- Sell-off provides opportunities for smaller companies and entrepreneurs
- Spending in pubs remains strong despite Brexit uncertainties
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 from 15,840 in 2015, as they continue to restructure their businesses, says Ortus Secured Finance, the commercial lender.
According to Ortus Secured Finance, the reasons pub companies are selling off assets include a need to pay down debt and to restructure portfolios to respond to changing consumer trends drinking and eating out.
Ortus explains that since the ban on smoking and the recession the pub market has changed radically. A number of larger chains have moved away from being overwhelmingly orientated towards sales of alcohol (wet led) towards sales of food and coffee – including the gastropub trend.
A number of pub chains that had been built through the use of large amounts of leverage have gone through restructuring since the credit crunch that includes the shedding of parts of their estates.
Continued consolidation, through mergers and acquisitions has, ironically, also resulted in a reduction in the overall portfolios of the Top 10 as non-core pubs are sold off following acquisitions. For example, the merger of Greene King with Spirit Pub Company led to the sale of 16 pubs. The planned acquisition of Punch Taverns by Heineken may also result in the sale of some pubs to meet the requirements of the CMA.
Ortus Secured Finance says the sale of assets by large pub companies provides opportunities for smaller companies looking to expand their market share. Many of these assets tend to be functioning pubs but which may require some further capital investment to meet their full potential.
The reluctance of traditional high street banks to lend is creating opportunities for alternative finance providers to fill the funding gap.
Jon Salisbury, Managing Director at Ortus Secured Finance, says: “The shedding of assets by large pub companies can provide a real leg-up for smaller companies.”
“Many large pub companies are looking at food-led pubs over the last few years or more consistently branded and fitted out pubs.”
“That has allowed smaller operators to step up and help relaunch community pubs which are an important cornerstone of a local area. Of course independent ownership can also allow for greater experimentation in the market and really intensive attention to the customer – that keeps the whole pub and bar industry fresh.”
“Spending in pubs remains strong, even while other consumer spending starts to wane as inflation rises post-Brexit. But the craft beer trend of the last decade shows that smaller pub companies and entrepreneurs can charge premium prices even in a weak economy.”