On reflection: Ian Payne talks company deals, Covid and celebration cake

Ask Stonegate Pub Company founder and chairman Ian Payne why he is passionate about the industry and he will recount the time he was sitting with his senior team in Greene King’s Hillfield Farm pub in Solihull, on “a horrible wet day”, awaiting the news that he could go ahead with the purchase of the Ei Group.

It was March 3, 2020, and the contingent had enjoyed a “very nice breakfast” and a good chat with the pub manager when an employee suddenly emerged from the kitchen cradling something in his hands.

Approaching the group, which had not yet received confirmation from London to say it had court approval to proceed with the acquisition – the pub worker said, “congratulations on doing the deal – we made you this cake”. “And that is why I love this business,” Payne exclaims. “Where else would you get that?”

Cause for celebration would unfold later that day when Payne learned that he would be able to proceed with the £1.27bn Ei Group purchase, creating the UK’s largest pub business due to EiG’s 4,000-strong pub estate across England and Wales.

Yet, in the space of 17 days, that sense of elation turned to sheer horror as the grim reality of Covid-19 began to sink in. In a fireside chat at MCA’s Pub’s Conference, Payne recalls: “I’m sitting there with a £1.5bn debt…and no business. [It’s] something I never want to go through again in my life.”

Now the beleaguered hospitality industry faces further obstacles in the form of staff shortages and rising fuel and food costs, but Payne remains resilient.

“I know we have been hearing a lot about the problems the sector faces, but whenever my people tell me we’ve got problems, [I] talk about March 2020 when we didn’t have a business.

“We’re open. It’s now down to us as managers to manage through all the issues that the industry is facing. At least we’ve got an opportunity because our business is there.”

‘Being on the ground is the most important thing’

So, what is the secret of Payne’s success, and is there anything he avoids? The industry stalwart has an intense dislike of head offices “because you don’t actually learn anything”.

Of course, he spends time with investors and the senior team, but Payne cites being on the ground as the “single most important thing”.

“People sit there and tell me what they think I want to hear,” Payne says. “The only way to find out what’s going on is being out in the field, out on the sites, talking to the people that run the pub.”

In 2022 alone, the business has set aside £180m for 150 pub investments, above £100k each. “I’ve tried very hard during the course of the year to see every single one of those,” Payne says. “That’s one of my absolute key things to do. Are we spending our money? Are we getting a return on the money? The only way I find that is by going to look at the site itself.”

Nurturing and developing long-term relationships, he says, is also key as it builds trust and the ability to deliver.

“If you’ve got a good track record that helps an awful lot, it helps with your potential investors, with your backers and with whoever it is you’re trying to do the deal with on the other side.”

Payne is also “proud of the fact” that he worked for Bass. “We have an association called The Old Bass-tards and [have] an annual lunch,” he says fondly. “It’s amazing how many people at the top of this industry came through that Bass network.”

‘I love buying in areas where we are weak’

Despite the size of Stonegate, Payne says the business still looks at every opportunity that comes to market.

“We go through a number of things. Does it fit with us strategically? Secondly, does it fit with our business geographically? I particularly love buying in areas we are weak in because I work on the basis that we must be taking it from somebody else and not ourselves, and, of course, is the price, right?

So, what does the future hold in store for Stonegate? Transferring sites from tenanted to managed will continue apace with the aim of hitting almost 200 by 2023.

Meanwhile, the business is also exploring the world of premium food.

“We bought Hippo Inns 100% so we could use that as the basis to set up a premium food division,” Payne says. “It’s much, much harder to sell premium food than it is to sell liquor for all sorts of reasons, but it’s an early start.

“We’ve only done three, and there’s another one on-site at the moment, and it’s going to take time, and I’m sure there’s going to be a lot of tears and sweat, but we will get there because it’s the one gap in our portfolio that we need to fill.”