For years the story of the famous UK public house has been one way traffic. Changing drinking habits, the high cost of operating bars, the shift from the wet (drinks) trade to a bias towards food and the high cost of a pint in the local compared with buying alcohol from supermarkets has all led to a steady decline in pub numbers.
Like so many customer-facing businesses, pubs were forced to close for months under pandemic restrictions and then to operate under severe capacity restrictions and since then the sector has faced mounting challenges. But the downward trajectory in pub numbers started long before the pandemic, with the total number of UK pubs down from 60,800 in 2000 to 47,200 in 2019, according to the British Beer and Pub Association.
But could all that be changing? Just before the summer of sport began, Heineken UK announced that it was to invest £39 million in upgrading and reopening pubs in its Star Pubs’ estate in 2024. This, it said, demonstrated its “confidence in the resilience of the great British local” in the face of global uncertainty.
The move will create an estimated 1,075 new jobs, according to the global drinks giant, with a quarter (612) of Heineken UK’s 2,400 pubs slated for improvement, with 94 of these set for makeovers costing on average £200,000. Significantly, the investment will also cover works to reopen 62 long-term closed locals in 2024. By the end of the year, Heineken UK will have reopened 156 such pubs since the start of 2023, reducing the number of closed pubs in its estate to pre-pandemic levels.
The focus of the refurbishments also reflects what Heineken clearly views as long term trends, as it said that with working from home having become far more commonplace and people looking to save on travel, its major refurbishments will concentrate on transforming tired pubs in suburban areas into premium locals.
The revamps, Heineken said, are designed to broaden each pub’s use and appeal, giving people additional reasons to visit and delineating areas within the pubs so that customers – from those watching sports to those dining – can enjoy a trip to the pub without disturbing each other.
Summer profits boost
Within a month of Heineken’s announcement, pubs in England had received a further summer boost when the national football team went all the way to the Euros final, with that one match alone estimated to have driven £50 million in pub sales.
Emma McClarkin, CEO of the British Beer and Pub Association, called on the new government to continue the momentum by addressing both business rates and the high cost of duty and VAT on both alcoholic and soft drinks sold in pubs.
"During the election campaign the Chancellor highlighted the importance of supporting Britain’s beer and pub sector when she announced a five-point plan for pubs. Central to that plan was the need to reform the business rates system that currently penalises bricks and mortar business like pubs that pay five times more than their share of turnover,” she said.
And Heineken is not alone in doubling down on its renewed investment in pubs. In recent months several pub groups have announced fresh plans for investment, with Tim Martin, the founder and chair of JD Wetherspoon, declaring that he has a list of 130 towns and cities where he wants to open a pub over the next decade, though he warned that as a “mature business, sites don’t’ come up easily”.
Wetherspoons looks for growth
Wetherspoon’s currently has around 814 pubs, down from the 955 outlets it operated in December 2015. The company said it saw the potential for about 1,000 pubs in the UK and would also look at expanding some of its existing outlets by adding gardens or increasing the size of customer areas.
The company announced an eightfold rise in pre-tax profits in the six months to January 2024 and in a May update revealed a robust first quarter, with sales growth driven by a recovery in traditional ales including Abbot Ale, Ruddles Bitter and Doom Bar. Sales for the 13 weeks to 28 April 2024 were 5.2% higher on a like-for-like basis and were 8.3% higher year-to-date.
“Wetherspoons seems to be moving in the right direction, following a difficult few years. Like-for-like sales are growing and profits are expected to come in towards the top end of expectations,” according to Charlie Huggins, fund manager at Wealth Club.“Wetherspoon’s commitment to low prices and doing the basics well are helping to keep punters loyal.”
Stonegate refinances
There has also been a reprieve for the UK’s largest pub group, which on 31 July announced that it had secured a debt financing deal. Stonegate Pub Company - the owner of bar chains Slug & Lettuce and Be At One - agreed the financial package to address its £2.2 billion debt, which included a circa £250 million shareholder contribution from funds managed by private-equity firm and owner TDR Capital.
The news came after Stonegate revealed in April that its debt may not be refinanced by the deadline of July 2025. Formed in 2010 and domiciled in the Cayman Islands, Stonegate owns over 4,500 UK pubs and bars but total debts were over £3 billion at the end of its financial year in April. Much of this stemmed from its £3 billion acquisition of rival pub business Ei Group in 2019, of which £1.7 billion was debt.
Meantime, Greene King announced recently that it would invest £40million in a new brewery in Bury St Edmunds, East Anglia. Over the last two years, Greene King has invested in a new distribution centre, adjacent to the proposed site for the new brewery, as well as over £9 million in its Belhaven Brewery in Dunbar.
The investments are a far cry from the bleak days post-pandemic, when the future of many pubs looked in doubt and long-term trends showed few signs of reversing.
“People are looking for maximum value from visits to their local. They want great surroundings and food and drink as well as activities that give them an extra reason to go out,” Star Pubs managing director Lawson Mountstevens said.
“Pubs have proved their enduring appeal; after all the disruption of recent years, Star is on track to have the lowest number of closed pubs since 2019. We’ve spent more than £200 million upgrading and maintaining our pubs over the last five years, and we’ll continue to invest to keep them open and thriving.”