{"id":1581,"date":"2021-03-29T08:56:49","date_gmt":"2021-03-29T08:56:49","guid":{"rendered":"https:\/\/londondrinker.camra.org.uk\/wordpress\/?p=1581"},"modified":"2021-03-29T19:23:01","modified_gmt":"2021-03-29T19:23:01","slug":"trade-news-march-2021","status":"publish","type":"post","link":"https:\/\/londondrinker.camra.org.uk\/wordpress\/index.php\/2021\/03\/29\/trade-news-march-2021\/","title":{"rendered":"Trade News – March 2021"},"content":{"rendered":"\n

New ventures<\/strong><\/p>\n\n\n\n

In late January came the announcement of the formation of two new pub owning businesses (POBs). One analyst told the Morning Advertiser<\/em> that, \u201cWe fully expect 2021 to present a number of opportunities for new entrants and existing operators to acquire assets, individually or in packages, as the market rebounds from the series of lockdowns and the vaccines take effect<\/em>.\u201d I\u2019m assuming that the targets will be independently owned pubs or very small chains which see being taken over as the only way out of their mounting debts. I assume that they will not be looking for tenanted pubs and that rival POBs would not give their consent anyway.<\/p>\n\n\n\n

So, is this a vote of confidence in pubs and, by implication, in us pub goers or will it simply be an asset stripping exercise? Some combination of both is possible, of course. The leisure industry property specialists, Fleurets, produce an annual survey of pub prices and the one for 2020 reported that the average price for a freehold pub still trading had fallen by 35% and that for a leasehold pub by 46%. Increases had been reported prior to the COVID outbreak.<\/p>\n\n\n\n

The first of the new companies is the RedCat Pub Company<\/strong>, which sees the return to the pub trade of the former Greene King chief executive, Rooney Anand. Mr Anand has recently been chairman of the Casual Dining Group, which includes such brands as Bella Italia and Caf\u00e9 Rouge. He will be executive chairman of RedCat. Chris Hill, previously with the pub and bar chain New World Trading Company, has been appointed chief executive and their nonexecutive directors include a former Lord Mayor of London. The company was reported to have a war chest of \u00a3200 million provided by an American private equity fund, subsequently revealed by the Telegraph<\/em> to be Los Angeles-based Oaktree, whose \u00a3110 billion portfolio already includes interests in the UK. The funding may be increased by up to a further \u00a3300 million in due course through borrowing. Mr Anand told the Telegraph<\/em>, \u201cThere is no set playbook. I am not trying to recreate Greene King. I see myself as someone who\u2019s investing in a sector that has been oversold, where people have taken cover and written it off and have been quick to say \u2018it\u2019s not going to recover\u2019. I\u2019ve always been a strong believer in the great British pub. It has survived the Blitz, the Great Plague and the credit crunch; always bouncing back and taking its rightful place at the heart of the community. There will always be a market for a decent pub<\/em>.\u201d<\/p>\n\n\n\n

The other is the Valliant Pub Company<\/strong>. This company also sees the return of some experienced pub operators, the co-founders of Hawthorn Leisure, Mark McGinty and Gerry Carroll and James Croft, who used to be the group strategy and retail director for the Ei Group. They had previously worked together at Enterprise Inns. The initial funding has been provided by the trio themselves, along with some other private investors and they are looking for more. Their target is reported to be pubs in the suburban and community pub sector. Mr Carroll told the Morning Advertiser<\/em>, \u201cWe obviously want an unrestricted market place; we don\u2019t want to be opening up when you can\u2019t have vertical drinking and you\u2019re stuck with table service and closing at 10pm. We were heartened to see how well pubs bounced back post the first lockdown and believe that once COVID restrictions are lifted the pub sector will be one that recovers quickly.\u201d <\/em>He added that they were already \u2018eyeing up sites as we speak\u2019 and \u2018would look at bigger deals as they come to market\u2019.<\/em><\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

In the event that a tied pub is acquired from a pub owning business (POB) which is subject to the Pubs Code by a POB that is not (ie owns less than 500 pubs), the tenant retains some Pubs Code rights, including a rent assessment when the rent is next reviewed. The tenant\u2019s right to change to a Market Rent Only agreement is however lost. The entitlement to Pubs Code protection lasts until the next rent review or the existing agreement expires.<\/p>\n\n\n\n

Wouldn\u2019t it be a positive gesture if, to show good faith, these new companies decided not to operate the tied house system and instead let their pubs long term on agreements similar to \u2018market rent only\u2019 terms.<\/p>\n\n\n\n

Young\u2019s<\/strong><\/p>\n\n\n\n

Young\u2019s have confirmed that 143 of their pubs which have gardens or outside space will be reopening on 12 April. All being well, the rest will follow on 17 May. Work has finished on the Grade II-listed Enderby House in Greenwich and that will also be opening. Usefully at this point, it has two terraces areas.<\/p>\n\n\n\n

Young\u2019s have also acquired a pub in St Albans, the Alban\u2019s Well, a former BHS store in Peters Street. It is currently undergoing an extensive refurbishment and will feature a self-service \u2018Wine Wall\u2019.<\/p>\n\n\n\n

J D Wetherspoon<\/strong><\/p>\n\n\n\n

In March, JDW very usefully issued lists showing which of their pubs would be opening their outside areas from 12 April. As I understand it, the lists included all of their pubs, area by area, with the pubs that were opening indicated by a tick. Unfortunately when the lists were printed in a number of local newspapers, the ticks were missed off.<\/p>\n\n\n\n

The company originally said that it would extend the life of CAMRA vouchers that have gone out of date during the recent lockdown by six months. This has now been extended to a year.<\/p>\n\n\n\n

JDW issued a COVID update, as reported in the Morning Advertiser<\/em> (20 January), which said that it had 99% of its staff on furlough. Despite implementing cost saving measures, the company was still spending nearly \u00a33.5 million per month on those staff not furloughed and the costs for those that are.<\/p>\n\n\n\n

JDW have decided to join the British Beer & Pub Association (BBPA) who are regarded as the trade body for the larger pub owning businesses.<\/p>\n\n\n\n

In order to cover a slow return to profitability, JDW have raised \u00a393.7 million through a share issue (8,370,000 shares at 1.12 pence each). The Guardian<\/em> (19 January) reported that the funds might also be used to buy more pubs although JDW subsequently made it clear that their aim was \u2018the acquisition of a number of properties in central London, the freehold reversions of pubs of which it is currently the tenant, and properties adjacent to successful pubs<\/em>\u2019. It was reported in the Morning Advertiser (3 December) that chairman Tim Martin had disposed of more of his own shares, reported to be around \u00a35 million (431,500 shares at \u00a311.66 each) which leaves him with 27% of the company\u2019s shareholding.<\/p>\n\n\n\n

Mitchells & Butlers<\/strong><\/p>\n\n\n\n

I reported in the last edition that M&B might have to ask investors for more funds and they did just that in early February, to the tune of \u00a3350 million. It however became more significant to the future of the company than expected. I mentioned previously that Joe Lewis, the majority shareholder in Tottenham Hotspur Football Club, and racehorse owner John Magnier owned more than half (not \u2018nearly half\u2019 as I said) of M&B\u2019s shares. I should also have mentioned that their shareholdings were held by their investment companies, respectively Piedmont and the Elphida Group, in which Mr Magnier is partnered by J P McManus. They have now teamed up with a third shareholder, currency trader Derrick Smith, whose shares (4.3%) were held by a company called Smoothfield Holdings, to form a new holding company, Odyzean, into which all three have transferred their interests. Odyzean then acquired the whole of the new issue of \u00a3350 million, giving it 55% of M&B\u2019s shares and unchallenged control of the company. M&B\u2019s chairman, Bob Ivell, told the Morning Advertiser<\/em>, \u201cWe are pleased to have received the support of our major shareholders and key creditors. Mitchells & Butlers was a high performing business going into the pandemic and this capital raising and refinancing will provide the business with the certainty of funding that it needs in order to emerge in a stronger position to take advantage of its strong property portfolio, well known brands and operational expertise in order to win market share and continue its long-term strategy of deleveraging and driving value creation for shareholders<\/em>.\u201d Odyzean are reported to be fully supportive of M&B\u2019s current management but are considering reducing the number of non-executive directors on its board and reviewing the company\u2019s strategy.<\/p>\n\n\n\n

Marston\u2019s Attract Interest<\/strong><\/p>\n\n\n\n

Marston\u2019s, formerly Wolverhampton & Dudley Breweries and who, contrary to what was said in several newspaper articles, are no longer a brewing company, recently attracted the attention of an American private equity group called Platinum Equity Advisors (PEA). At the end of January, PEA made what Marston\u2019s called an \u2018unsolicited and non-binding proposal\u2019 in the form of a cash offer for \u00a31.05 per share. This followed earlier bids priced at 88p and 95p. PEA\u2019s offer would have made Marston\u2019s a private company with their shares no longer traded. It led to the value of Marston\u2019s shares rising by 17% to 87p, putting a value on the company of \u00a3553 million. In 2019, their shares had been valued at around \u00a31.30.<\/p>\n\n\n\n

Marston\u2019s directors unanimously refused the offer because it undervalued the company. That suggested that they might still be open to an offer nearer their valuation. This left Platinum Equity with a deadline of 26 February by which time they had to either make a definite offer or confirm that they were not proceeding. They however announced on 11 February that they would not be making a further offer. Marston\u2019s share price fell to 86p.<\/p>\n\n\n\n

An influential party in this deal must have been the Carlsberg Marston\u2019s Brewing Company (CMBC) in whom the Copenhagen based multi-national has a controlling interest. CMBC would not have wanted to lose Marston\u2019s 1,400 pubs as outlets for their products.<\/p>\n\n\n\n

Given that the activities of such organisations as PEA are normally based on research, I wonder what attracted PEA to bid for Marston\u2019s in the first place. Like the Terminator, will they be back?<\/p>\n\n\n\n

Hawthorn Leisure<\/strong><\/p>\n\n\n\n

Hawthorn, the pub company owned by property developers NewRiver, has some \u00a3250 million available for further additions to its 700 strong estate. This is after investing some \u00a39.4 million on pub projects during the latter half of 2020. Their funds have however been bolstered by the disposal on \u2018non-core\u2019 pubs. Their Chief Executive, Mark Davies, told the Morning Advertiser<\/em>, \u201cHawthorn\u2019s overwhelming priority is to protect our people and to protect our pubs. We\u2019re continuing to support our pub partners to help them stay afloat and to ensure that they can thrive again and bounce back when their pubs reopen. We remain bullish about the role that community pubs will play in people\u2019s lives once lockdown is lifted<\/em>.\u201d<\/p>\n\n\n\n

Revolution Bars Group<\/strong><\/p>\n\n\n\n

A pattern is emerging here. As I reported two editions ago, following a company voluntary arrangement (CVA), RBG\u2019s plan was to renegotiate the rents on a number of their sites. The landlord of their site at Clapham Junction preferred to grant a lease to Wetherspoon\u2019s instead and now the same thing appears to have happened with their riverside site in Richmond upon Thames, the former Castle hotel and ballroom. A spokesman for the company told the Richmond and Twickenham Times<\/em>, \u201cWe have loved our time in Richmond and hope to return one day, however due to the government\u2019s ongoing closure of the hospitality industry we have had to seek concessions from our landlords and in this instance our landlord has taken the opportunity to assign a new lease to another operator. We are doing all we can to secure onward employment for our Richmond team<\/em>.\u201d There had previously been complaints about noise levels and, last year, Richmond Council refused an application for extended hours. The identity of the new lessees is not yet known.<\/p>\n\n\n\n

Heineken<\/strong><\/p>\n\n\n\n

Being a pandemic, COVID is also hitting the multinational companies. Heineken, the second biggest brewer in the world, registered a net loss of \u00a396 million for 2020. As a consequence, they are restructuring the company, looking to cut costs by \u00a31.75 billion over the next two years. This will include reducing their workforce by 10% with the loss of up to 8,000 jobs, many of them at their Amsterdam headquarters. Their future plans include introducing more no and low alcohol lines and \u2018hard seltzers\u2019 (alcoholic carbonated drinks) while dropping some existing beer brands. There is no suggestion that the losses have come about for any other reason than COVID. There will be job losses in the UK, including some at Star Pubs and Bars. No other effect on Star\u2019s operations has been reported. The announcement was made by Heineken\u2019s chief executive and chairman, Dolf van den Brink, who took over in April 2020. Not, perhaps, the best of times to do so.<\/p>\n\n\n\n

Star Pubs & Bars<\/strong><\/p>\n\n\n\n

Meanwhile, Heineken\u2019s UK pub operation, Star, has fallen foul of the Pubs Code Adjudicator again, although this time with an amicable outcome. One of the rights that the Pubs Code gives a pub tenant is to oblige their pub owning company (POB) to give them a rent assessment proposal (RAP) if there has not been one during the previous five years. Star were not doing this because they claimed that, where their agreements provided for automatic rent increases based on the retail price index (RPI), this amounted to the same process. The PCA disagreed and pointed out that this had already been the outcome of a previous arbitration. Star agreed to change their practice accordingly. A spokesperson for Star was quoted in the Morning Advertiser<\/em> as saying, \u201cWe welcome the improved relationship with the PCA. They came to us in this instance with their concerns and we were able to resolve the issue to everyone\u2019s satisfaction<\/em>.\u201d This, of course, is a reference to the row about Market Rent Only applications where Star have an appeal pending against a \u00a32 million fine. The report, incidentally, added that Star have so far allowed rent reductions totalling \u00a344 million arising from closures during the COVID pandemic.<\/p>\n\n\n\n

Diageo<\/strong><\/p>\n\n\n\n

The increase in home drinking enabled Diageo to stay in profit over the last six months of 2020, although profit fell by 10% to \u00a32.2 billion. Sales in the UK actually increased by 2%, with off-sales increasing by 30% to compensate for pubs being closed. The included sales of spirits increasing by 15%, which hardly contributes to controlled drinking. I have, incidentally, yet to see the alcohol free version of Guinness, \u20180.0\u2019, return to supermarket shelves after its withdrawal shortly after it was first released.<\/p>\n\n\n\n

AB InBev (Budweiser Brewing)<\/strong><\/p>\n\n\n\n

The Leuven based multinational has upset many of its customers by reducing the strength of its flagship product Stella Artois. Apparently, as is often the tactic with such events, this happened last October but it is only now being noticed. The \u2018reassuringly expensive\u2019 beer has been reduced in strength from 4.8% ABV to 4.6%. It had already been reduced from its original 5.1% ABV. AB InBev\u2019s brewmaster in Leuven, Dorien Nijs, was quoted in the Daily Mirror<\/em> as explaining, \u201cWe know that taste and quality remain the number one priority for Stella Artois drinkers. We also recognise a health and wellness trend through moderation<\/em>.\u201d According to the same article, one unhappy customer complained on Tesco\u2019s website, \u201cI cracked open a can of Stella 4.6 per cent and thought I had COVID since I could not taste anything<\/em>\u201d while another commented, \u201cA once great beer of the geezers. Now watered down to 4.6 per cent<\/em>.\u201d<\/p>\n\n\n\n

Apparently, AB InBev have produced a dark version of Stella Artois, called Midnight or Noire at 5.4% ABV. It is not clear however whether it is available in the UK.<\/p>\n\n\n\n

For 2020, AB InBev reported a fall in sales of 5.7%, leading to a reduction in revenue of 3.7%. They are however still planning to invest \u00a372 million in the former Whitbread plant at Magor in Monmouthshire, which is their largest UK operation and produces both Budweiser and Stella Artois. There are also plans to expand production at Salmesbury, another former Whitbread site, in Lancashire.<\/p>\n\n\n\n

Curious to be sold<\/strong><\/p>\n\n\n\n

The Chapel Down winemaking group have decided to dispose of their Curious brewery and cider making operation, based in Ashford, Kent. According to a report in the Morning Advertiser<\/em> (9 February), their plan is to put the business into administration and for private equity firm NewCo Risk Capital Partners to then purchase the business and its assets from the administrator. Nearly all of Curious\u2019s output goes to the on trade, so it has suffered because of COVID and, unlike the wines and spirit business, no alternative sales were possible. Chapel Down\u2019s chief executive, Frazer Thompson told the Morning Advertiser<\/em>, \u201cFollowing a strategic review, the board has taken the decision to focus our energy and resources on building the Chapel Down brand and business to ensure we continue to flourish. While this has been a difficult decision, we are very pleased to have found in Risk Capital Partners an excellent home for Curious Drinks, where the business will be able to fulfil its exciting growth potential<\/em>.\u201d There will be no redundancies and shareholders in Curious will be offered shares in Chapel Down. The founder of Risk Capital Partners, Luke Johnson, said, \u201cWe see terrific potential in the Curious Drinks business and we are very excited about its future, despite the challenges of the past year. Brewing will always be a cornerstone of British culture and the craft beer revolution has only strengthened that. Curious is a great brand made in a fabulous facility and, with our support, the business can be developed further<\/em>.\u201d<\/p>\n\n\n\n

Kegstar<\/strong><\/p>\n\n\n\n

Casks and kegs, especially durable stainless steel ones, are one of a brewery\u2019s biggest investments. Quite often, small brewers find it easier to hire them, especially if the hire company themselves recover the cask from the brewery\u2019s customers. One of the biggest cask hire companies, KegStar, has been taken over by a company called MicroStar Logistics who are based in Denver, Colorado. KegStar already operate in the USA, as well as the Netherlands and as far away as Australia. Thanks to Martin Butler for the information.<\/p>\n","protected":false},"excerpt":{"rendered":"

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