Red Oak founders eye next stage of growth

Aaron Brown and Mark Grunnell describe themselves as the “metronome of pub operators”.

They may not be the most high-profile of pub operators but have been involved in some of the biggest pub deals of the past 20 years and over the past six have built a diverse portfolio of tenanted (and a handful of managed) pubs.

Speaking to MCA in the boardroom of their Marylebone offices the pair discuss the knowledge they have built up in a career that has stretched from overseeing the Pubmaster sale to Punch, to dealing with the switch from single to three-phase electricity at one of their newly-acquired pubs (Brown’s bête noire, this one).

Now the pair are ready for their next stage of growth and admit “we’re six years in and we’re just getting started”.

The company was launched with a portfolio of 32 pubs and Brown admits that despite their experience on a number of managed and tenanted pub company boards, they found there was plenty still to learn.

He says: “We had been involved in thousands of pubs. But, there were so many things we didn’t know. Everything from collecting debts to arguing with utility companies. What it’s ultimately about is making sure your tenants have everything they need and that covers a hell of a lot of ground.”

Grunnell adds: “We also learnt very early on how much money closed pubs cost you and since then we have done everything we can to avoid that. That is all about due diligence and making sure you pick an area where you are sure a pub can be sustainable and then finding the right operator for that pub. Everything else is fixable.”

Brown adds: “People talk about the death of the pub but the truth is that societies change, and the way people live their lives changes. It’s our job to move with that and be responsive to where people are and what they want.

“The pub is no longer just a place to drink cheap beer – it’s a meeting place, it’s entertainment and it’s a venue for a good value meal. There are multiple versions of the pub and we are open to fitting the right offer to the environment.”

Because of the diverse nature of its estate and the pair’s desire to invest in the estate, growth has been – in Grunnell’s words “measured and systematic”.

The purchase of the 146 GRS estate came just under two years ago and the company has steadily moved through the estate, investing and perfecting the offers. Now, with a solid estate of 164 pubs, they have their sights set on further growth.

Brown says: “One of the mistakes people make in this industry is to see pubs as financial assets. They try to make money and grow through consolidation without really getting into the details of how you run pubs.

“We don’t see our estate as a collection of financial assets, we see it as a collection of operating businesses with shared values running through those businesses. Growth for us is seen through that lens. Our growth has been measured because in order to run our business properly we have to get everything right.”

Grunnell says: “I would describe us as now being in the early phase of wanting to grow again. We are not trying to consolidate the market really quickly because this is very much our business, our future. We’re in this to build a very significant, long-standing pub business.”

The group offers a variety of lengths of agreement and Brown says they are “agnostic about free-of-tie agreements”. He thinks this gives them an advantage in the market place.

He says: “There are a lot of factors at play in the tenanted market at the moment. There’s the pubs code and the changing models that have resulted from that. Then there’s obviously the Punch/Heineken deal. All of these shifts in the market, either directly or indirectly, create opportunities for us and I think with our track record we could be a very attractive partner for groups looking to dispose.

“The next 18 months could be very interesting.”