Tue 22nd Oct 2013 - Spirit – we’re starting our acquisition stage Spirit – we’re starting our acquisition stage: Spirit Pub Company has told City analysts that it will now start buying new freehold pubs to add to its Fayre and Square and Flaming Grill brands as it aims to expand to 1,500 pubs. The company said it would begin buying pubs in its second quarter – at the end of this year – and is looking for a 20% return on its investments. The company declined to give precise numbers for acquisitions but its target size is around 270 pubs bigger than its current size. The move to start to buy pubs comes because Spirit feels that it had moved beyond the ‘stabilisation’ stage for its estate and into the ‘optimisation’ part of its journey. Chief executive Mike Tye said that there is now “an opportunity to acquire pubs” to “leverage fixed costs, brand and skills”, with each of its brands capable of growing to 200 sites without risk of cannibalisation. “We’re now ready to begin expanding the estate again,” he said. Food sales now stand at 44% of managed sales and average pub sales have increased by £2,000 per week per pub in the last two years. Tye said that Spirit will continue to evolve and flex its brands’ portfolio as the market evolves. Its Taylor Walker pubs would be evolved to become slightly more premium, particularly at sites that attract fewer tourists. The Chef & Brewer estate “needs to shift slightly” in the direction of premium without alienating its mid-market core customer. “They will not become gastro-pubs”, said Tye. More Premium Pub and Dining sites will be added in the 2014 financial year to join the existing two pubs trading within the segment to “optimise Spirit’s very affluent London village locations”. Within Fayre & Square, Spirit will continue to “accentuate the (value) price credentials of the brand. Flaming Grill will be re-positioned slightly to a clear price-focused model”, with a number of John Barras community pubs switched to the Flaming Grill ‘lite’ model, which requires around 50% of the investment involved in a full Flaming Grill conversion. Tye told City analysts that he thought that around 40 of the company’s 225 John Barras locals pub would switch to other brands. He reported that the company had hired an “innovation manager” who has been looking at how John Barras pubs could segment further. Early work on new neighbourhood concepts had researched well, Tye said.