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thePublican Monday 12/07/10 17 City & Business This Week


Brewer and pub operator Greene King plans to be ‘the best in British pubs and beer’ and is radically reshaping its offer to achieve its goals. Hamish Champ reports


KING ON THE MARCH


MENTION ‘FIVE-year plan’ to people of a certain age and up pop mental images of dungaree-wearing workers beavering away in tractor factories or of beaming farmhands singing songs of communal unity while stacking bales of hay.


Aged Marxists might harbour a certain nostalgia for Soviet bloc economic planning, but it is far removed from the sort of strategy being pursued by Greene King, despite the time frame similarities. As part of his ambition to make the Suffolk brewer “the best in British pubs and beer” within three to five years, chief executive Rooney Anand wants to advance what has for some time been an already successful strat- egy, that of having a more retail-led and branded focus.


A major thrust towards the goal of being ‘the best there is’ will


consist of a radical reshaping of the group’s retail offer towards more managed pubs and fewer – but better quality – tenanted and leased ones. Greene King’s managed pub opera- tion accounted for 60 per cent of its total turnover in the last financial year and 50 per cent of the group’s operat- ing profit. As with many operators investing in managed estates, food sales are helping to underpin this performance. This is a trend which it believes can only grow in the months and years to come.


Greene King is investing in its managed estate


Expansionary vigour But there is also an expansionary vigour about Greene King that implies it hasn’t even got started yet. Anand says there is a real momentum on the retail side of the business that can be tapped into for future growth. “It’s rare for a business to have the largest segment of its operation offer- ing the best prospects for growth, but that is what we have here,” he says. Greene King plans to boost the number of its managed pubs by nearly a quarter to 1,100 sites, through acqui- sition or transfer from tenanted oper- ations. Around 150 sites will be bought, funded in part from the £100m that remains from last year’s rights issue proceeds. Between 50 and 75 sites will be trans- ferred from the tenanted business and around 25 pubs will be built from scratch on brownfield and other sites, Anand says. Destination pubs and restaurants, such as Hungry Horse and Old English Inns, will be at the forefront of this expansion, with growth still available despite the current recessionary pressures. At the same time that it is beefing up its managed pub portfolio, Greene King will downsize its ten- anted pub estate by a quarter, to around 1,200


sites. “The process will be completely independent of the rise in the number of managed pubs,” says Anand. The group’s tenanted and leased pubs have to be more competitive, he says. Work is being undertaken and resources allocated to bolster and improve their lot, with support pack- ages for tenants forming a core part of such efforts.


In setting out its determination to improve the competitiveness of its tenanted pubs by taking a more retail- led approach, Greene King is effec- tively saying to its tenants, “we’ll give you the tools to do the job, now you do your part”.


In reducing the size of its tenanted and leased estate from 1,584 to 1,200 Anand and his colleagues are putting down a marker that says “less is more”; better to have fewer but better quality pubs that can perform in this or any other market, than have pubs that drag down the estate as a whole. The 6.5 per cent decrease in tenanted pub revenue came from an estate with more than five per cent fewer pubs, points out Anand, a performance rarely bettered by others in its peer group, if at all.


Those tenanted pubs that will be transferred into managed sites or sold altogether will come from both Greene King’s England-based estate and its Belhaven portfolio, north of the border. Speaking of which, the Scottish brewer, along with its pub business, continues to perform markedly better than many believed it would when Greene King bought the business five years ago. “It’s a great business,” says Anand, who half a decade after it was done still appears sensitive about the deal’s reception in 2005. “The Scottish pub market is more fragmented than in England. Food sales are catching up and the combination of that and the success of the performance of Belhaven Best is paying off.” Closer to home Greene King’s own brewing operation saw volumes up 3.6


Greene King annual results for 2010 Total turnover:


Total pre-tax profit: £984.1m (up 3.1 per cent)


Total operating profit: £211.3m (down 2.3 per cent) £123m


(up 3.8 per cent)


Operating profit: EBITDA per pub:


Pub Partners Turnover:


Operating profit: EBITDA per pub:


Belhaven Turnover:


Operating profit:


Greene King Retail Turnover: £589.2m (up 3.5 per cent) £106.4m


(up 0.8 per cent) £182.4k


(up 1.6 per cent) £145.1m


(down 6.5 per cent) £64.6m


(down 8.9 per cent) £52.3k


(down 3.2 per cent) £151.9m


(up 11.7 per cent) £32.7m


(up 8.3 per cent)


Brewing Company Turnover:


Operating profit: £97.9m


(up 4.3 per cent) £25.6m


(up 0.8 per cent)


per cent in a market down nearly twice that percentage figure.


Sticking to its guns Anand says he doesn’t see the group’s portfolio of beer brands “changing radically”; rather the company has “stuck to its guns, brewing on one site”. It boasts leading cask ale brands such as Greene King IPA, Old Speckled Hen and Abbot Ale, all of which have the sort of market profiles many rival brewers would give their finings stock to have.


So what will Greene King look like in five years, as the current plan effec- tively draws to a close? “It will look like a slightly more retail-oriented version of what it is now,” says Anand. “Investment in our businesses is leading to good returns for licensees and shareholders alike.” Anyone holding Greene King stock will certainly have been pleased with the 2.4 per cent increase in the full- year dividend which the group unveiled at the time of its recent results announcement. Finally there’s the ‘regional brewer’ tag which Anand finds so irksome. “It has been inaccurate for some time and hopefully will be a thing of the past in five years’ time,” he says. Predictions either way on a postcard to the usual address… ■


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