With much chatter about the external headwinds facing the industry, why would operators allow profit to be poured down the drain due to their own actions? Vianet’s Steve Alton examines just how the much the sector is losing through poor beer quality.
Much has been written and said about the business challenges facing pubs, not just in the next 12 months, but in the years to come. For operators in the on-trade, the near future promises to be particularly
testing, set as it is against the backdrop of rising costs, continuing Brexit uncertainty and an ever-shifting economic landscape damaging consumer confidence.
With the wall of costs that operators are facing, specifically around additional employment regulation, as well as the substantial hikes in business rates, profitability is under pressure like never before. While there are justifiable complaints around additional costs placed on the sector and the ensuing pressure on margins, the majority of operators are ignoring thousands of pounds of unrealised profit from their draught beer performance.
This is a key area where even the best pub operators could be running better businesses. The great Victorian thinker John Ruskin said: “Quality is never an accident, it is always the result of intelligent effort.” In today’s world, big data – the term that describes the large volume of both structured and unstructured data that inundates a business on a daily basis – is becoming increasingly important. But, at an operational level, it’s not the amount of data that really matters – it’s what you do with it.
That is why we have once again partnered with Cask Marque to produce the Beer Quality Report – an in-depth study that reveals a definitive picture of beer quality in pubs across the UK. It clearly shows the opportunity available to retailers of an insight-led, systematic approach to quality management.
Last year’s report found that pubs were missing out on tens of millions of pounds of untapped profit from their beer sales. For this year’s report, we again analysed various critical quality measures from more than 220,000 Vianet devices in pubs and cellars across the country. That data is then informed and validated by quality scores from Cask Marque’s annual visits to more than 22,000 pubs, and reveals that the industry as a whole is losing a staggering £709m a year in profit through multiple issues around poor quality.
The figures come from a combination of factors. Pouring loss – simply, beer not making into a customer’s glass – makes up £206m of the total. A total of 2% of total drinks served – or £248m in cash doesn’t make it to the till. Some £73m is lost through over-ranging and wasted taps, with pubs over-ranging by an average of three pumps. The report shows that a £182m quality uplift is achievable at 50% GP of serving perfect pints every time.
This headline figure equates to 5.8% of total UK on-trade beer sales. At an industry level, the report estimates an average profit opportunity of more than £14,600 per pub per annum. At higher volume pubs, the opportunity is even larger; for a pub trading at 500 barrels per year, the profit potential is approximately £28,000 per annum.
So, while the report lays bare the profit opportunity to be grasped for licensed retailers regardless of whether they run managed, tenanted or independent outlets, what the findings also show is that maintaining consistent quality when it comes to keeping and serving beer remains a challenge for a significant proportion of pubs.
It’s imperative that operators seize the opportunity at hand and drive up quality and retail standards. Not only will this increase profitability it will also help safeguard the future of the beer category and keep pubs attractive to consumers.
From a consumer perspective, we’ve all drunk in pubs where the beer, for one reason or another, fails to meet expectations. It could be that it’s dispensed too warm or tastes stale and tired because it’s not been looked after well enough. Whatever the reason, it’s an experience that disappoints and makes you think twice about a repeat purchase or visit. Our report shows that 6% of all pints are served too warm.
There can’t be many operators that can afford to lose customers in the current economic environment. Study after study shows that Millennial consumers – those currently aged 18 to 34 – demand authenticity, personalisation and, above all, quality. Even if their relationship with beer and alcohol in general may not be the same as previous generations, their importance cannot be overstated.
Research by Carlsberg UK suggests the almost 15m Millennial consumers in the UK influence the non-Millennial big spenders to follow suit. As discerning drinkers, they are willing to trade up, and as such have been driving the premiumisation trend. However, they are also a promiscuous bunch and won’t hesitate to switch venues, brands or categories if their expectations aren’t met. They will rightly expect a perfect pint every time when they part with their cash.
There is no doubting the beer industry has made great strides when it comes to quality from grain to glass, with Cask Marque leading the charge through its audits and independent accreditation scheme. But at retail level, as our report clearly shows, it can do better.
Consumers continue to show an increasing desire to eat and drink out, seeking value, provenance and an element of theatre. Pubs remain an important part of our national psyche. In order to maintain this sentiment, operators must ensure their offer meets – and exceeds – consumer expectations.
The rewards are clear to see: a higher quality product, greater profitability and happier customers. The report provides food for thought for all those along the supply chain, and hopefully the insight and incentive to improve retail standards for the benefit of both operators and drinkers. Yes, there are headwinds but, as ever, quality will shine through.
■ Steve Alton is managing director of Vianet Ltd, the provider of real-time monitoring systems, data management solutions and business intelligence for the leisure and vending sectors