Streamlining pub portfolios: an opportunity for smaller players

The year 2007 was a significant one for the pub industry.

Hit by a triple whammy – smoking ban, recession and a reduction in supermarket alcohol prices – the pub industry, as it was then known, was dealt a game-changing blow.

It also marked the beginning of its transformation into what we know it as today.

Pre-2007, a large proportion of pubs were ‘wet led’ – or orientated mainly towards the sales of alcohol. Since then, however, the industry has increasingly emphasised the sales of food and coffee – as well as alcohol. As the UK has emerged from the recession, this trend has continued and today the gastropub is a prominent feature of UK middle-class life.

Large pub companies have had to, accordingly, reconsider their business model. Large chains have had to move away from the wet led/large chain look and feel of their pubs and instead opt for the softer, more bespoke approach their customers are looking for.

This has required a certain kind of catchment area for that pub and is likely to be a principle driving factor behind many of the asset sales by the UK’s leading pub companies.

There are, of course, other reasons lying behind the decision to streamline portfolios. Not least the need for pub companies to pay down debt accrued before the recession. Furthermore, continued consolidation and the resulting M&A activity in the sector is likely also to have played a part. The merger of Greene King with Spirit Pub Company led to the sale of 16 pubs, for example.

Our research has, in fact, found that the UK’s top 10 pub companies sold off 820 pubs last year – reducing their total pub estates to 15,020 pubs and bars in 2016.

However, the important point to be made here is that all these sales provide a very real opportunity for smaller pub companies – or even individual pub owners – looking to expand their market share.

It is always important to keep in mind that the large pub companies are effective operators, so if they are selling an asset, it may be that it simply doesn’t work as a pub. However, with the right operator, a great business plan and the necessary capital investment, these pubs can often meet their full potential.

This is where Ortus Secured Finance is very happy to step in.

Many smaller pub companies are still struggling to get the funding they need from traditional high street lenders. Alternative finance providers, however, are enthusiastic about filling this gap.

It is often the case that all a recently purchased pub needs is a few tweaks to appeal to current consumer tastes – whether this be investment in an ‘organic’ menu, an offering of craft beers and artisan spirits or incorporating an events space.

A little can go a long way and – in the current climate – there is a lot of opportunity out there for the pub industry’s smaller players.

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