6 April 2017, Smart Zones
Vianet-Cask Marque joint report shows pub profit opportunity available through improved quality management
At a time when operating costs are set to escalate significantly in the coming years, pubs are missing out on an average of over £14,600 per year in profit through inadequate beer quality management, in-depth new research has revealed.
The findings, published today (Thursday, 6 April) in the Beer Quality Report 2017, show a significant untapped profit opportunity due to in-pub quality issues which could more than offset the new business costs coming on stream from additional employment regulation and this year’s business rates revaluation.
Analysis shows the industry as a whole is losing a staggering £709m a year in value through multiple issues around sub-standard quality from cellar to glass. The figures come from a combination of waste, missed till yield, over-ranging and low throughputs, alongside equipment and cellar maintenance failings and lost sales through reduced visits and repeat purchase. This headline figure equates to 5.8% of total UK on-trade beer sales.*
Broken down in detail, analysis shows the pub industry is missing out on:
The report shows that retailers have failed to act on improving beer quality following last year’s report, with the same proportion of beer served too warm. On the critical issue of line cleaning, this year’s report shows that, according to Vianet Business Insight research, one in three pints served to a UK consumer is via a line overdue a clean – again the same proportion as last year.
Cask Marque audits reveal that, based on visual inspection, only 72% of beer lines are perfectly clean, with the remaining pubs failing to keep adequate records and visible yeast build up.
The report finds that the average annual difference in beer volumes of pubs that serve almost all beer via clean lines (between 90-100% of beer) and those that serve less than half (40-50%) via clean lines is 63 barrels. This equates to 18,144 pints over the course of a year – and is worth approximately £63,500 at a retail selling price of £3.50 per pint.
Assuming a gross profit margin of 50%, that’s still worth almost £32,000 per year to the operator, a significant profit opportunity.
Steven Alton, managing director of Vianet, said:
“This report lays bare the profit opportunity for all operators across the pub sector, regardless of whether they run managed, tenanted or independent outlets. With a raft of new business costs hitting the industry this year, for instance further uplifts in the national living and minimum wages, pension auto-enrolment and the apprenticeship levy, as well as substantial hikes in business rates for many pubs, profitability is under pressure like never before.
“The message is good operators could have better businesses by driving up retail standards and, in turn, help safeguard the future of the category and keep pubs attractive to consumers. Draught beer remains in value growth and beer still accounts for about seven in 10 drinks sold in pubs. However, the findings in our report provide a much-needed reality check and demonstrate the category’s continued health could be threatened by quality.”
Paul Nunny, director of Cask Marque, added:
“Cask Marque has spent nearly 20 years banging the drum about beer quality and still the message is not getting through to retailer. This is a damning report on the quality offer to consumers. Findings from our own recent research showed that 49% of pubs are not meeting Cask Marque standards thank goodness nearly 10,000 pubs can! It remains vital for the future of the category we don’t disappoint customers when it comes to serving a perfect pint, every time.”
Other key findings:
*Based on CGA Strategy figures for on-trade beer sales 2016