A Marginal Existance

I was talking to a local pub landlord recently and during the conversation, was disappointed, but not surprised, how in winter particularly, when it is pissing down as it often has been in recent months, just how many times he had to make recourse to his reserves to pay the bills as the pub was so empty.  Now you might liken this a bit like when you pay your monthly ransom to the power companies, using the excess built up in the so called warm months, to offset the cost in the chilly winter months, which if you are like me, you'll consider that is most of them. But you'd be wrong. it isn't really like that. Let's have a look at it. 

It’s Friday night, the local is packed. The place is going like a fair and the atmosphere is just what you want on a good night out. To the casual observer, it looks like a gold mine. You’d be forgiven for thinking the landlord is currently scouting for a second home in Marbella. But talk to anyone behind the pumps, and you’ll find a much grimmer reality. The "busy pub" is becoming a bit of a mathematical mirage. Here is the sobering truth about why that bustling atmosphere isn’t making the boss a fortune.

Input Costs

While the price of a pint has crept up toward the £6 or £7 mark (and beyond in that there London), the landlord isn’t seeing the benefit of that extra few quid. He or she has to think about the fixed costs of the operation. That is the things that can't be avoided, or discarded: 

Energy: It’s not just the lights. Cellar cooling, glass-washers, heating, kitchen appliances are all energy-hungry beasts. For many, standing charges and unit rates have doubled or tripled since 2022. And nobody wants a cold pub, though you like me, will have noticed plenty of times when the pub isn't as warm as it should be. If your pub is cold, it is likely that cost which makes it so.

The Beer: Barley, hops, wages and more suffer from inflation too. Brewers have had to pass on their own rising costs, meaning the "wet rent" (the price the pub pays for the cask or keg of beer has continually increased to its present high level..  

The Chancellor's Cut: This is where things really bite. The UK has some of the highest Beer Duty rates in Europe. When you buy a pint, you’re effectively paying a stealth tax. and unlike the supermarket where you buy your cans of lager, pubs have to pay 20% VAT on every pint, snack and plate of chips sold. 

Business Rates: The system is archaic. Pubs are often taxed based on their "fair maintainable trade" (basically, how much they could make), which penalises successful, busy locals.  It also makes the somewhat unrealistic assumption of how much of turnover is profit.

Dry Rent: What you pay to occupy the building. Typically, there will be an initial deposit then a monthly rent, agreed for (say) a three to five year term.

The Minimum Wage & Staffing Costs: Nobody should grudge hardworking bar staff a decent wage, but it all costs. A busy pub needs bodies. With the National Living Wage rightly increasing to support workers, the wage bill for a fully-staffed shift has ballooned and of course, that doesn't just apply to busy Fridays. The irony is that to serve the crowd that makes the pub feel alive, you have to hire more staff, which often eats the very profit those customers are generating.

Back to my landlord friend. Everything costs more he tells me and people need to be enticed out of their homes to come to the pub. A musician for example, will often attract customers and fill the pub, but the £300/£400 bill for that needs a hell of lot more drinks to be sold, just to break even. It is done though to make the pub more attractive,  and in the hope the customer will like it and come again at other times, but ......

Supermarkets- the elephant in the room: One of Tim Martin of Wetherspoon's pet hates, this is where the "pre-drink" or "instead of" culture is the enemy of margin. In the 90s, the gap between a supermarket beer and a pub pint was a manageable jump. Being very old, I can remember when that gap was tiny and hardly game changing. Today, it’s a veritable chasm.   If a customer stays for two pints instead of four, either because they can't afford more, or because they drank a cheap few cans at home first (or intend to after) to offset high pub prices, the pub still has to pay the same fixed costs for the heating, the live band and everything else.  

And then there is food. Pubs often rely heavily on food sales to survive, but food carries additional and  higher overheads  - chefs, wastage, supply chains with their own struggles - and of course VAT. No wonder so many have decided that game isn't worth the candle, but maybe, looking on the bright side, the pub snack may make a comeback as seems to be happening in some cases? Filled rolls and Scotch eggs anyone?

Margins in the hospitality industry used to hover around 10% to 15%. Now, many independent publicans are operating on a knife-edge of 3% to 5%. One broken glass-washer or gas boiler, or a quiet rainy midweek is enough to wipe out the profit from a successful weekend.  While brewery owned pubs and national chains have different issues, it all is very costly for them too. Debt is everywhere in the pub trade since the Beer Orders.

These are just some of the issues which vary from pub to pub depending on size, location, local authority, type (managed/ leased/free or whatever) and so much more, but fixed costs are a killer. 

The type of beer sold has different costs and margins, so that affects things too. It all boils down to margins being squeezed and viability on a knife edge. If you can just about come down on the right side, then you are surviving at least.

So, next time you see your local packed to the rafters, don't begrudge them that extra 40p+ on a pint. Most of them aren't getting rich; they’re just trying to keep the lights on, preserve tradition and hopefully make a few bob so we all have somewhere to go when want a bit of conviviality rather than drinking alone in the house.

 

This is just a brief dip into what is a very complex area.  Price of a pint? You tell me. It varies so much, as there are so many factors to take into account.

What is also for sure is that the drinker has to get value out of their experience too and that isn't helped by pricing them into the supermarket.  The government has to make its mind up here. Do they want to preside over more and more closures? Chances are they will continue to screw hospitality and just hope for the best, so probably.

Apologies too for the Ai photo use, but I felt the Mr Macawber definition needed suitable illustration. 

 

Sam's One Pound Gamble

It is true. That doyen of the cheap pint, Samuel Smith of Tadcaster has decided to get out of that particular game, with prices rises all round on re-opening. Well as far as we can make out that's the case, but of course, with Sam's, the facts are as murky as a Railway Arch Pint.

So what do we know? Samuel Smith, outside London is pretty cheap for draught beer and lager. In their heartland, pints are often £2 or less.  Rumour now has it that mild and bitter will rise by a pound a pint and lager by up to £1.20.  An entry on Facebook by one of their landlords, which seems to be a re-hashed version of something sent by the brewery to managers (all Sam's pubs are managed) - justifies the price increase.  It reads roughly thus:

"We have had no choice but to raise our prices. For years Sam Smiths pricing has been way below our competitors. Our family run company have been producing excellent value in brewing since 1758. In these uncertain times and let’s face it, no one really knows what the future holds, to open up hundreds of pubs is really risky and costly. We are just raising our prices inline or below of our brewing friends. 

Please bear in mind how really low our prices we’re for years and at some point to sustain stability we have no choice but get inline with everyone. 

When I made a quick visit to the THT on Sunday, our landlord mentioned he had a Sam's manager in, who had mentioned in conversation, the price increase will be in the range I mention above.  Now I can't yet actually confirm it and equally, I have no idea how prices will or won't change in London, or indeed how much we can depend on what we read elsewhere.

Sam's pubs operate without televisions, with no music - recorded or live; no use of phones, laptops or even Kindles, as well as being liberally emblazoned by signs telling you in no uncertain terms what you can or can't do within. It probably isn't unfair to say that part of the quid pro quo for doing what you are told is low prices.  Having said all that, the actual sentiment of catching up may have some validity. Outside London, for draught products only, Sam's pubs are cheap as chips. In fact, cheaper than chips if you drink mild - but it is a bit of a gamble to pile it all on at once. Given the odd way Humphrey operates, like an East German holiday camp, he attracts a certain kind of customer.

Now if you are paying bottom dollar for your ale, you may well be minded to put up with all this, but if a price rise take your pint to broadly in line with elsewhere and you realise that five pints cost you a fiver more,  I dare say many won't.  After all, why pay £3 a pint to put up with Humphrey's lopsided world, when you can go elsewhere and won't have to?

Whichever way you look at it, this is a gamble and it signposts, the end of a unique business model, but if it backfires, it may also be the last blast of Humph's reign.

Wetherspoon's may be the likely beneficiary of any ex Sam's customers. While the Bailiwick of the opinions of another lopsided eccentric,  you can at leastphone your pals about it, while gently effing and jeffing. And you can get cask ale, which you can't in almost all the 33 Sam's pubs in my area.

Can't see it helping to re-open the many Sam's pubs which are currently closed.  You would have thought that a slow increase might have worked better, rather than a short, sharp shock.  Then again, people have short memories.