Wednesday 01 June 2016 7:25 pm

How to do things differently in the pub industry: An interview with Marston’s chief executive Ralph Findlay

It's fair to say it’s been a challenging decade for the UK's pub sector. First it was hit by the smoking ban in 2007, then by the recession in 2009. Revenues across the industry have also been affected by broadly falling levels of alcohol consumption.

Pub companies have been forced to rethink their strategies to stay resilient in a changed market, and also to redefine their purpose.

Many have turned traditionally drinking-focused, community pubs into foodie hotspots.

Data released this week showed the food-led branded pub segment has grown by 17 per cent in the last year and 47 per cent in the last five years.

Marston’s, the independent brewer, nationwide pub operator and, most recently, lodge provider, might have taken the pub sector's focus on food on board, but it's also adopted a different approach.

According to chief executive Ralph Findlay, avoiding London and making sure it maintains a diverse business have been key for the FTSE 250-listed company.

It has mostly eschewed the capital in favour of the regions and suburban areas where the company can be a big fish in the small pond of less competitive pub markets.

“The London market is incredibly vibrant from the point of view of consumers, but for our sector the competition is very intense,” Findlay told City A.M. in an interview last week.

“Also, the cost of property is a major barrier. We are a returns focused business and making high returns in London is harder.”

While the company operates a handful of pubs in London, including the Fire Station in Waterloo and Pitcher and Piano on Cornhill, the majority of its 1,600 or so pubs are located elsewhere.

“We aim to be the best pub for miles around and that is a greater challenge in London.”

Although the group has locations across England, Scotland and Wales, you would be forgiven for not being aware of it.

As well as avoiding London, the company shuns national advertising campaigns, opting for local advertising and sponsored events promotion.

“We think we might turn people off if we operate with big brand behaviour,” Findlay said.

It’s a strategy that would seem to be working for the firm. Like-for-like sales across its managed and franchised pubs grew three per cent last year, higher than the market average. The average profit for each of its pub was 13 per cent in 2016 and up 44 per cent since 2012.

Marston’s beer business has continued to grow strongly, with the group's underlying profits in 2015 driven by its acquisition of brewer Thwaites last March.

While its pub business accounts for around 90 per cent of profits, Findlay maintains that the brewery is still the “beating heart” of Marston’s, both for the company and its employees.

Among its many ales the company brews Hobgoblin, Banks’s Bitter and Pedigree. However, the company is notably not precious about maintaining a monopoly of its own drinks at its pubs.

Some 80 per cent of the beers sold in Marston’s pubs are not manufactured by the company.

A part of its diversification strategy has also been to look to take over other smaller brewers, while maintaining an independent, craft beer feel.

“In the mid-2000s we looked at the US market and saw that, while consolidation was what everyone had expected, actually the market was getting more and more fragmented,” Findlay said.

Marston’s took over Ryland Thompson and its subsidiary Refresh, which included the Oxfordshire Wychwood Brewery in 2008, and acquired the Hampshire-based Ringwood Brewery in 2007.

As for the future, the company is aiming to build 20 new pubs per year, cultivating its premium segment, franchised business and destination lodge arm.

“I think the key thing in our market is to be able to move and be agile,” Findlay said.

“What it does mean is that we don’t have all our eggs in one basket,” he added.

“That’s something that the microbrewers are good at and so are we.

“We have a number of areas where we try to grow the business.”