Categories
opinion pubs

People think pubs are ripping them off

“I personally believe pubs/bars have priced themselves out of business.”

When you spend a lot of time talking to people who like pubs, and are sympathetic to their situation, it’s startling to come across a statement like that.

And this from the same conversation:

“The key question is why can Wetherspoons sell beer at £2-3 a pint, and some pubs sell at £6? It’s not just about landlords’ rent.”

We spotted those on LinkedIn in comments from an accountancy firm MD on a post from an insolvency expert – so these are people who understand business and can do sums.

We can hear publicans groaning from here.

In the context of supply chain issues, rampaging inflation and staff shortages, let alone the long-term structural problems caused by the pubco model, how much control do most really have over the price of a pint?

That’s not to say, of course, that some people don’t do quite well running pubs. We find ourselves thinking of a businessman who owned several pubs in Cornwall and would turn up for inspection in a huge Range Rover with personalised plates, gold cufflinks flashing.

It’s perhaps no wonder his customers got the impression that running a pub might be a nice earner and occasionally grumbled about the price of a pint.

As one pub landlord said to us a few years ago, “Even if I did have a Ferrari, I wouldn’t let my customers see me driving it, know what I mean?”

In general, though, it is fair to say that by the time you’ve covered the very cost of selling a pint in most settings, your margins will be pretty slim.

That’s why so many pubs try to compensate with food, the margins on which might give them a little bit more for manoeuvre.

Well, that is, until food also started going up in price.

“It cost me £110 to take my wife and two 7-year-olds to the pub for tea on Friday. Who can afford to do that often?” asked another commenter in the LinkedIn chat above.

For a while, pub food had an advantage: because it was allowed – no, expected – to be heartier and less fancy, it could fill a gap in the middle.

A decade or so ago, a Sunday roast in a pub might cost, say, £8-10, and you’d expect to pay less than a tenner for fish and chips. In fact, researching this on Twitter, we found someone in 2012 expressing fury at having paid £13 for fish and chips in a pub.

Now… those prices have barely changed. Because (a) those prices are almost hard-wired in people’s brains; and (b) nobody has any money.

Unless you’re confident that you’ll be able to continue to attract well-off customers, and the rest can go hang, putting up prices is a bold move.

So, what’s gone? The publican’s margin.

It’s helpful in this context to give people running pubs chances to talk openly about the challenges they face.

Tom Kerridge’s BBC documentary series did a good job of highlighting the gap between drinkers’ ideas of a fair price and the reality of many pubs’ accounts.

Pieces like this, in which a pub landlady talks about impossible fuel bill increases, can also be a reality check.

Perhaps what we need is more publicans to be more open about how they work out the asking price of a pint, if they feel able to do so.

Yvan Seth, who works as a beer distributor, had a go at this back in 2014, including a snappy infographic.

We’d certainly be happy to share more information on this if anyone feels like sharing with us privately.

8 replies on “People think pubs are ripping them off”

This all may be true but isn’t the simple reality that going to the UK pub has been priced beyond the reach of many? Not through wickedness of pub owners but through general socio-economic change. I don’t mind having 24 premium craft beer delivered at $3.50 a can but I do balk at $10 for the same beer someplace out. I can’t subsidize that business model. The ticker of daily pub closures also doesn’t sit beside another counting the other new entertainments – or the number of people improving their health habits. So even if the pub trade here, as I expect it does there, is doing all it can to keep costs down perhaps they are just not as much of a draw.

Spot on, Alan. Folk just haven’t got a spare tenner each for a couple of pints and a bag of peanuts, let alone a £30 Sunday lunch and bottle of wine. What was really noticeable in east Somerset pubs last week was the death of trade after about 3pm. The dining pubs wind down, closing after lunch, the wet led pubs don’t open in the evenings. And pubs that used to open all week don’t open till Thursday.

The wetherspoons comparison is sort of unavoidable when you can’t escape the fact that you’re buying the same product.
In food terms, if I buy dinner at somewhere fancier than wetherspoons, they’ll be at pains to demonstrate that the quality of the food is better – e.g. organic, well-reared meat, etc – but with beer there’s no escaping that you’re buying the exact same drink in two pubs at radically different prices.
There’s plenty of good arguments for why you should – nice atmosphere, good service, and so on – but it’s not nearly as clear cut a difference as it is with food.

This applies to all types of businesses, not just pubs, but customers aren’t really that interested in tales of woe about how costs have increased. They want a product that meets their needs at a price they can afford, and it’s up to businesses to find a way of providing that.

In the U.S. a big factor is the rise of the brewery tasting room. You’re not going to find a fresher pour, and a lot of people like the ambience. In some jurisdictions a single brewery can have multiple taprooms, not necessarily located anywhere near the brewery, and they soak up a lot of the dollars that would otherwise be spent at beer bars.

From my perspective this is a mixed blessing. The beer is often great and earning retail prices keeps breweries afloat. But of course it comes at the expense of the superior selection a really good beer bar will provide, plus the chance to try things from further afield. Right now we’re in a golden period where both are readily available in a lot of places, but it’s not hard to imagine the tasting room model winning out and the high end beer bar becoming a rarity.

And I can see from the publican’s perspective why it would feel as though you are being cannibalized by your own industry.

The BBPA give an idea of costs at: https://beerandpub.com/briefings/running-a-pub-2018-cost-guide-for-tenants/

But broadly, if you say that the ex-VAT price of your pint is broadly split three ways – the liquid, the place (including insuring/heating etc it) and the person serving it to you, the one that people don’t like to talk about is the staff cost. Running a pub is labour-intensive, but eg the minimum wage was introduced at £3.60 for adults in April 1999 and is now £9.50, but would have been £6/hour if it had kept pace with CPI inflation. And on top of that you now have statutory holiday pay (an extra 12.07%) as part of the adoption of the Working Time Directive in 1998, and statutory pension contributions as a result of the Pension Acts 2008 & 2011, which started in 2016 for small businesses and require them to pay 3% of earnings over £120/week (ie 12.6 hours at min wage) – call it 2% overall for a business with part-time workers. So suddenly, that £3.60 that would have gone up to £6 with inflation, is now at £10.83, 80% more.

Or look at it another way, if you say that wages were 20% of the ex-(17.5%) VAT price of a £2 pint in 1998, wage inflation would have added 23p to the price of a pint, but instead it’s gone up 68p – and for a smaller place with 30% staff costs, it would be £1/pint (the BBPA quote 14-27% staff costs excluding manager/tenant’s earnings)

Which gets onto another factor – a small pub has to have 1.0 staff on duty, even when there’s only 0.3-worth of trade, so that person costs 3x as much per pint to employ at that time compared to a bigger place which can reduce from 3 people to 1 person in quiet periods.Whereas when they’re busy, extra trade means having to employ extra staff and hence less extra profitability than the same amount of extra trade in slack periods. So if you want to help pubs, go when they’re not busy, it’s worth more to them – and it’s better from a Covid POV. Yes the cask may not be so fresh, but you might decide that Tuesdays is the night when you go to drink keg and cans, then drink cask at the weekend when it’s busier.

In that regard, the cultural shift away from weekday drinking is one of the things that has hit pubs, particularly smaller pubs. And more generally, people are drinking less, particularly less in the on trade, so all those fixed overheads are being spread over few pints. So it all costs more.

So the future is in fewer, bigger pubs – which is what Spoons do, but also the likes of Brunning & Price in a different way. Or the micropub model where you’re employing a minimal number of staff other than mine host, but hours are cut accordingly.

The food thing is a separate issue – the problem with “full-service” food is that although the margins are higher, there are massive fixed costs to absorb before you send out your first plate. So again it favours big sites – the alternative is the food truck model where someone else pays those fixed costs and has the hassle of recuiting chefs etc (I know a couple of places which have had to downsize what they do on the food side because of the current shortage of chefs). Or you just do the cold plates or pies that can be knocked up by untrained barstaff, less as a revenue source than to keep people buying beer.

That’s a very good explanation of the economics of the pub trade. It’s not properly appreciated that, when you buy a pint in a pub, you’re primarily buying a service, not just a product.

And, to become more price-competitive, pubs have to become less labour-intensive, even at the cost of losing “atmosphere”.

While (most) pubs may be genuinely under huge cost pressure, they’re not helped by plenty of opportunist price hikes by businesses who aren’t particularly facing cost pressures but have seen inflation as good cover to hike their own prices. I’m thinking particularly of alternatives to pubs, such as internet streaming channels who seem to have slipped in the odd pound or two rise, probably hoping it won’t be noticed above all the other noise. Wetherspoons, to give them a bit of credit for a change, could easily have ridden the wave of raising prices but they realise their market has much less price elasticity than rivals and they’ve kept prices down (although arguably at the cost of quality).

It’s hard to avoid the conclusion that without significant government intervention, notably requiring councils to actually implement pro-pub planning polices, that a certain type of pub is doomed. It’s the type of community pub that’s been on the ropes for a long time, dependent on a regular clientele to provide reliable wet-led income to pay the bills. These places can’t expect people to come in 5 nights a week and drink 5 pints at a fiver each. That’s over £600 a month — half of which is likely to be the rise in energy prices for an average house by the autumn. Esther the punters cut the drinking nights or the number of pints per night.

Pubs that pull through are going to have to cut their cloth accordingly. This is one reason why I’m much more sympathetic to limited hours trading than I used.to be.

Comments are closed.

%d bloggers like this: