Mixed Fortunes in The Pub Trade
Pub chain JD Wetherspoons have announced expansion plans on the back of strong profits whilst M&B Breweries are in trouble. Their differing fortunes highlight how recessions can provide great opportunities for some businesses and sound the death knell for others.
The Chairman of the JD Wetherspoons chain, Tim Martin, has announced plans to expand the chain through opening a number of new pubs throughout the UK. BBC News reports that 250 new hostelries are to open which will potentially create 10,000 jobs. This is rare good news in the job market in these uncertain times. Their impressive recent Results show 1.2% growth in like for like sales over last year and they have opened 39 new pubs despite the climate of fear and misery pervading the industry as a whole. Mitchells and Butlers, a key competitor, are still suffering from the effects of a failed hedging strategy which has cost them almost £400m at a time when customers and turnover are falling Guardian reports and are now in the midst of a takeover row.
Whilst their core business is sales of alcohol, the Wetherspoons business strategy is based around offering value for money to the consumer in terms of food and drink as well as offering a low-priced alternative coffee option to the likes of Starbucks. Diversifying into these areas means a steady stream of customers throughout the day, unlike many of their town centre competitors relying on late-afternoon and evening trade.
Another interesting facet to this story is that whilst most pubs are feeling the heat of the recession, Tim Martin has sensed a chance to grow his empire further. The reason is simple, property prices have tumbled since the heady days of Spring 2008 when Martin believed they were overpriced. In a bid to capitalise on this rare buyers market, he has increased the rate at which the company is opening new outlets. What’s more, Wetherspoons huge economies of scale (they own over 700 pubs) allow them to offer some of the lowest prices in the market and so, as belts have tightened, frugal drinkers have been queueing up at JDW’s bars for a cheaper tipple, meal or even cappuccino.
Tim Martin opened his first pub in 1979 and has seen off two recessions and 4 Prime Ministers. He has clearly learned lessons from previous downturns and the business model he has adopted, whilst maybe not to everyone’s taste could provide a blueprint in how to successfully ride out a downturn by focussing on value for money and exploiting opportunities to expand.
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