Success of Wetherspoon in Ireland will come down to the price of its pints
Too many pubs in Britain are run by people who have too few incentives to get it right
CAMRA now serves as a guardian of the pub while remaining a lobbyist for real beer: they have recently claimed that the rate of UK pub closures is now 26 per week, sharply up on a year ago. Data from the British Pub and Beer Association is stark and backs up CAMRA: between 1999 and 2012, total beer sales fell 24 per cent. But the split between on and off sales is fascinating: the sale of beer in licensed premises fell by a staggering 41.6 per cent. In off-licenses (specialist retailers and, of course, supermarkets) beer sales rose by 14 per cent over the same period.
Up until the 1970s, virtually all beer sales in the UK were controlled by pubs: they either had an off-license counter or small shop attached to cater to those peculiar souls who wanted to drink at home. This all changed within a decade when supermarkets, mostly, grabbed that slice of the trade.
The trend away from pubs has many drivers, but the principal one is price. Since 1990, the real price of beer consumed in UK pubs and other licensed premises has increased by nearly a third; the real price of beer sold in supermarkets and other retailers has fallen by around a quarter over the same period. Aggressive pricing, including loss-leading, by supermarkets is a big part of the story. People respond to incentives, particularly ones involving price.
The data, of course, show very similar patterns in Ireland. The Drinks Industry Group of Ireland recently reported that 60 per cent of alcohol sold in this country is now done by the off trade and that bar sales of alcohol are down by one third over the past five years. There are regional variations: the problems for pubs seem to be more acute outside big cities.
J D Wetherspoon seems to have coped with all of this very well. Its share price has been very strong. We don’t know much about its intended strategy other than a mention of focussing on central Dublin. But Wetherspoon’s did shake up the British market with aggressive pricing, astute management of its supply chain and interesting marketing tactics. I suspect success or failure will all come down to the price of its pints.