past year.
“We’ve segmented further than neighbourhood and high street…this served us well in the past, but now we need to understand how each pub can serve its individual community.
“This could be regular daytime older customers, midweek quizzers, sports customers, weekenders, or a 20-something crowd on a Friday night.”
Premiumising while remaining value-conscious
As the estate increasingly attracts a younger demographic, it will broaden its drinks offer to appeal to a more premium late-night market – installing Birra Morretti across its estate, for example – but remains “free from the complexity of working out what food trends are.”
Premium products have therefore seen strong like-for-like growth and are overindexing, albeit the core draught range remains strong.
While under-25s have become a new target demographic, Craft Union’s core consumer won’t be forgotten, with investment in its sports viewing experience also on the cards. While the business has had little trouble pulling customers back in after the pandemic, modernising where necessary and “moving with the times” is key, Grimbleby says.
“Everybody has a 45-inch TV at home, so it’s about how to enhance our sports entertainment offer and make it next level.”
The business has yet to see a drop in average spend but has noted a drop in frequency.
“When people are out, they’re out and spending. If people can have one instead of three experiences a week, we have to make sure that one experience is great.
“We operate in the value space and understand the value customer, but they’re changing in their habits. They want a more premium product but also the value experience.”
The community pub on the high street
A blend of neighbourhood and high street locations have allowed Craft Union to thrive, albeit the neighbourhood business outperforms its counterpart, and increasingly so following the pandemic. For the 80-strong estate within the M25, consumers are more likely to stay local as they work from home and have been drawn back into supporting local businesses.
“London was slower to recover, but it’s now very buoyant and ahead of other geographies in terms of growth. The rest of the country has behaved in the same way for us.”
The company has had to implement price rises, but no more so than the competition and it retains a strong commitment to accessibility, according to Grimbleby. As it adds more premium products, those will be priced accessibly as well.
“The midweek and daytime business remains resilient. We think we are seeing people trading down to us,” he says.
“We prepared for a real downturn in January, but we only dropped to 80% of run rate sales – our customer base is consistent and regular.”
While the high street has been “harder work”, Grimbleby points out that customers do want to stay out late but stay local.
“Post-pandemic, the younger customers couldn’t get to the bars quickly enough. Now they’re starting to trust in their local. We’ve got to make sure we have the right offer to appeal to the younger generation.
“Ultimately, even when we’re on the high street, we’re still the local community pub on the high street.”
The model
With pubs under an operator agreement, optimising earnings for operators is essential. Elements of the agreement changed in November 2022 to offer benefits that set Craft Union apart from its competitors, Grimbleby emphasises.
Operators now get a 10% share of earnings from machines and games, and see a 10% share of incremental profit created in each pub year-on-year. While they previously earned 18% of weekly net turnover, the percentage has risen to 19.5%-20% on average and is uncapped.
“Some are now earning in excess of 25%,” Grimbleby adds. “Everyone is always working for every single extra pound and that enables us to be profitable.”
As a result, staff retention is strong. While operators are dealing with the pressure of minimum wage increases, Craft Union deals with utilities and the cost of goods.
“We carry the burden of all that – we don’t want to pass it on to our operators at all. We want to retain them for the journey and take them with us.”
A restructure last year means there are now separate teams looking after the existing estate and new acquisitions, while a new development programme has been created to offer workshops tailored for operators.
The average number of pubs per regional manager has been brought down to 15 as well.
During the pandemic, teams focused on community outreach in the form of charity and other initiatives, which has given the business “credit in the emotional bank account.”
“That’s given us payback by building trust and confidence…people were nervous about coming back out, but we were there when they were ready to.
Looking ahead
After opening its 500th site in March, Craft Union will look to continue growing at a similar pace over the next five years, while reinvesting in its core estate and keeping the proposition fresh.
The future pipeline will continue to be spread across England and Wales with an even split of high street and neighbourhoods, albeit with a broader target demographic than before.
“We’ll have a broader range as opposed to just the value-conscious customer,” Grimbleby says. “That opens up our ability to go into certain geographies and populations we wouldn’t have gone into.
“We want to keep it fresh and evolve the proposition through a good cycle of reinvestment.”
Relationships forged with Stonegate during the pandemic have only helped the business.
“We joined forces on 4 March 2020, and then were locked down into the pandemic furore. What it did do is brought us together very quickly.
“Good things came out of the pandemic – relationships and resilience. Our philosophy of placing quality pubs in the heart of communities remains the same as it was at the beginning.”
