What you need to know

Pubs remain a central part of the British way of life, with 87% of adults frequenting them and the market reaching £23 billion in 2015. However, the industry remains under pressure and in the midst of a period of significant modification. The introduction of a market rent-only option (MRO) for many ‘tied’ tenants by the end of 2016 is set to add further change.

Pubs are still closing at a rate of more than 25 per week, with the downturn in on-trade sales of drinks such as beer a core reason for this. Despite the government’s intervention by cutting alcohol duties in recent years, on-trade prices remain much higher than in the off-trade, contributing to a reduction in many pubs’ footfall. A variety of developments such as the National Living Wage and new alcohol guidelines are set to pose additional problems for many landlords.

As a result, many pubs have looked to adapt by putting an increasing emphasis on food in attempts to compete more effectively against restaurants for the leisure pound. That a much higher share of pub-goers prefer venues with dining space than without shows the rising expectations for pubs as food venues. A high-quality food menu can help landlords to position their pubs as destination venues, appealing to key groups such as families and older age cohorts. However, there are also a number of drink-related opportunities for landlords to tap into in the coming years, such as craft beer’s growth and the newer popularity of wine on tap.

Covered in this Report

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 2016, 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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