My F-Plan to save the Great British pub
. . . that’s females, food, family, and forty to fifty-somethings
LAST WEEK’S headlines shouted ‘31 pubs shut a week’, but according to Ralph Findlay, chief executive of FTSE 250-listed pub and beer company Marston’s, the reality is rather different. ‘The sector is in as good a position as it’s been in for a number of years,’ he insists, trying to make himself heard over the lunchtime crowds at the Pitcher & Piano in the City of London, a Marston’s pub. ‘There’s more energy and excitement in the sector than I can ever remember.’
Having racked up 20 years at Marston’s, first as financial director and then as chief executive from 2001, Findlay’s memory goes back a long way, which is why he finds the ‘pub closures’ line baffling.
‘It’s a really odd story because 31 pubs closing a week sounds like pubs are in trouble, but we’re building 30 pubs a year that are absolutely thriving,’ Findlay, 53, says.
‘Good pubs are doing really well, whereas pubs which aren’t attracting people will close, and I cannot see how protecting bad pubs which aren’t giving customers what they want is going to help anyone.’
Findlay bases his pubs around the FPlan. ‘This means females, family, food and forty to fifty-somethings,’ he says.
‘It makes sense with a maturing population, women often controlling the family budget, more people eating out and families visiting after the smoking ban.’
Marston’s – formerly The Wolverhampton and Dudley Breweries – owns 1,800 pubs in the UK and is the largest brewer of cask ale in the country, having snapped up regional breweries such as Jennings, Ringwood, Hobgoblin and Brakspear in the late 2000s. At a time when beer was out of favour it was a bold move which has paid off hugely with the craft beer revival.
‘There are more breweries now than there have been for decades,’ says Findlay, ‘and we were fortunate in predicting that. Ten years ago we just had our main brands, such as Pedigree and Banks’s, and the market was pretty moribund.
‘We were looking at the growth in the industry in America and assumed that would make its way over. From a brewing point of view that has been absolutely fundamental to us.’
It was not just in brewing that Marston’s bucked the trend. In 2009 pubs were out of fashion thanks to the recession and smoking ban, and many pub companies were struggling, having taken on far too much debt in the years before the crash.
Marston’s avoided the unsustainable debt piles which almost crippled its rivals Enterprise Inns and Punch Taverns, mainly due to ignoring the more excitable shareholders.
‘We had a level of debt which we thought was appropriate, but plenty of investors would have liked us to borrow more and would point to what Punch was doing as an example,’ he says, shaking his head. ‘I think we have all learnt from that.’
So when the industry nosedived – the market value of listed pub companies plunged from £16billion to less than £2billion – Findlay started buying up the likes of Wizard Inns and Eldridge Pope.
‘There was a chance to raise money and buy pubs when no one else was doing anything,’ he recalls. So with a £165 million rights issue the firm started its own building programme, adding about 30 new pubs a year.
‘It wasn’t the most straightforward idea to sell as that was against a backdrop of pubs shutting,’ Findlay admits. Each pub costs £2.5million
There are more breweries now than in decades – we were fortunate in predicting that
to £3million and next month sees the 100th pub opened since 2009, he says, adding: ‘We’re investing £90million a year so you can see why I think there’s a different story to 31 pubs closing a week.’
Marston’s is also building budget hotels – it has built four of its ‘lodges’ so far – and is working on its branding to mark its pub-restaurants as specifically Marston’s.
Rather than turn to costly, shortterm bank debt, Findlay’s idea was to tap the UK’s biggest pension funds, L&G and Standard Life, for cash in return for a healthy yield.
‘We’ve raised £155million over the last 18 months in this way,’ he says. ‘It’s over 35 to 40 years, there are no covenants, no reporting and an average yield of 5.1 per cent – they see it as very secure long-term funding and I don’t think anyone else is doing what we’re doing.’
But Findlay’s most radical contri- bution to the industry could be the franchised pub model, which he introduced a few years ago. With the debate raging about whether tying pubs to brewers or pub companies is good or bad, Marston’s has sidestepped this by moving from tenanted pubs to a model similar to that used by florists and pizza firms.
‘In 2009 most of the pressures affected tenanted pubs rather than managed pubs, so most of our competitors tried to deal with that by cutting rents and increasing the discounts on the stuff they sold to the tenants,’ says Findlay.
‘Our view was that might leave the tenants in place, but wouldn’t bring more customers through the door. So we started something more like a franchise agreement, where we put in the beer, Sky TV and so on, and the licensee is focused on selling and getting close to the community.
‘They’re not buying beers, they’re not paying rent or doing up the pub, that’s taken care of.’
Marston’s has 550 franchised pubs and by 2016 will have almost left tenancies entirely, which has the added benefit of shielding Marston’s from forthcoming pub industry legislation.
Having recently supplied beer from the Wychwood brewery to the Oxfordshire garden party of Witney’s most famous resident, David Cameron, Findlay is under no illusion about the likelihood of a VAT cut for the leisure industry, but says the recent beer duty cut was incredibly helpful.
Findlay recently showed Cameron around Marston’s brewery in Wolverhampton and told him bluntly that it would have closed if beer duty had continued to increase.
‘You just can’t have your costs running ahead of inflation,’ he said.
‘At this point our beer volumes are healthy, with about 20 per cent of the premium cask ale market and 20 per cent of premium bottled, so there’s no current pressure on us.’
A creature of habit, Findlay lives in the same house, drives the same model of car and frequents the same Berkshire pub – The Swan, Compton – that he did when he took over at Marston’s 13 years ago, but he has added a love of hopping on a Boris bike when he is visiting the capital.
Just back from safari in Botswana with his wife and two children, aged 20 and 18, he is sporting a tan and beard and is itching to get back to the business.
As for politicians, what would he like them to do for the industry?
‘Apart from reducing tax I think it would just be helpful if they did very little,’ he says with a grin.