Joule’s Brewery managing director Steve Nuttall has told MCA that the group is to focus on an organic growth rate of two new Brewery Taps a year.
He said that after a period of consolidation – during which it acquired the full brand ownership of the Joule’s trademark – the group was keen to add to its estate of 39 Joule’s Tap and three unbranded pubs.
He said no disposals were planned and that acquisitions would focus on premium sites within an hour and a quarter drive of the Market Drayton headquarters.
He said the group was also steadily accelerating its brewing programme and soon expected to be producing a seasonal beer a month. He said the beer market remained competitive but he anticipated a consolidation of brewers over the coming decade.
Nuttall was speaking to MCA following the publication of the group’s annual results to 31 March 2017, in which EBITDA before projects grew 2.2% and operating profit exceeded £2m for the first time.
The company invested £257,000 in refurbishment projects within its current estate, with ROI on the tap and tied investments improving to 17.25%, from 16.27% last year. Total volume sold in the Tap estate increased by 4%.
On further growth, Nuttall said: “Two a year is the right kind of pace for us both in terms of being able to find the right sites and being able to grow organically. That is our preference but we have a very supportive relationship with Natwest, who can provide further facilities if we need them. Ideally we are looking for controlled organic growth rather than anything too frenetic
“We are looking at the top end and finding sites of that quality makes life even more difficult. We have a series of target towns for a Joules Tap and we are definitely more interested in towns than villages now. The sites we’re looking for tend to be on the edge of town.”
Joules beer sales improved in the year by 4% to just under 7,000 brewer’s barrels.
Nuttall said: “We have been doing more seasonal beers and some specialist keg beers. Our brewers are growing in confidence and in the coming months we may well be looking at a monthly seasonal beers.
“There seem to be breweries popping up – particularly at the very micro end. There is an over-supply of cask and now a proliferation of cold beer as well. The spectrum has never been wider even if the quality is always there. That will consolidate over time and the consumer will become more discerning. I think that will take ten years plus.”
Chairman Mark Heappey said: “The Tap business faces challenges going forward, enhanced competition with the continued increase in craft brewers many of whom are now also reaching out into the pub arena. However, the most significant threat is the continued escalation of the overhead cost of running a pub driven by utility costs, minimum wage legislation, enhanced regulation and most critically the penalising rating system which singles out pubs alone for unfair assessment by turnover levels.
“We consider this punitive approach to pubs especially damaging to the nation’s high street where pubs are anchoring the leisure sector which in turn anchors the high street. In many market towns, the high street is stressed and most businesses pay little or no rates, other than pubs.
“The singling out of pubs in the rating system, if left unaddressed, will lead to business operators, who can, migrating or leaving the sector. Pubs who offer value added services and premium services, such as sport, live music pubs, or value added food offers will all be under extra pressure as the system only looks at turnover and does not consider the operating cost that supports that turnover.
“We are hopeful that this obvious inequality is an area that is re considered.”