The performance of Wetherspoons is well documented across the financial and hospitality press. It is a great business, even if they go on a little too much about BREXIT, nonetheless the Chairman speaks in a very common sense way and so does the offer in their outlets – it just seems to make sense.
As does the way they seem to go about things. The press conference held for journalists the other day, the first that I have attended, was a completely different format than imagined. 14 journalists around the table with Tim Martin, the CEO and FD in a very intimate, free-ranging Q & A.
Long gone are the days of Wetherspoons the one-man band, selling beer at £1 pint, although sometimes it can sound like it, and frankly that is comforting in many ways. With sustained growth and development over at least 10 years and a BREXIT vote campaigned for and won, you’re left thinking where next and how.
There were a couple of interesting notions that stood out. One is the hotel offer. JDW have developed one in Barrow-in-Furness that does very well. For those of you that don’t know where Barrow is, then go to the Lake District and turn left to the farthest point west of England. Home of historic ship-building, this working town is very salt of the earth and with a strong working ethic. Look out from the sands and you can see the Isle of Man. Wetherspoons occupies the former Co-operative department store premises which they had occupied since 1889. This hotel has performed very well according to Mr Martin and they are set to open more. He reckons the chain will open between 50 and 100 – a total of c.150 in the next 3-10 years above good pubs. A bit of a broad target to be completely focussed upon but considering their value proposition, it would not be surprising for a chain of Wetherspoons hotels to be more of a force.
The other is Corporate Governance with a bit of Tax thrown in. Some of this issue is tied up with the BREXIT campaign. If you subscribe to the notion that the EU has made business in the UK a defence of the ‘Corporate Body’ and that it has withdrawn opportunity from the general working person, in order to place it in the safe hands of big companies then it is a strong argument. Mr Martin argues for a complete over haul of Corporate Governance rules.
The current code ‘places excessive emphasis on meetings between directors and shareholders and places almost no emphasis on directors taking account of the views of customers and employees’. In the JDW preliminary results they explain that in the UK Corporate Governance Code there are 64 references to shareholders, but only 3 to employees and none to customers.
The new P.M., who has shown her way of working is to take careful considered decisions (such as Hinckley nuclear plant), then you would hope that it makes sense to address this issue in more detail. Although business does not have a great history of being successfully self-governing from Bob Maxwell to Sir Philip Green there are also too many cases of exploitation of employees and situations which need to be accounted for in any such changes.
JDW also make a big point about taxation, reflecting on the fact that 42.1% of their sales are paid in taxes and a massive £705,000 per pub of which 46% is V.A.T., which is the butt of their issue. The disparity between the V.A.T. that supermarkets pay and the the V.A.T. that pubs pay on food is large. Supermarkets pay no V.A.T. on food; whereas Pubs pay 20%. The argument goes that pubs have a far better record of creating jobs than do supermarkets per pint or meal. Presumably the suggestion is that reduced cost of meals in pubs would reduce prices, inspire trade and go some way to re-create the social lives lost in so many communities where the pub has shut down.
Duty forms 24.4% of JDW’s tax bill, and is the same whether a pint is sold in a pub or a bottle of wine or spirits in a supermarket. So if reduced prices is the benefit and driver of new business for pubs then does the same hold true for the drink?
There are many good arguments to re-invigorate business back into pubs, the community, self-policing, local networks, sociability, but I do wonder if there is enough creative thinking going on in the pubs themselves about what else they could do. An example might be around the female clientele. Pubs are still ostensibly machismo. How about make-up parties, more business networking; ideas that are more connected with today’s communities. There still seems an over-arching feeling of ‘let’s get back to the way things were’ within the pub community, not necessarily JDW, but maybe that is what government wants to see from pubs – a more interconnected, creative way of using their space in order that they consider more strongly the V.A.T. reduction.
As for my own specialism, wine, Mr Martin believes that the elimination of the CCT element of tax for imported products from outside the EU will counter for any exchange rate depreciation, which is going to impact on pricing in the next few months. The Aussies have ruled out any quick trade deal and 99% of the time the Kiwis follow, so no quick win there then.
So for more of the common sense approach, with hopefully a little less rhetoric about BREXIT, then keep with Wetherspoons.
Alistair Morrell
Hospitality & Catering News, Wine Content Executive