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Pub Visiting - UK - May 2013

“With closures slowing, the now-streamlined pub industry is better placed to take control of its own fortunes and focus on its strengths rather than looking for people to blame for its recent problems.”

– Chris Wisson, Senior Drinks Analyst

Some questions answered in this report include:

  • What impact will the 2013 budget changes have on pubs?
  • Could pub closures be a blessing in disguise?
  • How can pubs improve their use to the community?
  • How can the leased/tenanted market improve its performance?
 

Pubs continue to be a central feature of the leisure industry in the UK, with three in five adults visiting them for a drink in 2013. However, the industry remains in transition and pubs are under pressure from a plethora of factors. The uncertainty surrounding legislative changes such as minimum pricing, pubco-tenant ownership guidelines and tax escalators continue to cloud the outlook in the market.

However, with few signs of notable economic improvements, it is likely that the pub industry faces at least a few more years of tough trading. The now-streamlined industry should be better equipped to thrive in the longer term, with the current total estate of around 50,000 pubs sufficient to serve the UK’s ageing population.

Price continues to be an important factor when determining which pubs people visit but this in fact falls behind other factors such as cleanliness and service when it comes to things which deter consumers from certain venues. As discretionary spending continues to be closely scrutinised, pubs are having to work harder to justify the consumer’s decision to visit them instead of drinking/eating at home. In this sense, much of the power lies with the landlords themselves and the overall fortunes of the pub industry in the short term will be driven by how many pubs are able to deliver a cost-effective and enjoyable experience for consumers.

This report examines the market for pub visiting, with the primary focus on drinking in pubs/bars. A separate Mintel report, Pub Catering – UK, May 2013 looks at the business of food in pubs in more detail.

All pubs (public houses) and bars have on-trade licences to serve alcoholic drink for consumption on the premises. These licences may also be granted to other outlets, such as hotels or cinemas, but a pub has at least some traditional characteristics that differentiate it from other bars.

Most pubs trace their heritage to close links, or ‘ties’, to a local brewery. The brewery traditionally owned the freehold, or a long lease, on the property and then either sublet it to a tenant (tenanted pubs) or installed its own landlord to run it (the managed estate). The managed/tenanted distinction still pertains to many ‘estates’ (owned groups) of pubs, but tenancies have often been replaced by more modern, long-term leases (leased pubs).

A ‘pubco’ (pub company) is independent from the control of a brewer, although it may negotiate long-term supply contracts with a single brewer and thus maintain close links with the brewing industry. Leased/tenanted pubcos make most of their money from supplying beer and other drinks to their tenants at wholesale prices.

‘Wet sales’ refers to the proportion of a pub’s turnover from drinks (sometimes confined to alcohol), while ‘dry sales’ refers to food turnover.

 

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Table of contents

  1. Introduction

      • Definition
        • Abbreviations
        • Executive Summary

            • The market
              • Figure 1: Forecast for UK pubs industry revenues, 2007-17
              • Figure 2: UK pub industry turnover, by segment, 2012
            • Market factors
              • Figure 3: Number of pubs in the UK, 1980-2012
            • Low consumer confidence remains a barrier to growth
              • Population changes will have notable impacts…
                • … as will external factors
                  • Companies, brands and innovation
                    • Figure 4: Turnover of leading pub operators in the UK, 2011-12
                  • The consumer
                    • Three in five adults visit pubs for a drink
                      • Figure 5: Frequency of visiting pubs/bars for a drink, February 2013
                    • Tradition and comfort are the leading pub enticements
                      • Figure 6: Pub enticements, February 2013
                    • Clean toilets are important for consumers
                      • Figure 7: Pub deterrents, February 2013
                    • What we think
                    • Issues in the Market

                        • What impact will the 2013 budget changes have on pubs?
                          • Could pub closures be a blessing in disguise?
                            • How can pubs improve their use to the community?
                              • How can the leased/tenanted market improve its performance?
                              • Trend Application

                                  • Trend: No Degree, No Problem
                                    • Trend: Collective Intelligence
                                      • Mintel Futures Trend: Access Anything, Anywhere
                                      • Internal Market Environment

                                        • Key points
                                          • Pub visits are in decline
                                              • Figure 8: Trends in UK per capita consumption of 100% alcohol, 2006-11
                                            • Pubs remain popular venues but are under threat from rising prices
                                                • Figure 9: UK excise duty rates for cider, beer, wine and spirits, 2003-12
                                                • Figure 10: Volume trends in the sales of beer, by channel, 2000-12
                                                • Figure 11: Average price paid for a pint of draught lager/bitter in UK, 1992-2012
                                              • The end of the line for the beer tax escalator
                                                • Figure 12: UK excise duty rates for selected alcoholic drinks, 2003-13
                                              • On-trade price rises outstrip those in the off-trade
                                                • Figure 13: Index of price of beer and wine in the on- and off-trade, 2006-12
                                              • Is it last orders for the British pub industry?
                                                • Figure 14: Number of pubs in the UK, 1980-2012
                                                • Figure 15: Net number of pub closures, December 2007-September 2012
                                              • The smoking ban continues to be a talking point
                                                • Increasing overhead costs adds to the burden on pub operators
                                                  • Figure 16: Trends in the average rateable value of pubs in England & Wales, 2005-12
                                                • Late night levy and EMROs add further pressures
                                                  • Pubs look to build strength in numbers
                                                    • Best Bar None (BBN)
                                                      • National PubWatch
                                                        • Purple Flag
                                                          • Business Improvement Districts (BIDs)
                                                            • Utility costs are on the rise…
                                                              • Figure 17: Trends in utility prices paid, by non-domestic consumers (excl. the climate change levy), 2007-12
                                                            • … with Sky subscriptions also putting the squeeze on publicans
                                                              • A new challenger in the market
                                                                • The managed pub industry strikes back…
                                                                  • The Community Right to Bid
                                                                      • Figure 18: Structure of the pub industry, by outlet numbers, by ownership type, 2009-12
                                                                    • Government intervention into tied pubs
                                                                      • … despite its typically higher prices
                                                                        • Figure 19: Average price per measure (£) in the UK on-trade, 2011
                                                                    • Broader Market Environment

                                                                      • Key points
                                                                        • Consumer confidence remains low despite the recession ending
                                                                          • Figure 20: Household income vs expenditure per head (£), 1997-2012
                                                                          • Figure 21: Consumer Confidence Index, monthly, January 2007-April 2013
                                                                        • An ageing population is a threat to the pub industry
                                                                            • Figure 22: Projected trends in the age structure of the UK population, 2012-17
                                                                          • The growing C2DE population could be problematic for pubs
                                                                            • Figure 23: Changes in the adult socio-economic structure of the UK population, 2012-17
                                                                          • The weather and high profile events also influence the pub industry
                                                                            • Figure 24: Hours of sunshine in the UK, by month, 2008-12
                                                                        • Competitive Context

                                                                          • Key points
                                                                            • Pubs/bars prove to be a resilient part of the leisure landscape
                                                                              • Figure 25: Value of the UK leisure industry*, by segment, 2008-12
                                                                            • Restaurants still lead the way
                                                                              • Most drinks markets continue to grow in value terms
                                                                                • Figure 26: Value sales of selected alcoholic drink categories, 2007-12
                                                                            • Strengths and Weaknesses

                                                                              • Strengths
                                                                                • Weaknesses
                                                                                • Who’s Innovating?

                                                                                  • Key points
                                                                                    • Coverage
                                                                                      • New builds/redevelopments defy the downturn
                                                                                        • Micropubs and pop-up pubs offer variety and a lighter cost base
                                                                                          • Pubs look for new ways of providing on-site entertainment
                                                                                            • Aiming for family appeal
                                                                                              • Tapping into edutainment
                                                                                                • Mobile technology can also help pubs to stand out
                                                                                                  • Innovating with cocktails…
                                                                                                    • … and with beer
                                                                                                      • Self-service
                                                                                                        • Focus on quality
                                                                                                          • Other
                                                                                                            • Limited availability
                                                                                                              • Global observations/innovations
                                                                                                              • Market Size and Forecast

                                                                                                                • Key points
                                                                                                                  • Value sales continue to nudge upwards in 2012
                                                                                                                    • Figure 27: UK pub industry market size and forecast, 2007-17
                                                                                                                  • Pub numbers expected to continue falling, but at a slower rate
                                                                                                                    • Forecast
                                                                                                                        • Figure 28: Forecast for UK pubs industry revenues, 2007-17
                                                                                                                    • Segment Performance

                                                                                                                      • Key points
                                                                                                                        • Pubs continue to show signs of recovery
                                                                                                                          • Figure 29: UK pub industry turnover, by segment, 2009-12
                                                                                                                        • Alcoholic drinks retain a majority share of on-trade sales
                                                                                                                          • The growing influence of food
                                                                                                                          • Market Share

                                                                                                                            • Key points
                                                                                                                              • Managed operators enjoy a profitable year while the tenanted/leased market struggles
                                                                                                                                • Figure 30: Turnover of leading pub operators in the UK, 2010-11 and 2011-12
                                                                                                                              • Tenanted/leased operators dominate in terms of outlet numbers
                                                                                                                                • Figure 31: Leading pub operators in the UK, by outlet numbers, 2012
                                                                                                                            • Companies and Products

                                                                                                                                • Enterprise Inns
                                                                                                                                  • Company overview
                                                                                                                                    • Financial information
                                                                                                                                      • Figure 32: Key financial data for Enterprise Inns PLC, 2008-12
                                                                                                                                      • Figure 33: Enterprise Inns PLC turnover, by segment, 2011-12
                                                                                                                                    • Strategy and recent developments
                                                                                                                                      • Marketing support
                                                                                                                                        • Greene King
                                                                                                                                          • Company overview
                                                                                                                                            • Financial information
                                                                                                                                              • Figure 34: Key financial data for Greene King PLC, 2008-12
                                                                                                                                              • Figure 35: Greene King PLC revenue, by segment, 2011-12
                                                                                                                                            • Strategy and recent developments
                                                                                                                                              • Marketing support
                                                                                                                                                • JD Wetherspoon
                                                                                                                                                  • Company overview
                                                                                                                                                    • Financial information
                                                                                                                                                      • Figure 36: Key financial data for JD Wetherspoon Plc, 2008-12
                                                                                                                                                    • Strategy and recent developments
                                                                                                                                                      • Marketing support
                                                                                                                                                        • Mitchells & Butlers
                                                                                                                                                          • Company overview
                                                                                                                                                            • Financial information
                                                                                                                                                              • Figure 37: Key financial data for Mitchells & Butler Plc, 2008-12
                                                                                                                                                            • Strategy and recent developments
                                                                                                                                                              • Marketing support
                                                                                                                                                                • Punch Taverns
                                                                                                                                                                  • Company overview
                                                                                                                                                                    • Financial information
                                                                                                                                                                      • Figure 38: Key financial data for Punch Taverns PLC, 2011-12
                                                                                                                                                                      • Figure 39: Punch Taverns PLC revenue, by segment, 2011-12
                                                                                                                                                                    • Strategy and recent developments
                                                                                                                                                                      • Marketing support
                                                                                                                                                                        • Spirit Pub Company
                                                                                                                                                                          • Company overview
                                                                                                                                                                            • Financial information
                                                                                                                                                                              • Figure 40: Key financials Spirit Pub Company PLC, 2010-12
                                                                                                                                                                              • Figure 41: Spirit Pub Company PLC revenue, by segment, 2011-12
                                                                                                                                                                              • Figure 42: Spirit Pub Company PLC average number of pubs, 2010-12
                                                                                                                                                                            • Strategy and recent developments
                                                                                                                                                                              • Marketing support
                                                                                                                                                                              • Brand Communication and Promotion

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • Above-the-line adspend continues to fall
                                                                                                                                                                                    • Figure 43: Total above the line adspend in the UK, by selected brewers and pubcos, 2008-12
                                                                                                                                                                                  • Major pubcos lead the way in 2012
                                                                                                                                                                                    • Figure 44: Expenditure on advertising, by selected brewers and pubcos, 2008-12
                                                                                                                                                                                  • Press dominates the advertising landscape for pubs
                                                                                                                                                                                    • Figure 45: Expenditure on advertising, by brewers and pubcos, by channel, 2008-12
                                                                                                                                                                                  • Promoting the pub
                                                                                                                                                                                    • Rallying against the government
                                                                                                                                                                                    • Consumer – Frequency of Visiting Pubs for a Drink

                                                                                                                                                                                      • Key points
                                                                                                                                                                                        • Three in five UK adults drink in pubs/bars
                                                                                                                                                                                          • Figure 46: Frequency of visiting pubs/bars for a drink, February 2013
                                                                                                                                                                                          • Figure 47: Frequency of visiting pubs/bars for a drink, February 2012 vs February 2013
                                                                                                                                                                                        • One in five adults drink in pubs weekly
                                                                                                                                                                                          • Appealing to the casual drinkers
                                                                                                                                                                                          • Consumer – Pub Enticements

                                                                                                                                                                                            • Key points
                                                                                                                                                                                              • Tradition and comfort are the key enticements for pub operators
                                                                                                                                                                                                • Figure 48: Pub enticements, February 2013
                                                                                                                                                                                              • Appealing to younger consumers
                                                                                                                                                                                                • Outdoor facilities can appeal to visitors with families
                                                                                                                                                                                                • Consumer – Pub Deterrents

                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                    • Unclean toilets/facilities drive consumers around the bend
                                                                                                                                                                                                      • Figure 49: Pub deterrents, February 2013
                                                                                                                                                                                                    • Good service can also be a key point of difference
                                                                                                                                                                                                      • The clientele can shape the pub experience
                                                                                                                                                                                                        • High prices are also a notable deterrent
                                                                                                                                                                                                          • Many consumers willing to travel to pubs… but look for a reason to do so
                                                                                                                                                                                                          • Consumer – Pub Concepts

                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                              • ‘Try before you buy’ could help to draw drinkers back to pubs
                                                                                                                                                                                                                • Figure 50: Interest in pub concepts, February 2013
                                                                                                                                                                                                              • Signature beers and ordering from tables are also popular concepts
                                                                                                                                                                                                                • Innovating with payment technology
                                                                                                                                                                                                                  • Other concepts can help pubs to forge a niche in the pub market
                                                                                                                                                                                                                  • Appendix – Market Size and Forecast

                                                                                                                                                                                                                      • Figure 51: Best- and worst-case forecasts for the UK pub industry, by value, 2012-17
                                                                                                                                                                                                                  • Appendix – Consumer – Frequency of Visiting Pubs for a Drink

                                                                                                                                                                                                                      • Figure 52: How respondents would describe their financial situation, by demographics, February 2013
                                                                                                                                                                                                                      • Figure 53: Frequency of visiting pubs for a drink, February 2013
                                                                                                                                                                                                                      • Figure 54: Most regular frequencies of visiting pubs for a drink, by demographics, February 2013
                                                                                                                                                                                                                      • Figure 55: Other frequencies of visiting pubs for a drink, by demographics, February 2013
                                                                                                                                                                                                                      • Figure 56: Frequency of visiting pubs for a drink, by most popular pub enticements, February 2013
                                                                                                                                                                                                                      • Figure 57: Frequency of visiting pubs for a drink, by next most popular pub enticements, February 2013
                                                                                                                                                                                                                      • Figure 58: Frequency of visiting pubs for a drink, by most popular pub deterrents, February 2013
                                                                                                                                                                                                                      • Figure 59: Frequency of visiting pubs for a drink, by next most popular pub deterrents, February 2013
                                                                                                                                                                                                                      • Figure 60: Frequency of visiting pubs for a drink, by other pub deterrents, February 2013
                                                                                                                                                                                                                  • Appendix – Consumer – Pub Enticements

                                                                                                                                                                                                                      • Figure 61: Pub enticements, February 2013
                                                                                                                                                                                                                      • Figure 62: Most popular pub enticements, by demographics, February 2013
                                                                                                                                                                                                                      • Figure 63: Next most popular pub enticements, by demographics, February 2013
                                                                                                                                                                                                                      • Figure 64: Pub enticements, by frequency of visiting pubs to eat, February 2013
                                                                                                                                                                                                                      • Figure 65: Pub enticements, by most popular frequency of visiting pubs for a drink, February 2013
                                                                                                                                                                                                                  • Appendix – Consumer – Pub Deterrents

                                                                                                                                                                                                                      • Figure 66: Pub deterrents, February 2013
                                                                                                                                                                                                                      • Figure 67: Most popular pub deterrents, by demographics, February 2013
                                                                                                                                                                                                                      • Figure 68: Next most popular pub deterrents, by demographics, February 2013
                                                                                                                                                                                                                      • Figure 69: Other pub deterrents, by demographics, February 2013
                                                                                                                                                                                                                      • Figure 70: Pub deterrents, by frequency of visiting pubs for a drink, February 2013
                                                                                                                                                                                                                  • Appendix – Consumer – Pub Concepts

                                                                                                                                                                                                                      • Figure 71: Interest in pub concepts, February 2013
                                                                                                                                                                                                                      • Figure 72: Most popular pub concepts, by demographics, February 2013
                                                                                                                                                                                                                      • Figure 73: Next most popular pub concepts, by demographics, February 2013
                                                                                                                                                                                                                      • Figure 74: Interest in pub concepts, by most popular pub enticements, February 2013
                                                                                                                                                                                                                      • Figure 75: Interest in pub concepts, by next most popular pub enticements, February 2013

                                                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                                                  • Accolade Wines
                                                                                                                                                                                                                  • Belhaven Brewery Company Ltd.
                                                                                                                                                                                                                  • British Beer and Pub Association
                                                                                                                                                                                                                  • Enterprise Inns Plc
                                                                                                                                                                                                                  • Facebook, Inc.
                                                                                                                                                                                                                  • Greene King Brewing and Retailing Ltd
                                                                                                                                                                                                                  • Heineken N.V.
                                                                                                                                                                                                                  • JD Wetherspoon
                                                                                                                                                                                                                  • Luigi Lavazza SpA
                                                                                                                                                                                                                  • Mitchells & Butlers Plc
                                                                                                                                                                                                                  • Molson Coors Brewing Company
                                                                                                                                                                                                                  • Punch Taverns
                                                                                                                                                                                                                  • Realpubs
                                                                                                                                                                                                                  • Spirit Pub Company
                                                                                                                                                                                                                  • The Prince's Trust
                                                                                                                                                                                                                  • Wacky Warehouse

                                                                                                                                                                                                                  Pub Visiting - UK - May 2013

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