Draft House founder Charlie McVeigh created his craft beer-led model after a chance meeting with Duncan Sambrook. Now, almost 10 years on, the group is diversifying into food and in outlets out of London, as well as trying to reconnect craft and cask. Mel Flaherty reports
Charlie McVeigh attributes the uniqueness and success of his now 10-strong group of Draft House beer-led pubs to a strategy that must be a headache for his accounts department and that started unintentionally.
He says it boils down to the fact that each outlet chooses what beer it wants to sell. There are certain other lines all the pubs have to stock, but the draught, bottled and canned beer is selected at site level.
“I don’t think anyone else does what we do on this scale. The freedom is really exciting for the younger generation interested in beer and, from what I hear, it means we find it easier than other companies to attract good front-of-house staff,” McVeigh elaborates.
He’d love to be able to say he planned it that way, but is unashamedly candid: “We weren’t organised enough to control it at the beginning and by the time we looked at it properly, we realised something special was happening.”
That something special has helped the company grow from strength to strength, to the extent that it attracted the backing of Luke Johnson in 2012 and has doubled in size in the past 18 months, including its very recently opened pub in Milton Keynes. The site, within The Hub leisure scheme, marks Draft House’s first foray out of London. McVeigh, who admits to being very superstitious, is cautiously excited about the fact that the Milton Keynes site enjoyed the highest ever sales in the group in its first two weeks of trading. It has certainly boosted his confidence that the brand can succeed beyond the capital, however, and underpins his already-stated intention to focus expansion mainly in orbital London new towns, ideally within a manageable distance of less than one hour from the firm’s base in the city.
“We are very keen to find more locations next year. That will, in part, be about continuing London expansion, but it is also about finding towns like Milton Keynes that have a lot of workers and residents but little competition for us,” he explains.
The company’s current running turnover is around £10m, with EBITDA at just under £1m. Like-for-like trading this year has ended up around just 2% to 2.5% up on 2015, largely because a handful of the pubs had a big spike the previous year thanks to the Rugby World Cup.
His preference is for sites that have a minimum square footage of 3,500 (but only this small if there is decent outside space). The firm’s largest pub to date is Milton Keynes at 7,000sq ft. Buildings with existing fit outs mean the difference between spending £75-£100 a foot (as was the case at the 6,500sq ft Chancery Lane branch) to get opening-ready, as opposed to £200 for an empty shell (Draft House’s Old Street site was its first full shell unit). The pubs do offer good food and the firm has recently appointed its first group chef, but McVeigh says the “sweet spot” where profit justifies cost is a 25:75 split between food and beverage, in favour of wet sales. He also wants to appoint a sales manager to drive corporate business and to maximise the unused private spaces that are there by default at some of the sites. The synergy between beer and music is an area he is also literally just starting to explore – he is looking at either hosting music events or, more likely, selling quality beer at existing festivals, which are, on the whole, remarkably lacking in that area.
Since completing a £1.1m fundraising exercise more than a year ago, the group’s expansion has been self-funded and looks set to continue that way, with ongoing assistance from HSBC. The recent rates review will add a not inconsiderable £100,000 to overall costs and McVeigh recognises how much more difficult it is becoming to action quick rollouts, thanks to property prices. But he is feeling positive about the long-term potential effects of the Brexit on the economy and the potential for Draft House.
“My theory is that the casual-dining space is quite crowded, but the aspirational pub space is less so. If that is true, and not everyone I speak to agrees with me, we would be less affected by the perceived saturation in the market,” he says.
The craft beer focus of the brand is not its top priority. McVeigh stresses fun and good hospitality are at the heart of everything Draft House does and that the brand represents an accessible “reinvention of a great pub” rather than the home of the craft beer purist. Certainly the venues’ bright, modern design gives them a youthful rather than revenant vibe that backs up McVeigh’s description of their broad appeal. They are all recognisable as Draft Houses, but are each different in appearance as McVeigh relishes the opportunity to approach every building with fresh eyes and to make it relevant to its particular location.
Like a lot of things in McVeigh’s career story, it was happenstance rather than intent that led Draft House down its modern beery path.
Before all of that, he had started his working life as a business journalist, first at The Telegraph and then on the ill-fated The European. He decided he wanted to be in business rather than just writing about it and became a management consultant, living in hotel rooms around the world for a few years until he got sick of missing all his friends’ weddings. He came back to London flush with cash thanks to his tax-free earnings and all-expenses-paid lifestyle.
A night out with friends in Notting Hill, where he had grown up, led them all to bemoan the lack of late-night entertainment in the area. Resolving to address it, McVeigh contacted a friend of his father who worked in property and discovered plans had just fallen through to convert Notting Hill’s only suitable venue with a late-night licence into residential. McVeigh and his friends bought it. Woody’s nightclub opened in November 1998 and was a huge success, leading to the purchase of
the pub next door and then a restaurant in Notting Hill. The three businesses were successful but had no synergy, all with a different mix of shareholders, and were sold off in 2006-07.
McVeigh then went it alone for the first time and bought a leasehold pub in Battersea, which he unsuccessfully turned into an Italian gastropub, Matilda’s.
By chance, Duncan Sambrook walked in one day to talk about the brewery he was opening behind the pub. This was 2007 when there had been almost no new brewers setting up in the UK for decades, so when McVeigh sold the first ever pint of Sambrook’s Wandle Ale, the idea growing in his head of putting the spot-light on craft beer was ahead of the current curve, even though he readily admits it was evolution rather than revolution:
“It was ultimately like The Emperor’s New Clothes – doing a good pub with good beer.
“Back then there were lots of old men’s pubs with fantastic cask ale, but not aimed at people like me (I was in my mid-30s then and not interested in CAMRA pubs); gastropubs selling wine and food; and ‘kids’ pubs with alcopops and bad music.”
Matilda’s became the Westbridge and its fortunes improved rapidly as the emphasis on beer grew.
It was at that point, McVeigh decided to develop a brand, which he intended to put into practice first at a unit at Westfield London in Shepherd’s Bush. However, in what remains his biggest professional regret, trepidation caused by the fallout from the Lehman Brothers collapse led him not to take the property, which now does storming trade as the Bull for Geronimo Inns.
Instead the first Draft House (McVeigh learnt coincidentally that the new name for his business was the generic term for craft beer pubs in the US) opened in the smaller former Pitcher & Piano in Northcote Road, Battersea. The formula worked so was applied to the Westbridge and has been rolling out, even if not as rapidly as McVeigh would have liked, ever since.
As well as concentrating on expanding his pub portfolio, McVeigh has his sights set on trying to reverse declining sales of cask ales (in his pubs they account for only 8% to 10% of beer sales, and that is falling).
To this end, he is writing a booklet in conjunction with an as yet undecided brewer, to be distributed first within his estate and then hopefully to be published for a wider audience, aimed at putting cask ale right in the heart of the craft beer movement. He says that is where it belongs, given the fact it is such an artisanal product.
“My theory about cask ale is it is facing its second existential threat – the first was the big brewers in the ’60s and ’70s, which were not willing to sell it in their pubs, the second is that a lot of craft beer comes in kegs, bottles and cans. We want to increase our focus on young people, including our staff, as they are not engaging with cask ale as they are with cool bottles and cans.”
Having said that, he emphasises it is important Draft House never comes across as “geeky” about beer. Yes, he may be in his late 40s now, with a generous helping of facial hair and about to embark on a campaign to promote cask ale, but he has absolutely no intention of ever growing into an operator of old men’s pubs.
■ Mel Flaherty is a freelance journalist specialising in the hospitality sector
