Stuart Bateman, managing director of Batemans, has told M&C Report that the impact of progressive beer duty is forcing the family brewers to look at other revenue streams.
However, he said he does not think the Government will act to end the disparity of the system until “a number of established family brewers go out of business”.
He said after three years of testing its managed model the company was now ready to focus on acquisitions.
The growth strategy, headed up Bateman and newly appointed retail director Linda Green, will focus on buying managed houses and converting tenancies to the company’s managed franchise, or ‘manchise’ agreements. However, Bateman said he would not rule out adding to the tenanted estate. The 62-strong portfolio currently has just three managed sites and one franchised but Bateman said his aim was to have an even divide between the three models.
He told M&C Report the strategy had evolved because of the pressures facing family brewers.
He said: “I know of a wholesaler that is able to buy beer from a recently established brewery at nearly half the price that it costs us to actually brew it.
“The way in which progressive beer duty works is making it more and more difficult to pursue a constructive, viable, development beer and brands strategy.
“Supply is starting to outstrip demand and there are smaller brewers who are benefitting massively from being able to sell their beers at a very low price. This means that breweries such as ourselves need to start looking at other aspects of our business beyond brewing and brands and seeing how we can develop these. “
He said the Government needed to examine how to help “those breweries that are being squeezed in the middle that aren’t much benefit from either progressive beer duty or economies of scale”
He said: “They should raise the lower threshold below which those breweries get the half duty relief. I do think one day that is what will happen, but I’m afraid that what will make the Government sit up and listen is when there are a number of established family brewers, who are big employers, go out of business.”
He said the company’s work over the last few years on its managed estate had put it in a good position for expansion across all three models.
He said: “The franchised houses are really watered down managed house operations as opposed to a tightened up tenanted operation. So it is our view that you cannot run a franchise operation unless you are able to effectively run a managed operation.”
He said the franchise model would work for pubs taking £5,000 to £8,000 a week while managed houses needed to bring in £8,000 t0 £12,000 a week.”
He said the company had been approached by potential franchises and said that in the case of existing tenants it would be their choice whether to move across to the new model.
He said: “It needs to be the right person at the right pub.
“We don’t want to try to be all things to all people. We run quality community pubs with top quality products and good customer service with a reasonable accommodation offer. We don’t want to be involved in gourmet food and neither do we want to be involved in value offers ,nor are we kids’ pubs – we know what we’re about and we are making sure we are as good as we can be at that.”
The company has 12 pubs on the market at the moment with “a number of them” being sold for development.
He said: “If you look in Wainfleet, where our brewery is based, there were three pubs – one of them has been closed and will be sold for development, another is on the market for development. What we have committed to do with the remaining one is spend £150,000 on developing a great pub.
“Our aim is to put three environments into one pub because we want to service the whole community. We may even include a small museum, and a small library and meeting rooms for the organisations and societies within the village.
“People now expect more and better and so they should. To provide more and better does require a company to invest. There are certainly things the pub industry can do to entice more people through the door but we are never going to get back to the situation of 20 years ago when people went to the pub four nights a week. We have to adapt and change the business model accordingly.”
Bateman said all acquisition prospects would be considered but that the company was not actively looking for trade opportunities.
He said: “We would look at group acquisitions and we have made a number of enquiries. Often the problem is that within the ten pubs you buy you will have three great pubs, four that are ok and three duffers. The question is what do you do with the duffers?”
