JD Wetherspoon: positive results during recession
Published:20-March-2009
By Datamonitor staff writer
Despite the current economic downturn, the UK pub chain JD Wetherspoon has announced a 6.5% increase in sales. However, with a record six pubs closing every day in the UK, a trend largely attributed to the recession, Tim Martin, the company's chairman, has appealed to the government to help the on-trade compete with supermarkets selling drinks at discounted rates.
Wetherspoon grows sales and calls for government help for the struggling on-trade.
The pub chain JD Wetherspoon has announced a 6.5% growth in sales, although like-for-like sales grew by the reduced rate of 1.9% in the first half of its current financial year. Its revenue rose to GBP468.7m, but pre-tax profits fell 10% to GBP25.6m due to the settlement of legal action with its former estate agent and the cost of divesting superfluous venues.
The pub chain credits the rise in sales to its promotions on food and beer, suggesting it has accepted a cut in margin in order to maintain customer visit numbers. Because of this, more of its venues can now remain busy during the downturn, leaving the chain in a good position to exit the recession.
However, in contrast with Wetherspoon's success, a record six pubs are closing every day according to the British Beer and Pub Association, a trend many attribute to the current economic climate. The smoking ban has been cited as a factor, as has consumer preference for cheaper supermarket prices. With regard to the smoking ban, Wetherspoon is better placed than many pubs having tested the consequences of its own voluntary smoking ban in advance of the nationwide mandatory ban.
To address the issue of cheaper off-trade drinks, Wetherspoon's chairman, Tim Martin, has called on the government to reduce taxation of on-trade venues and limit new social legislation in order to protect the on-trade from more pub closures. However, while cheaper alcoholic drinks in the off-trade could be a factor in on-trade decline, pubs must also consider their own offering to address why UK consumers are eschewing the pub.
Wetherspoon's success despite the recession mirrors that of Domino's pizza. Both are large chains offering an affordable product with many outlets: in excess of 500 for Domino's and more than 700 for Wetherspoon. The success of Wetherspoon and similarly large operators in a variety of segments suggests that consumers seek a trusted brand during downturn. In commercial terms, scale of operations may become a determining factor in success, as the homogenization of the UK high street and the on-trade continues apace. Wetherspoon's success may give an indication as to the future of the UK on-trade unless consumer tastes change.
