Friday, February 29, 2008

RE: Inbev: UK beer volumes down 10.3% From The Morning Advertiser

I have no idea how much I pay for beer offhand - I gave up knowing the prices of beer over ten years ago... no point checking except everynow and then to make sure the gp isn't hemorraghing. I know what sort of price we can get away with charging before customers just walk out saying 'you're a rip off'. So prices are set by comparison with the competition, not by what mark up has to be achieved in order to get a living profit. My overall gp on beer has never been more than 51%. It's mostly been 49%. This is a laughable embarrasment.

Everything else though - from rent to rates to flour to olive oil, house wine to top of the list, bottled water, Fentimans to Millers, Bombay mix to Chilli cashews to Yorkshire crisps to olives in our own marinade. I know how much they cost. I know what my gp is.

I get up to 85% on cocktails, 75% on wines, 60-65% on food, 70-80% on most snacks. And an overall of 60% including beer - beer is a third of income volume overall and brings profitability down dramatically.

Another way of looking at this is to see that I HAVE to overcharge for everything that isn't beer to compensate for the fact that I HAVE to undercharge (against cost price) for beer.

TRUTH IS beer is a loss leader. And I'm not a supermarket.

RE: Inbev: UK beer volumes down 10.3%

Mark , well done , an overall GP of 60% , that should silence the posters who say that this type of GP is imposable in the leased estate. Proof of the pudding and all that ! From Graham Allman.

Graham. I am forced to wonder where you are coming from here. You flippantly try to make the well founded criticism I have of my business situation appear to be a sign of success for the PubCo model when I am arguing the exact opposite.

The point I am making should be clear to anyone who reads the above post objectively. I am a slave to my PubCo. The only reason I'm still in business after all these years is because I'm really good at what I do and Ihave been able to attract a broad range of customers to what for a long time was an utterly dead pub. And I was one of the pioneers for the whole 'gastropub' thing in the UK and I still only have one unit. I invested EVERYTHING I had in this business and will never get that back even if I were to assign the lease - the value is way below what I've invested. I have earned a very modest living out of it for over a decade. The point I am making Graham is that I'm one of the lucky ones. I still have a shirt on my back.

I have a busy pub that has massive overheads and a rolling programme of dilapidations that never costs me less than 15K a year. 60% gp is nothing to be proud of when I don't have the volume of turnover to make it translate into profit on an annual basis.

I said 49% on beer at best. It's undoubtedly lower now. 49% is a joke. If I were able to negotiate my prices on beer I'd be able to achieve at least 60% on beer and if that meant my rent was higher to reflect free of tie status at least the rent would be fixed. The more I work to increase income and barrelage the more I am penalised for selling a greater volume of product that's not worth selling. And there's another discussion to be had about product range as well. For my profile of business my beer product range is pedestrian. What you can see in every other pub in the south east. My customers are used to a wider choice.

Finally my PubCo told me they work out the p&l projections for my business on the basis that I achieve 58% gp on beer. Oh Yeah. Where does that come from? I might not be posting here if that were remotely possible. 9% difference is a massive margin of convenient error when it comes to working out rent projections.

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