Why M&B and Greene King have emerged strong through testing times
This week’s upbeat trading results from both Greene King and Mitchells & Butlers are a much-needed boost for the beleaguered pub sector, and demonstrate the discipline companies need in order to remain profitable through the downturn.
Yesterday Greene King announced that its managed pub division had seen like-for-like sales up 2.4% in the eight weeks to January 25, with strong Christmas bookings through its 800-outlet chain. Today Mitchells & Butlers announced like-for-like sales in the nine weeks to 24 January up 1%, with a strong two week Christmas period. The company reported that like-for-like food sales remained robust at 2.6% in the 17 weeks to 24 January.
Both these companies operate largely at the value end of the sector: neither has been afraid of discounting, giving customers a reason to keep coming. While other sizeable pub operators have struggled, both Greene King and Mitchells & Butlers are utilising the benefits of their scale to buy better and reinvest this extra margin in further promotion, which in turn boosts turnover further.
In a market where pubs are said to be closing at a rate of 39 per week, the fact sales through these two companies are holding firm shows how vital it is to get a balance between offering value for money for customers yet remaining in a position to absorb rising costs. M&B is retaining a healthier level of capex than other pub operators. That will place the company well ahead of the competition when the upturn comes."
Horizons' most recent analysis of the foodservice market shows that after a promising start to 2008 when food sales in pubs actually grew, the second half was disastrous and as a result total food sales for the full year fell by -3% after inflation. Managed pub operators, like M&B, did better than this while food sales in pubcos were worse.
