MCA talks to Everards managing director, Stephen Gould, on the back of its most recent financial results, with pub like-for-like sales up 2% in the year to 30 September 2018 and 2.5% in the year to date. He discusses consolidation in the beer market; why the managed pub model may be creaking and how smart operators are investing in occasions.

The surprise announcement last month that Fuller’s was to sell off its beer company to Asahi has led to renewed speculation about the plans of the UK’s other venerable family brewers.

In Leicestershire, however, Everards is making a significant statement about the importance brewing continues to play in the “symbiotic relationship” with the 174-strong pub estate.

This year will see the first phase of Everards Meadows, a £30m scheme anchored by a new brewery and beer hall as well a café, cycling centre and other leisure facets, with the site expected to be fully open and brewing from summer 2020.

The project is being funded by the proceeds from the sale of the group’s former brewery in November 2017, as well as a new five-year bank facility with Lloyds, which was signed in December.

Gould tells MCA: “When people talk about Everards there are two things which very clearly come through. One is that we are a family business and the other is that we brew beer. The brewery and the pub business feed into each other and that model is far from broken.

“That’s not to say that brewing is an easy business to be in, especially at our size. There is a lot of talk about the squeezed middle and it’s not an easy place to be, and we’ve seen that with the likes of Fuller’s and Charles Wells recently.”

The group has no plans to recommence the sale of its beer to national pub chains. The decision was originally taken after sale of its former brewery and the temporary contract brewing arrangements made with Robinsons, Jules and Purity.

Gould says: “There’s no appetite to sell into the national chains, given the procurement spend necessary. We think we can enhance our brand credentials through our supply chain, our pub estate and our partners such as Leicester Tigers. We don’t need to be everywhere and focussing on core channels allows us to ensure the proposition is right.”

Asked what he expects to see in the brewing sector more widely in 2019, Gould says: “I would sum it up as continued innovation and a faster rate of consolidation. I think there will be more interest from international companies but there will also be some tidying up domestically.

“If you look at the brands that have attracted backing from the larger players, they have been focussed and professional in creating a brand with a real difference in the market they play in. It’s not enough to be a local brewer anymore – you need to stand out in any market.”

On the pubs side, Gould says Everards is acquisitive but not desperate for growth, adding: “We never set ourselves goals for the number of pubs we want to add. Some years it’s six or seven, some years it’s a couple.”

He says the group would be interested in a group deal, if the right package came about, and that the Lloyds funding allowed for the flexibility to look at group deals.

He stresses that while the group offers a variety of agreement types, it remains wedded to the tenanted model, with no desire to go into the managed arena.

“Firstly, for a managed model to be economically viable, I think you need greater scale than we have. But even if we had the scale I’m not sure that now would be the time to look at managed pubs. There are some great operators out there – Fuller’s and Young’s to name just two – but the market as a whole is becoming very crowded and there is a danger of trying to covert pubs that simply aren’t suitable for the managed model.

“The beauty of the tenanted model is it is led by independent business owners. That taps into a lot of current trends and you see that reflected globally as well. The way the global hotel companies and the likes of McDonald’s have expanded – it may be under the umbrella of a global brand but it is still seeking out independent, local business owners to take the lead in each market and share in that success.

“I would say that the opportunity in the tenanted and leased sector to unlock more profit potential from investing in technology and innovation is greater than in the managed sector.”

The year to 30 September 2p18 saw Everards grow like-for-like pub revenue by 2%, with EBITDA up 17% to £5.9m and underlying pre-tax profits up from £1m to £3.3m. Group turnover fell £1.7m to £29.6m as a result of the cessation of beer sales into national pub chains.