UK Pub sector faces £600M sales shortfall as food turnover fails to plug the gap
Wet sales through the pub sector are likely to fall by £1bn in 2008 and will decline by a similar figure next year too, according to our latest report.
The report - How Can Food Fill a £1bn Gap? - reveals the extent of the damage to the UK's pub sector caused by the long-term fall in drink sales. While many operators have turned to food to improve turnover, food sales across the pub sector would have to rise by 20% in order to fill the gap entirely.
Our figures show that pub sector sales (both wet and dry sales) were worth £22.5bn in 2007, with food (and associated drinks) representing around 28% of that turnover - £6.21bn.
The pub sector could improve turnover from meals by £400m, which still leaves a shortfall of £600m.
Food has a lower margin than drinks so pubs would have to sell more of it to make the same amount of profit. The additional problem for pubs is that their kitchens and layout often make it difficult for them to grow their food sales without a major investment.
While the pub sector has been able to offset a 20-year fall in beer sales with rising sales of other drinks categories, in 2007 for the first time, these drink and food-related efforts were insufficient to overcome the hydra-headed effect of the smoking ban coupled with low price off-trade beer offers. The result was a decline in overall sales - not only in inflation-adjusted prices but, for the first time, in current prices too.
As pubs compete more fiercely for declining food sales we are likely to see prices lower, and therefore margins reduce. This puts further pressure not only on the pub sector, but on restaurants and quick service outlets too.
