Revolution sales hit by ‘affordability issue’

When Revolution Bars Group acquired Peach Pubs a year ago, it was seen in the sector as an unexpected, but sensible strategic move for the then predominantly late-night operator.

After all, Revolution had experienced the pain of being wedded to a Covid-challenged evening-oriented daypart, and Peach opened the door to an almost opposite demographic – older, suburban, affluent and food-led.

As cost-of-living pressures impact the group’s core Revolution bars brand, and city centres feel the effects of work-from-home and rail strikes, Revolution’s hedge looks even more prescient a year later.

Indeed, Peach is the one part of the business in growth, with the first new pub opening under its stewardship, The Three Horseshoes in Letchmore Heath, near Watford.

But while CEO Rob Pitcher sees growth opportunities in a favourable market, he predicts this is a short-term condition rather than a longer term shift away from late-night.

“I believe that once cost of living crisis starts to abate, we will see value in expanding both the Revolution and the Revolución de Cuba brands, as well,” he tells MCA.

“We’ve got a product that people really love. It’s just that some of them can’t access the brand the way they would like.

“Right now, market conditions would suggest growing pubs is the thing to do, and that’s what we did last week with the opening of the Three Horseshoes.”

Pitcher was speaking after the group released its preliminary full year results ending July 2023.

Total revenue for the year was up £11.8m to £152.6m. However, the group faced “continuous and varied external headwinds”, particularly impacting bars meaning like-for-like sales were down -8.7%.

On the macroeconomic situation, the update painted a bleak picture, with late-night hospitality in particular is facing “very challenging times”.

Despite the difficulties, Pitcher was pleased to have delivered adjusted EBITDA of £6.6m, in line with expectations set in January.

While Peach is doing “very nicely indeed”, up +14.1% LFL sales since the acquisition, Revolución de Cuba, the group’s 30-45-year-old targeted concept is somewhere in the middle.

“Revolución de Cuba is performing very well, its trading well ahead of the CGA bars market, and has started pushing through into growth in a market that’s been reported at minus seven minus eight for the last few months.”

With Revolution, the brand most under most pressure, Pitcher sees its younger demographic as the driving factor behind its underperformance.

“That younger consumer group, 18 to 25 year olds, are disproportionately impacted by the cost of living crisis. While they would like to come out, they can’t afford to do so.”

Pitcher is hesitant to suggest green shoots of improvement, however the return of students has been a welcome boost for the core brand.

“It’s been stronger than it was last year, it’s nice to see the students have come back in good numbers this year.”

Work to improve the numbers at Revolution is starting to have an impact, with the trajectory of sales now heading in a more positive direction.

This has involved looking to provide better value for the customers who are struggling financially.

The launch of main course meals for £2.99 during the summer created a 40%+ swing in food volumes through the Revolution brands.

“It’s incumbent on us to help customers through that cost-of-living crisis by providing better value.

“We know when they can afford to do so, they love to come to us, and we will continue to provide better value to the Revolution guests whilst they struggle with cost of living.”

Again, Pitcher doesn’t see customers moving away from nights out, but sees personal finances as the sole reason would-be customers are staying away.

“People will go where the best value is, and whilst they would love to continue coming out at night, and that’s still the busiest time, there is a percentage that are shopping around on value. We see it as more an affordability issue at the moment.

“Whilst they’re limited on disposable income, they’re going to shop around on value. We see that more as a short-term impact rather than a longer-term trend.”

The CEO remains confident about the group’s offering when customers can afford to come back more regularly.

“Our guests metrics have never been higher across all three brands. Their propensity to recommend post visit has never been higher. We think we’ve got three good pillars for growth in the future.”

One spoiler to this faith could yet be more rail strikes, and Pitcher is desperate they do not blight another festive season.

“There’s no getting away from rail strikes, they take our fortunes out of our hands and put it in the union’s hands unfortunately. We are disproportionately affected by people being unable to travel around the country on rail.”

The company is campaigning alongside UKHospitality, calling for strikes to be rules out over the festive period. Pitcher says the disruption impacts team members in particular, who miss out on their best opportunity for earning through tips extra shifts.

“The great British public haven’t had an uninterrupted festive period since 2019,” he adds. “I think everyone deserves a decent festive period.”