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Morning Briefing Strap Line
Fri 20th Jan 2017 - Friday Opinion
Subjects: It’s not just about the beer for pubs, cask beer bashing – why it has to stop, and preserving margins and minimising pricing impact 
Authors: Glynn Davis, Paul Nunny and Ann Elliott

It’s not just about the beer for pubs by Glynn Davis

If you cast your mind back to about 2010 and think about the pioneers in craft beer – the likes of the North Bar in Leeds, The Rake bar in London’s Borough Market, and also the Cask Pub & Kitchen, as well as the Euston Tap and the Jolly Butchers also in the capital. They all had one thing in common – they were predominantly focused on the beer.
Each of them was early into the game of offering craft beer to a drinking community that had been given little exposure to some of the great beers we now, all too easily, take for granted. To get access to a constantly changing array of beers was a challenge, made more difficult by the fact it involved a lot more importing than it does today because there were far fewer domestic craft brewers to buy from than there are today.
The time-consuming sourcing efforts, combined with the uncertainty of any financial success with these slightly risky pioneering ventures, meant fewer resources were committed to other aspects of the proposition. Fit-out costs were kept to a minimum, often with simple stripped-back interiors (leading to shocking acoustics), and furniture was rather ramshackle if you were to compare it with more established operators’ swish outlets.
Comfort was not necessarily the name of the game, food was often a bit of an after-thought if it existed at all, and service was often a tad amateur – albeit enthusiastic – and maybe a little unwelcoming to the uninitiated beer drinker. The facilities were often exceedingly basic too (Euston Tap was among the guilty parties) and we are certainly not talking about these places being pubs with any great architectural merit.
The situation today is these early craft beer outlets have been joined by numerous other venues that now also offer decent beer selections. They are all catering to an ever-broader market with a thirst for craft beer. It is no longer the domain of the beer geek. With this comes an audience that is more demanding and requires a greater range services and facilities – or even just a bit more comfort.
This has certainly been recognised by the owners of the aforementioned pubs. They realise the market has been quickly maturing and in response their more recently opened pubs have all sought to ensure they do not simply just provide a great range of beers and nothing much else. A massive selection of keg beers is no longer enough in today’s market.
With his latest pub in Limehouse, Martin Hayes, founder of The Craft Beer Co, has installed some rather smart furniture and admits he now wants to open pubs that appeal to more than one group of people. He says: “A good pub needs to be geared to everybody. Beer bars can make you feel like you are too old. They are trying to be to cool in some cases, which is odd because I thought that if you were trying to be cool then you aren’t cool.”
He suggests the overall offer now needs to transcend a great beer selection because even the most committed craft beer drinkers will some days go to a pub local to them that has five decent beers rather than always travelling the extra distance and visiting a more specialist bar that might have 15 to 20 beers available – especially on those nights when they are only going to drink a couple.
This gradual move towards a situation where exemplary beer selections are being combined with improved pub environments suggests things are looking good for drinkers who appreciate high quality beers but also want the venue to be of the same standard. I’m certainly not talking big spending, overbranded corporate-type concepts, just the traditional pub environment with old-school service.

Indicative of this is the Euston Tap that has gone through a major overhaul recently, which involves highlighting the features of the historical building it is housed in (next door to Euston train station), and they have also thankfully updated the previously dire toilet facilities. Progress indeed.
Glynn Davis is a leading commentator on retail trends

Cask beer bashing – why it has to stop by Paul Nunny

Over the past few weeks I’ve read with interest a raft of articles responding to Cloudwater’s decision to cease cask beer production. Its announcement was met with a flurry of articles (few of them written by brewers) that all seemed to applaud, congratulate and condone this “brave” direction. Its declaration, which was massively publicised, served to open the floodgates to a huge amount of “cask beer bashing” in the media, which has turned quite vitriolic and nasty towards various organisations that have campaigned for years to establish cask as a unique and valued part of the British pub industry.

Cloudwater stated two primary reasons for its decision. Firstly, the shrinking margin associated with cask beer pricing and how it had become unprofitable to continue investment in this category. Secondly, and perhaps more pertinent, its declaration it could not be confident in the quality of its product at the point of purchase. Therefore, it would not be producing its beers in cask for the foreseeable future.

Let’s take each issue in turn. Pricing, from both the brewer and at the pump is a self-inflicted wound. For the brewers there is a major issue of supply and demand. Too many brewers are competing in a market that is experiencing declining barrelage. The latest figures show a decline in total on-trade beer sales of more than 2% balanced with a growth in off-trade with cask maintaining market share. Therefore brewers are using price to gain market share, particularly the small brethren who have the benefit of progressive beer duty.

When it comes to the price of beer at the pump, cask is almost always the cheapest product on the bar. Yet it is the most premium in terms of providence – it takes time and skill to manage, and is frequently cited as the original “craft” beer. This is where the second issue plays a key role. Knowledge, patience, and expertise are the vital elements required to get the quality right.

Cask Marque has always recognised the intrinsic link between good quality and sales, and it has hard evidence to back up this theory. Enterprise Inns pubs with the Cask Marque plaque are growing total beer sales by 4.4% over their non-Cask Marque pubs. A regional brewer can prove a growth of 6% in sales in Cask Marque-accredited pubs.

More recently, Cask Marque carried out a piece of research on the quality of cask in non-Cask Marque pubs by auditing the pubs closest to an accredited pub. This showed where 90% of Cask Marque pubs pass their quality assessment only 51% of non-Cask Marque pubs met the quality standard. This shows there is certainly an issue.

So both pricing and quality need to be addressed – but how? Pricing is perhaps the most difficult. In a free market, supply and demand should balance itself and I am sure we will find a number of brewers struggling to survive particularly when they have no USP. Those brewers with poor quality at the brewery gate will fail as more retailers demand brewers gain the Salsa + Beer accreditation. This is already required by Mitchells & Butlers, Enterprise and Punch on new listings. Waitrose is the champion of this beer quality standard in the off-trade. The Society of Independent Brewers also endorses the scheme.

Retailers need to be brave, and address pricing at the pump. Ok, have the session beer at a fixed price point but stop underselling brands that are aspirational. Have a fair pricing policy based on ABV and brand values. Learn from the grocers where normally brands are premium priced. On quality of beer in the glass the solution is simple. A trained cellar manager can improve yields by more than 7% and, as illustrated above, enhanced sales (4%-plus), of which both lead to increased bottom-line profitability. 

The cost of training is approximately £100 per site. This can be done off-site or in the pub itself. The return on investment is realised in a matter of a few months and has the added advantage of attracting – and keeping – satisfied customers. Cask beer has enjoyed a phenomenal rise in popularity and now represents more than 16% of on-trade beer sales. Pubs that focus on cask as part of their retail proportion grow their total beer sales. The category is far from dead. Cask has led to the revival of British beer. Long live the king of beers! (Sorry Budweiser, but you have been superseded!)

I have every respect for Cloudwater’s beers and its views – but please, don’t bite the hand that feeds you. If it wasn't for some of our long-established brewers and their commitment to quality, growth and accessibility, you might not have a market place in which to exist. This has been a long journey, and with all due respect, you could have helped address the quality issue yourself. Focusing on keg will not make these issues go away as you still need pubs to clean their beer lines, operate good cellar management and bar staff to pour the perfect pint.

Lastly addressing Pete Brown’s outburst. Like any good journalist he qualifies his headline with the real truth. He says if the pub has a solid cask ale reputation there is no better beer to drink. I suggest he uses the Caskfinder app, which maps out the 10,000 pubs with the Cask Marque award and he can then continue to drink his favourite beer.
Paul Nunny is sales and marketing director for Cask Marque 

Preserving margins and minimising pricing impact by Ann Elliott

The Folly in the City is packed, with every table taken. The greeters on the door are struggling to cope with sudden influxes of the baying, harassed and hungry city crowd. It’s loud, bustling, busy and slightly manic. The bar is heaving. The waitresses never stop and they skid to a halt when I try to stop them to ask for yet another coffee or a mac ‘n’ cheese side dish. They don’t tut at me – they never do – but there are more important, bigger tables to serve with the prospect of more cash in hand from tips. My drinks take an age but its fine – in fact the waitress tells me honestly she forgot to order it so it’s on the house. That’s great service, under pressure, which makes me feel like less of a nuisance. I can eat, drink, work and watch.
You would never ever sit here and think this is now a slightly nervous, apprehensive and anxious sector. That the combined cost pressures (many government driven) of rent increases, rate increases, apprenticeship levies, minimum wage increases and food cost inflation are deeply worrying to those that operate bars and restaurants like this one. While customers here eat, drink, laugh and gossip, operators are trying not to think themselves into recession and what they might do in that catastrophic economic scenario.
Now though, operators are reacting to the current scenario in a number of ways with their offer. Faced with suppliers and wholesalers demanding up to 6% food price increases in October, many operators raised prices in November helping to generate some great like-for-like sales performances over Christmas (albeit not all including pricing in their like-for-like figures). Undoubtedly more price increases, sooner rather than later, are about to hit. No operator wants margin dilution. The customer will have to pay.
While menu food pricing has moved upwards, it's wine pricing that has really taken the body blow with house wines often difficult to find under £20. Wine lists have had to change at short notice. Wine suppliers have been changed quickly where they haven’t been able to respond flexibly to the new dynamic (or haven’t wanted to). Soft drinks have also had to take some of the pain, understandably.
Menu dishes have been uncoupled. Items that used to form a constituent part of a dish have now moved to sides and charged accordingly. It is now the customer’s decision whether to buy or not – spend per head has increased and margins have been preserved.
Portion sizes have also reduced and some dishes moved on to smaller plates so they don’t look too puny. Dish presentation changes have been dramatic in some cases – at one high-street casual dining brand I ate in last week, it felt as though everything that could have been removed from the plate had been. My inch-deep shepherd’s pie looked forlorn on its own with no attempt to create plate fill. It’s a hard balance. Preserving margins and minimising pricing impact, all while trying to maintain value-for-money perceptions, is really challenging. At the same time, much can (and has) been done in menu design – and that really is both an art form and a mathematical exercise.
This is only the start. I know (as you do) many operators who have stopped expansion and are now actively selling sites. I know others who are now cutting both head office and site-based teams. “Nice to have’s” that may have been considered integral to the brand offer are now being removed. The move to more cost-effective digital marketing is really moving apace. It does feel like all hands to the pump in a real effort to get through this year unscathed.
Operator ingenuity and creativity will, as usual, ensure the best survive. They have to – because the bigger challenge of talent recruitment and management in a world outside of the single market is coming over the horizon. People, not product and pricing, is the bigger threat to our market. It’s a threat that these diners and drinkers aren’t even aware of – yet. 
Ann Elliott is chief executive of leading PR and marketing company Elliotts –

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