After a long interview process, which allowed him to get to know Mitchells & Butlers’ (M&B) people, and business fundamentals, and also hear a candid assessment from the board on what they thought needed to be done to transform the company, Alistair Darby admits that there was only one surprise awaiting him when he took up his new role as chief executive last October.
In an interview to mark his first 12 months in the role, which will be published in full in December’s issue of M&C Report, Darby touches on the high quality of the people, brands and pubs he found, but it was on another thing at which M&B had been historically strong that he was surprised to find it had “lost its way a bit” – consumer research.
He says: “Historically M&B had always been strong on guest research, knowing where the market was and where trends were going, which is one of the main reasons why they were so good at brand development. Although there was a lot of consumer research in the business it was very dated. The consequence of this was when the business was under pressure and costs were being cut this development ceased. We were running a bit blind to what had happened to guests before austerity struck. That was the really big piece of work that needed to be done.”
Darby admits that the lack of this data was proving a handbrake to the transformational programme the group wanted and needed to embark on. “There was too much stuff going on, it is difficult to stop this if you can’t decide what to keep,” he says. The first results from this were announced in May this year when M&B set out its five ‘market spaces’ in which to focus, but more insight is set to follow.
Darby says: “Our consumer research didn’t stop in April, it gave us the appetite and desire to go even further. We are doing a lot of activation work across a number of brands to work out how you take a real leap forward on them. For example, we are doing a lot of work on Harvester, because if you talk to young families when they go out they don’t think there are a lot of brands who do families well.”
The group is also ramping up its research into the country pubs market, asking “what are all things that have to be done in a country pub that can make it feel special?” whether that is Vintage Inns, Premium Country Dining or Village Pub & Kitchen. The first fruits of this second stage of this research will be highlighted through the launch of a next generation Harvester site.
Darby has got under the skin of M&B and in doing so has put the group back on the road to what it has always done best; understanding the consumer and developing its business from those findings. The results should be worth keeping an eye on.
Out of here
Last autumn, Tesco chief executive Philip Clarke, in what looked like a further move to distance himself from predecessor Sir Terry Leahy, called a halt to the supermarket space race, as he admitted that shoppers were falling out of love with large out-of-town supermarkets.
So Tesco slashed its UK expansion plans in half with around 110 development sites no longer slated to be turned into supermarkets and a further 40 plots of land next to existing stores were put on the market after store extensions were abandoned. Clarke said: “We’ve looked at all of the schemes that we have in the UK and we’re pulling out of more than 170 of them.”
No other retail sector entered the space race with quite the same ferocity and flexibility as the grocers. From out-of-town hypermarkets to drive-thru click-and-collect pods, urban c-stores to the repurposing of pubs and even churches, the big supermarket groups have left no expansion stone unturned.
So what or who will fill the vacuum. Well Tesco has already answered part of that question with the acquisition of Giraffe and the development of Harris + Hoole. But what about the schemes and more importantly the development space that is now being left open. Over the last five years Marston’s has invested £290m in new big managed pubs. Earlier this year, the company reiterated plans to accelerate new-build openings from 20-25 to 25-30 per year. It opened 22 in FY2013, including its first in Scotland, and over the past seven years has built more than 100. Since 2010 the developments have beaten target returns on capital of 16.5%, representing an investment multiple of 6x EBITDA. Marston’s said 30% of its new builds are in the south, while there are expected to be 25 Scottish outlets in the next five years.
While Marston’s has been more vocal with its strategy, rival Greene King has also quietly stepped up its Hungry Horse new build developments. Fuller’s is also about to enter the arena, with the £3.4m development of Cams Mill overlooking the estuary in Fareham, Hampshire, complete with smart ventilation, heat recovery and LED lighting, making it both sustainable and energy efficient.
Not that the pub sector isn’t returning the complement to its retail cousins in terms of space. The majority of the 202 pubs Marston’s has sold to NewRiver Retail Limited for £90m will be converted to convenience stores operated by the major supermarket chains, a category they increasingly see as the future of retailing.
It seems slightly ironic then that two groups that have so often been in conflict on regulatory issues could now be the answer to each other’s expansion strategies.
