‘Boom and bust’ fear for food pubs
16 November, 2006
Investment returns under threat in rush to create food offer
The rush to invest in food sales as pubs seek to compensate for the smoking ban may see many pub groups struggle for a return on their investment, delegates to The Publican Conference heard.
Peter Hansen, principal of industry consultant PC Hansen warned of a ‘boom and bust’ cycle similar to that seen by high street operators as overcapacity began to hit profits after the expansion of town centre pubs in the 1990s.
Speaking during a debate on ‘The Pub Industry of the Future’, Hansen warned that with at least 20,000 outlets seeking to convert their business model into food- led operations, it could be many years, if ever, before they see a return on investment.
“Where are all the customers? Consumer spending is likely to lag behind that investment in food by several years,” he predicted.
The panel also raised concerns that the influx of new investors into the pub sector, from property tycoons to private equity players, would see an increasing split between the operations side of the trade and the ultimate owners of the business.
Sean Williams, partner with PriceWaterhouseCoopers, said that this could see some businesses become underinvested as companies tried to take cash out of pub companies.
He predicted one or two high profile casualties towards the end of next year among pub operators with outlets suffering from lack of investment.