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The Scottish Mail on Sunday - 2021-11-21

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You’ll pay more for New Year drinks warns pub boss

Financial Mail On Sunday

BY HARRIET DENNYS

MEETING Greene King chief executive Nick Mackenzie for lunch at the Coach and Horses in Mayfair initially feels like stepping back in time to 2019. Tables are filling up as London eases into the start of the Christmas party rush and Mackenzie, looking tanned after a post-lockdown holiday to Dubai, says sales across Greene King’s 2,700 pubs, restaurants and hotels have ‘grown and grown’ over the past two months to recover to ‘pretty much parity with before the pandemic’. Yet behind the scenes, not all is well. An acute staff shortage in the hospitality sector means stretched employees are catering for soaring customer demand. There are also supply chain issues to grapple with and soaring costs as inflation bites. Mackenzie says there are gaps on the menu due to disrupted deliveries – ‘some days you don’t quite know what is going to turn up’ – and the post-Brexit exodus of workers has left pockets of ‘real shortages’ of staff, particularly in the kitchens. He adds: ‘If you are a general manager of a pub right now, it is really, really tough. These guys have probably had the hardest trading conditions they have ever had, day in, day out. It’s the combination of all these things coming together.’ The cocktail of cost pressures spans from rising energy bills to wage inflation and rising prices for food, beer and wine. Last week, official data showed inflation hit its highest level for a decade in October, up to 4.2 per cent, amid warnings it could rise still further. Mackenzie, whose brands include the Hungry Horse pubs and the Loch Fyne seafood restaurants, says: ‘We talk to people in the industry and you hear of people saying there is 40 to 50 per cent inflation on utilities coming down the line. The cost of supply chain and the cost of delivering is going up, labour costs are going up, and on pretty much every profit and loss line there is cost impact.’ As a result of the cost pressures, he warns customers will pay more for their food and drinks in pubs and restaurants in the run-up to Christmas and into the New Year. He says: ‘Cost inflation is real, and the natural response to that from any business is going to be, you are going to have to look at prices.’ He adds: ‘I think it is inevitable price inflation will flow through the back end of this year and into next year. I think that’s coming.’ And while business is booming at Greene King’s country and food-led pubs, Mackenzie says those in Central London are still struggling with a drop-off in customers caused by the shift to working from home. He says: ‘London is a lot slower to come back. Tourism is down but, most importantly, people are not coming back to the offices like they were and that has a real impact.’ Translated into Christmas bookings, the number of people putting down deposits for parties at Greene King venues in Central London was down by up to 50 per cent in early November, compared with 15 to 20 per cent down for regional pubs. Hospitality firms make up to 40 per cent of their annual profits between Halloween and New Year’s Eve. Mackenzie, who was frustrated by some of the Government’s restrictions on pubs over the pandemic, wants Boris Johnson to send out a ‘clear signal’ that Christmas will be business as usual as pubs try to recover lockdown losses. He says vaccine passports would add ‘significant costs’ to the business and dent customer demand, and argues pubs need further Government support, such as a permanent VAT cut to 12.5 per cent and ‘fundamental reform’ on business rates. Without this help, he warns there could be business failures early next year. He says: ‘If VAT comes back to 20 per cent in March, that’s another cost to businesses as we’re trying to come out the other side.’ Greene King is drawing up spending plans for 2022 with owner CK Asset Holdings, controlled by Hong Kong billionaire Li Ka-shing, to upgrade more pubs to premium sites serving food, rather than traditional ‘wet-led’ pubs. Mackenzie says a strong run of trading over the winter would allow Greene King to set out its plans with confidence, after investing in 245 managed and tenanted pubs so far this year. Mackenzie says: ‘We want to invest in the New Year but we are tentative because we don’t know what the future holds.’ The group’s latest trading update, covering the six months to July 4, showed a £100 million pre-tax loss after revenues fell 24 per cent, to £146.3million, compared to the previous year. Over the pandemic, CK Asset Holdings refinanced a portion of Greene King’s bank debt and it accessed a £300million Covid loan, now paid back, plus £136million furlough support for its 40,000 staff. ‘We needed that,’ says Mackenzie. ‘My personal view [on furlough] was that it was a very innovative approach to keeping people in employment.’ Mackenzie is also putting his stamp on the company culture, after taking over from predecessor Rooney Anand in May 2019. A key part of this is the ‘Calling Time On Racism’ campaign surrounding cofounder Benjamin Greene’s links to the 19th Century slave trade. Greene owned slaves on his sugar plantations in the West Indies and campaigned against the abolition of slavery. He later received £500,000 in today’s money as compensation from the British Government when he surrendered the rights to three plantations. In January, Greene King announced plans to rename three pubs called The Black Boy and a fourth called The Black’s Head, and Mackenzie says other pub names could be changed over time. He says: ‘I was very uncomfortable with some of the pub names. We can’t do anything about the past, but we can do a lot about the future.’

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