Watching the news this morning and seeing the first pints being pulled in the early hours we are reminded what an institution the British pub is. Finding a seat in a beer garden this week, next week, even next month is the hot ticket this Spring but what happens after that initial boom? What is next for the British pub?

S&P published a report last week - U.K. Pubs, Shaken And Stirred, Look To Recover After A Cocktail Of Headwinds - pointing to varied recovery based on size and operating model. They are predicting:

  • Larger pub chains have a better prospect of recovery
  • Managed pubs will fare better than L&T
  • Both tenants and business models will need to adapt in order to secure recovery

Almost 10,000 licensed premises in the UK closed last year, these declines in the already shrinking market were clearly exacerbated by COVID-19. Among larger pub operators, however, proportionate closures were far lower due to their wider footprint and diversity in format. S&P's report anticipates that these larger pub chains will have better recovery particularly in respect of their managed estates. With more capital and head office support these operators are able to act quickly, ensure a consistency of offering and provide better logistics across sites.

L&T operators depend more on their publicans who are far more susceptible to losses during economic downturns. These operators will continue having to support publicans over the next few years leading to far slower recovery.

Beer consumption in licensed premises has declined over the past 20 years as consumers become more concerned about their health and more interested in premium offerings including all things ‘craft’. As a result, S&P are predicting that food-led offerings and pubs that appeal to families will be quicker to recover than the classic wet-led, local boozer.

Interestingly from my perspective, the report also predicts that the sector will need to innovate to recover. We have long been talking about digital innovation, brand value and the consumer of the future when discussing food outlets but what about pubs? The report suggests three focal points:

  • Brand collaborations - between pubs and manufacturers, for example.
  • Digitisation - to bring the industry into the 21st century.
  • Sustainability - food waste management, healthy eating, responsible drinking and responsible socialising.

Pubs have a huge amount to learn from the innovation that we have seen over the last five years (and in particular the last year) from restauranteurs and food operators but a few words of caution from a risk-averse F&B lawyer:

  • Engaging in brand collaborations without protecting your brand is extremely risky –protect your IP and make sure you include can get out of the arrangement if you think the collaboration is causing you reputational damage.
  • Digitsation is transformative but do your research, invest in tech that actually helps your customer and make sure your contract is water tight on data protection and IT security.
  • Finally, when it comes to sustainability start looking at your supply chain and contracts now – this isn’t just about you and your brand, this is about your network.

We expect many operators will take up to three years to rebuild their financial profiles to 2019 levels. Following the pandemic, customer behavior will continue evolving, so pub operators will have to be nimble with their offerings and formats to stay on top of fast-changing consumer preferences.

https://www.spglobal.com/ratings/en/research/articles/210408-u-k-pubs-shaken-and-stirred-look-to-recover-after-a-cocktail-of-headwinds-11889281