Wethering the storms

Wethering the storms

It’s not often that my colleagues in our design studio recognise the face of our lead interviewee. No offence at all to Steve Lock, Justin Phillimore, Toby Smith and all our other cover stars of the past, but, ordinarily, our team lays out a striking set of pages and moves onto the next article.

Not this month, however. “I know that guy,” says our head of studio. “He’s the Wetherspoon’s bloke who always goes on about Brexit.” I’m sure Tim Martin would allow a faint chuckle at such an esteemed character analysis, but it was testable proof to the public reputation that the chairman of J D Wetherspoon has developed for himself. Indeed, 11 out of the 14 paragraphs that made up his supporting statement in the pub company’s recent interim results were reserved for another Brexit barrage – it wasn’t until the 12th paragraph that Martin actually acknowledged the figures and financial performance listed in the release. One might say he has an agenda.

Stay or go, leave or remain – Pub & Bar’s not here to lend a hand with political policy. If our design team know where Martin stands on the matter, he doesn’t need us to reinforce his message. There was one paragraph in that statement though that did catch my eye when considering this magazine’s readership. It reads: “The biggest danger for EU producers, whose wine industry for example has lost huge market share to the New World, in spite of import taxes, is that UK consumers take umbrage at what they see as the overbearing behaviour of EU negotiators, and decide to favour products which originate elsewhere.”

Does he really believe this? That the consumers of the UK are so savvy that the behaviour of a politician or EU negotiator would lead them to order a wine from New Zealand rather than one from France? Just because of an associated origin?

“Are they savvy enough? You bet your life they are,” says Martin. “What’s going to happen is when we leave the EU, parliament will have the power to eliminate import taxes on food and drinks, which now only apply to non-EU countries, therefore New Zealand Sauvignon Blanc and Aussie Cabernet Sauvignon will be able to compete even more than they have done with European products. There will be a price consideration for savvy consumers, but possibly also if they feel that people haven’t been elected – like my view of [Michel] Barnier and others – and they are trying to punish the UK and that they’re pushing it too far, I think people will consider switching products, either consciously or subconsciously.”

Time will tell, as will Tim, of course. For the Wetherspoon’s chairman has made no secret of his willingness to drop a European product supplier in favour of one based in the UK or elsewhere around the globe, should the circumstance deem it necessary. He cites the Swedish cider Kopparberg as a prominent example. To be honest, such a decision probably won’t trouble many Wetherspoon’s customers. The familiar model and delivery of each site in the estate is the main draw – if consistency in style and offer breeds customer loyalty, then Wetherspoon’s has some of the most loyal customers in the country. For many, it’s an institution. For some, it’s now even considered… cool.

“We’ve become slightly ‘fashionable’,” says Martin. “We used to be unfashionable. But now, for example, there’s a book about our carpets – I’d forgotten they were all different. It made people think that these pubs have had quite a bit of effort put into them. Individualism and history and so on. People like that.”

Sales and sugar

In the six weeks to 11 March 2018, like-for-like sales at J D Wetherspoon increased by 3.8% and total sales increased by 2.6%. Martin says that the company anticipates higher costs in the second half of the financial year, in areas including pay, taxes and utilities. In view of those costs, and the expectation that growth in like-for-like sales will be lower over the next six months, he says that the company remains cautious about the second half of the year. Even so, as a result of year-to-date sales that were slightly better than expected, the trading outcome for the financial year looks relatively positive. “Bar sales are ahead of inflation,” says Martin. “And that’s the name of the game.”

Fruit machine sales are dropping, while food purchases are still rapidly increasing – breakfast is now delivering net income for the business. The Wetherspoon’s founder seems almost embarrassed that Lavazza is the biggest selling brand across the estate. “In a pub company,” he laughs. “How shameful is that?” What’s more, the biggest selling product throughout Wetherspoon’s is Pepsi. Although real ale sales are strong across the company, this soft drink sales revelation only strengthens the observations around consumers drinking less alcohol in the on-trade. Like most pub companies, Wetherspoon’s has put the price of sugary drinks up in order to cover the cost of the sugar tax, which, as you might expect, Martin questions the need for.

“It’s just another tax really,” he says with a sigh. “All the people I know who drink full sugar Pepsi are thin! Big Brother has stepped in. I don’t know a tremendous amount behind the science of it, but I do know that 50 years ago, people ate more calories per annum than we consume now, but people are doing a lot less exercise these days. You don’t have to be Albert Einstein to work out what the solution is. The 10,000 step movements are more beneficial. In a pub company, when you say to someone that they have to stay off the booze two days a week, so they come in for something else and you tell them that their Pepsi has too much sugar in it… people are going to get suicidal. Just tell them to walk to the pub and they’ll be fine.”

Does he not agree with Jamie Oliver’s crusade against the evils of sugar then?

“How can I put this diplomatically? No. This is a combination of Jamie Oliver and the addiction Cameron and Osborne had to PR things. They couldn’t resist being at one with Jamie and agreeing a sugar tax, which I don’t think is the answer. I don’t blame Jamie – I’m sure he’s a very nice fella. I just wish we didn’t have to pay £3m, which I think is what it is for us.”

A stormy market

As many of you will know, when Martin’s pedestal topic of choice isn’t Brexit, he tends to be talking about tax. While his insistence on using any public or industry-facing message to champion these matters may cause a few eyes to roll across the sector, his fight for tax equality is something every on-trade operator can get behind. Yes, he runs a business in order to “earn a buck”, but Martin is also very vocal about the survival of pubs in general and how such extreme taxation is suffocating these valued and cherished parts of the social economy.

“At some point, someone is going to have to say ‘pubs and supermarkets should be taxed equally’. It’s unfair that pubs are taxed so heavily on food – if you want pubs to survive in the long run, you’re going to have to equalise the tax. We’re not saying the treasury should have less money or that we should cut public expenditure, we’re just saying taxes should be fair, and I don’t think they are now.”

Of course, as the sugar levy has shown, when tax goes up, so does the product it’s linked to. With more cost increases creeping over the horizon, Martin knows that some of his menu prices will have to rise accordingly. However, he is quick to highlight the dangers of overbearing cost control.

“As a commercial organisation, we’ve got to earn a buck, but we’ll try and keep price rises as low as possible,” he says. “I don’t think we can tackle these price rises too easily – one of the mistakes made in pub companies is having good cost control. Certainly, you need to control costs and be inventive with what you do, but if it’s too much it can affect service. There has been too much of that going on.”

Does he think that these cost increases in an already tough market are responsible for the difficulties being seen in a number of large casual dining brands?

“It is possibly a particular phenomenon that is mostly London-based. They go into the prime sites with the highest rents – that’s what Jamie’s did, Byron the same. It’s possible that the huge surge in trade and population in London has just worn off. The good ones will survive and thrive as the years go by, but people are rolling things out at an unnaturally fast pace at a very early stage of their development. We were operating for 13 years before we opened in Central London. When you open on Threadneedle Street and start paying £350,000 a year, you’ve got to know what you’re doing.”

And clearly Tim Martin is a man who does know what he’s doing. Love or loathe the Wetherspoon’s model and offer, there’s no denying that not only is the business doing rather well, but there are millions of people who enjoy its pubs. He might be right in saying that Wetherspoon’s may now be cool – a pub business so prominently in the limelight that it makes the national news on a regular basis. Every news outlet in the country mentioned its decision to close down all of its social media pages last month, and this is because of the reputation, good or bad, that the company has. While seemingly popular burger restaurants and Italian chains are having to shut up shop, Tim Martin’s J D Wetherspoon enterprise continues to weather the storm, constantly carving out a reputation that will see its pubs remain dominant high street players for decades to come.

“The top brands will survive,” he concludes. “The Greggs and the McDonald’s and the Guccis and the Chanels… and the Wetherspoon’s… the top brands, they’re all doing very well.”