JW Lees: ‘The cost of electricity is devastating our business’

When, as a brewer and pub operator, a 50% increase in the cost of malted barley is “like chicken feed” compared to the increase in the cost of energy, you know times are challenging.

“We are asking ourselves a lot of big questions, like: Do we need as many fridges? And do we need as many lights?”, William Lees-Jones, managing director at JW Lees tells MCA.

While the business is doing what it can to mitigate against the increase in energy costs, “there is no magic wand when your prices double, which is what’s happened to us”.

The family business came out of its energy contract on 30 September, at “what couldn’t have been a worse time” and has since seen the price of its electricity double and gas up 25%.

“The price of electricity, in particular, is devastating our business,” he explains. “If we look at the inflationary pressures on the business, our forecasts for the next year are that between electricity, gas, payroll, food costs, and malted barley, those increases are more than the profits that we make as a business.”

“You then end up in a cycle where think ‘we can either cut costs or we can put prices up’. And I guess we’ll do a bit of both.”

While government support in terms of the Energy Bill Relief Scheme has helped, Lees-Jones believes the government needs to hold the energy companies to account, instead of letting them “rip off the hospitality sector”.

“We’ve got licensees being asked to lodge bonds – there’s a lot of smoke and mirrors and the price of wholesale energy has fallen dramatically.”

Sales have been holding up

Energy costs aside, the business has been performing well, and had been tracking pretty close to its forecasts for the first half of the year, until the end of September, when its higher bills kicked in.

Trading over the Christmas period was also buoyant, with December trade in absolute terms achieving its expectation, Lees-Jones says.

Its retail business saw sales up around 18% overall, and up 7% on a like-for-like basis, with a lot of its sales growth being driven by new sites. And in the build up to Christmas around a quarter of its sites achieved record sales weeks.

Around 20% of sales in its retail business is from accommodation, and while there was some dip in demand in terms of leisure breaks, the corporates didn’t shy away this year.

Turning to staffing, pressure on recruitment has eased but Lees-Jones is expectant that it will be hit with its annual struggle to find seasonal workers come the Easter. “In some areas that we trade in, like the Lake District and North Wales, the seasonal work challenge is just as much about suitable accommodation as skills and wages.”

In order to cope with staffing shortfalls and to improve efficiency, its pubs have cut back their offering quite considerably, with a lot of food specials having come off the menu. And it’s been working better with managers on when are the best times for it to be opening and closing its pubs. But while some might argue that would make sense to shut on Mondays and Tuesdays, as community pubs the business doesn’t want to let down its guests, he says.

Future opportunities

Despite the challenges of the past few years, and those that will come to bare in the year ahead, Lees-Jones believes there are still plenty of opportunities for the business to grow. It is just about to go on site with three big projects – not a usual step for the business in Q4 – including a major refurbishment of the Rain Bar in Manchester, the upgrade of several suites at one of its largest hotel venues and a revamp of one of its pub partnership sites in North Wales.

“We also anticipate there being the opportunity to buy new sites. I think that a lot of independents in particular will get squeezed out – but there is no shortage of buyers. We are looking at a couple at the moment but there is nothing particularly staggering that is on the market.”

Although he believes 2023 is going to be a really challenging year, Lees-Jones says that when he looks back at the rather terrifying fact that he has been in the industry for more than 30 years, his experience tells him that the business does tend to grow when there’s recession. “As a business we tend to take a long-term view. So I know that there will be opportunities for us to buy new sites – I just don’t know where they’re going to be.”