Friday, 16 November 2012

Profitable Pubs and Social Media

From Hydes Brewery in Manchester comes an interesting couple of assessments of the pub game. Managing director Chris Hopkins said the use of Twitter and Facebook to publicise special events and promotional offers had helped increase footfall, along with more emphasis on guest beers, live entertainment and soccer match screenings.

 Like me you may think this a "no brainer" in the digital age, but it is truly amazing that many pubs have no website, no twitter account and probably no Facebook either. Even I, as an old codger, look for such things to know what is going on, what is on sale, or simply what the opening times are. Clearly if you have special events as suggested by Mr Hopkins, you are going to do better to let the world know about it, than rely on a dodgy hand written piece of A4 stuck in a window of the pub, or tucked where no-one can read it in a corner.  For the younger generations of potential pub goers, I can imagine that this kind of social media update isn't just handy, but essential. A destination changer even.

 Mind you, you do have to actually use it. I remember with a red mist still hovering over me, traipsing across London to a pub I'd wanted to visit, only to find it was to be closed for renovation the next day. They had a website, but gallingly, there was no mention of the rather salient fact that it was going to be closed for a couple of weeks and therefore there was no beer to speak of, as stocks were being run down. Stupid, or maybe thoughtless.

Another interesting point made by Mr Hopkins was that Hydes pubs are the most profitable area of the business and have been for "many years". That may explain a little why they are currently downsizing their brewing business, by moving to a much smaller, more flexible brewery, allowing them to concentrate more on servicing their 66 pubs, rather than aimlessly brewing the failed Boddingtons brand.

So, two points to take from this. One is that  pubs should get on the web, open these accounts and keep them up to date. Hydes tell you it makes a difference for them.  The other interesting point is that pubs can be profitable businesses, providing I assume you haven't saddled them with mountains of debt.

Unfortunately, for many, no amount of social media will remove or reduce that debt to a point of making a realistic living for owner and tenant, but either way, social media involvement is a must.

Hydes is a Family Brewer in Manchester founded in 1863.


Curmudgeon said...

And if you have a website, it does help to actually update it from time to time.

Also, if you are a pub with a significant food operation, it's absolutely essential to display your current menu on your website. That is something that really can be a destination changer one way or the other.

Bailey said...

Pubs that have a detailed food menu on their website but, under drinks, say only "a range of chilled lagers, wines and real ales" get a big thumbs down from us.

py0 said...

Or indeed, a hugely detailed wine list with the desultory addendum "a range of beers are also available".

Neville Grundy said...

My local, the Guest House, puts its changing range of real ales on Facebook every couple of days. On the other hand, another local pub didn't think to mention on their website that they were running a beer festival last August. Considering the investment involved, that's quite astonishing.

As editor of our local CAMRA magazine, I often go round pubs to get adverts, and that experience leads me to conclude that some licensees aren't very good business people in general. I've occasionally made appointments to meet one, only to find s/he "has just gone out. Should be back soon." Yes, and I've just driven 10 miles.

As for notices, why put up a tatty, handwritten one when you can quickly produce something on a computer that looks so much better?

Seeing that Facebook is free and takes very little time to keep up to date, there's no excuse really. Are there any licensees at all who don't have a computer nowadays? I doubt it.

Cooking Lager said...

On social media, yes you are correct, if used well it an effective way to communicate with customers who have opted in to your marketing. As a new form of media it ought not to be a surprise so many businesses either do not use it or use it badly.

On debt, all capital has a cost. The issue with highly geared pub co’s isn’t the cost of capital a highly leveraged capital structure affords but the trading position of the business.

The point of leverage is that the interest cost on bonds will be lower than the return on capital employed providing a return to equity holders greater than the return on capital employed. If there is no return on capital employed die to poor trading then shareholder value is destroyed at a greater rate. However the issue is not one of debt but trading position.

The high leverage has to some degree protected the pub co’s from hostile takeover. With a full equity based capital structure and poor trading it would be clear these business had underutilised assets worth more if put to more profitable use.

Regional & Family brewers have an advantage of being private limited companies rather than public with a smaller set of shareholder to service and restrictions on how those shareholders trade their holding. These businesses have looked more robust however it all depends on whether you believe the pub industry is suffering from a storm or climate change. It looks more like the latter.

Cooking Lager said...

To back it up with numbers

That has a number of rather dry financial reports for Punch. They are paying between 4 & 7 % for the various notes they have issued.

They haven't been to wonga & the interest is below what most people can take a personal loan for or even a first time buyer taking a mortgage.

They ought to be able to not only service that but make a greater return on their assets than that.

Cooking Lager said...

Without wishing to bang on, have a look at the much hated tesco here

With a return on capital employed (ROCE) of around 13%

Now Tesco have lost market share & sales BUT are trading well.

A 7% cost of capital for debt would give the equity holders an additional 5% beyond the 13% indicated by the trading position.

Leigh said...

An absolute must. Simple as.
I belong to a demographic that, if I want to know what beers, food or events are on, I will get online to do so - wether it be twitter or the site. That's how I choose, and that's using the power of the tool to make an informed decision. Not only that, but by actually being in conversation with your punters before and after a visit via Twitter (for example), you've built a relationship before they've stepped through the door.
An absolute must.

Paul Bailey said...

You're blinding us with financial gobbledygook Cookie. Why not just say Punch are f****d?

Cooking Lager said...

Paul. That's a question where the books only tell you part of the picture. We can see the book value of the assets, what we cannot read is the market value of those assets. As pubs I suspect that market value to be below book. As retail or domestic real estate I suspect it is above book.

Anonymous said...

What's interesting is that their downsizing will take them below the volume of the sliding duty scale (5000hl they've quoted), effectively halving their duty bill.
It seems unlikely that they've decided they want to make less money, so pressumably the production end of the opperation is not sufficiently viable.
However they structure their internal pricing, they're not getting enough money for their product at the current duty rate.
Rather than attempting to charge more, they've decided to take it back off Mr Osbourne and his evil, greedy, rich mates.
A bit tenuous, granted, but a bit Robin Hood if true.
Not good news for Britsh brewing in the long term, especially mid sized, price based opperations.

Stono said...

actually I disagree its an absolute must, the internet can be a useful promotional tool if its used properly, though it rarely is, and its biggest fallacy is that simply being on the internet is enough. But equally adverts in local papers or on the radio can be a good promotional tool, I know one local pub group near me actually distributes leaflets to peoples homes. Yet no-one ever advocates those as musts, so its a strand that has a balance along with other forms of promotion, and things the pub can do (the age old karaoke/quiznight/music) that might work better, the internet is not a one size fits all solution.

and as users of the internet we need to recognise (outside the bloggers bubble because we run the risk of confirmation bias otherwise) how many people in the average pub actually use social media/internet to prompt their choices of pub, and it changes from place to place, London for sure its probably quite a high % of people in most places, but thats not the same across the country, especially in parts of the country where a standard mobile signal is unacheivable let alone mobile internet. people arent surfing the web to find their next drink, even if you yourself refuse to drink in any other way thesedays

I say this because I have sat in a pub, that has a website, which is reasonably nice to look at albeit slow at updates,has a facebook page even rarer updated and looked at the people who actually visit the most, keep the pub open & profitable, and they arent people with laptops,ipads, 3g or even 4g enabled phones, quite alot of them dont even have mobile phones, they are just average people there for a drink and to chat with friends they dont sit there staring at their phones checking their tweets.

and Ive been in pubs that tweet constantly, and again looked around and recognised actually none of the people here really are here because of a few electrons wasted on the internet.

Erlangernick said...

Why are people calling these couple of websites that people use to communicate with each other "social media"? It's just the fecking internet, people. Or were all the predecessors like Compuserve, AOL, Geocities, or even the USENET and (heaven forbid) bulletin boards also "social media"?