While there are a number of reasons for optimism, the UK pub market remains one under pressure and is still shrinking in size. Tenanted/leased companies continue to streamline their estates, contributing to a fall in the number of pubs to around 47,000 in 2015. The introduction of a market rent-only option (MRO) for many ‘tied’ tenants by the end of 2016 looks set to lead to significant changes in the industry. Meanwhile, the managed segment of the market continues to perform strongly and is likely to grow from its current representation of 16% of pubs.
On-trade drink prices continue to track at a much higher rate than the off-trade, leading many consumers to drink at home more often. An overall decline in alcohol consumption has also contributed to the woes of pubs. Despite the government’s intervention by cutting alcohol duties in recent years, which is credited with saving many pubs, high drink prices continue to put further pressure on many consumers’ discretionary spending budgets.
With pub drink volumes remaining in decline, food/catering is becoming an increasingly important component of many pubs’ turnover. Many consumers now expect pubs to serve high-quality food, underlining the evolution of pubs from often being drink-only venues. That this is the factor most likely to be cited as an enticement to boost pub visits, higher even than lower drink prices, underlines how landlords cannot afford to underestimate the importance of an appealing food menu to supplement their venues’ other strengths.
Definition
This report examines the market for pub visiting, with the primary focus on drinking in pubs/bars. A separate Mintel report, Pub Catering – UK, May 2015, looks at the role of food in pubs in more detail. The market size in this report refers to pub sales of food, alcohol, soft drinks and other items such as from snacks and vending machines.
All pubs (public houses) and bars have on-trade licences to serve alcoholic drink for consumption on the premises. These licences may also be granted to other outlets, such as hotels or cinemas, but a pub has at least some traditional characteristics that differentiate it from other bars.
Most pubs trace their heritage to close links, or ‘ties’, to a local brewery. The brewery traditionally owned the freehold, or a long lease, on the property and then either sublet it to a tenant (tenanted pubs) or installed its own landlord to run it (the managed estate). The managed/tenanted distinction still pertains to many ‘estates’ (owned groups) of pubs, but tenancies have often been replaced by more modern, long-term leases (leased pubs).
A ‘pubco’ (pub company) is independent from the control of a brewer, although it may negotiate long-term supply contracts with a single brewer and thus maintain close links with the brewing industry. Leased/tenanted companies make most of their money from supplying beer and other drinks to their tenants at wholesale prices. A free house has no contract to a specific pubco or brewer, and is run as an entirely independent business.
‘Wet sales’ refers to the proportion of a pub’s turnover from drinks (sometimes confined to alcohol), while ‘dry sales’ refers to food turnover.
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Market sizes at constant 2014 prices are devised using Mintel’s catering deflator. Value figures throughout this report are at retail selling prices (rsp) unless otherwise stated.
