Simon Townsend, chief executive of Ei Group (formerly Enterprise Inns), has told MCA that he sees Heineken’s imminent acquisition of rival Punch as “a great statement of confidence in the future of UK pubs”. He also believes pubs are in a good position to take advantage of any potential problems faced by those operating “very food led, labour heavy, low-ticket offers”. He also talks about how the company has got better at operational execution and site selection; the sharing of ideas from the group’s managed investment partnerships into its tied estate; and how the pipeline of interested parties in its managed investments operation is “much bigger than our ability to work with them all at this stage”.
Townsend said: “I see Heineken’s investment in Punch as a great statement of confidence in the future of UK pubs and if that helps underpins what we are trying to do, helps the profile of the sector and attracts greater levels of investment into the industry, that has got to be a good thing for UK pubs and consumers.”
Squeeze on casual dining
Townsend said: “The increasing pressure on the casual dining sector should be a good thing for pubs as people are increasingly looking for an almost chameleon experience and a pub can offer so many different things. If you are in the very food led, labour-heavy, low-ticket space, that is going to be quite challenging with all the potential cost implications that are out there. Pubs can offer so much more than that, they can offer great value, but in a great environment. I would hope that the flexibility a pub offers and that ability to change their offer and not be a one-trick pony has to be to their advantage at a time when others are more constrained.” Townsend said that across its managed and tenanted divisions, Ei Group’s sales split was still 70% to 75% drink-related.
Townsend said that the lessons the company learnt in the “really difficult years” has proven to be invaluable. He said: “That’s when we had to get much closer to our publicans to address the stresses that they were facing. The cost of business failures was very damaging to the group and our publicans. The overhead we put into the business to work out what it takes to really help publicans to reduce their costs and grow their sales and become more profitable has been invaluable even though the economic circumstances have been more benign over the last few years.
“You could say that it is all those sort of things that are the marginal gains, which we keep chipping away at – more support, more engagement, more innovation, the right type of investment. Just chipping away at keeping pubs competitive and sustainable.
“The strategy that we unveiled which was designed to create more value for shareholders is also the strategy that will ensure we are best placed to deal with any uncertainties ahead across our entire estate.
Bermondsey Pub Company
During the last six months the company said it has tailored its Meeting House format to satisfy three specific consumer occasions such that it now has three defined trading offers: City Social, Upbeat Urban and Modern Local. Townsend said that he expected these additional classifications of trading offer to enhance its future site selection and investment decision analysis.
He said: “The Bermondsey team has undoubtedly got better at operational execution and site selection. They have been able to subdivide their offer where 80% of it is broadly the same and the other 20% provides some flexibility.
“City Social is looking at the lunchtime community and the after work social occasion. Upbeat Urban is more entertainment led, not late night venues, but more a destination offer. Modern local is the most food led of the three and is in sites surrounded by more residential areas.
“The core offer remains the same, these are still great community pubs but the point of difference just allows them to make a little bit more of statement about what they are and who they are appealing to.”
The company now has seven managed investment partnerships.
Townsend said: “These are phenomenal guys to work with and they are not shy about sharing the benefits of their experience and helping us to both improve our managed house operations but also to package things up to make them available for our tenanted estate as well. Some of them have already been involved in our publican council where they are helping tied publicans choose brand ranges and helping them understand why certain brands work best in particularly situations. We also use their sites as shop windows to show our tied publicans around. These are great examples of best practise that we like to highlight.
“The pipeline of interested parties is much bigger than our ability to work with them all at this stage, but that is wonderful that they can see the value and opportunity in working with us. They know we have the sites and we know they have the expertise, but we are full at the moment in terms of our immediately pipeline of partners and sites to convert.”