Creative destruction

A point I have made more than once on here is that large sections of the pub trade seem to be intent on slowly but surely pricing themselves out of business, something that is echoed in this piece in The Independent by James Moore. While the finger of blame is often pointed at low supermarket alcohol prices, in reality it is the on-trade that has got progressively dearer, not the off-trade that has got cheaper.

To some extent this is inevitable because, as living standards rise over time, the price of services with a substantial labour content will rise more quickly than that of goods. But there seems to be a lazy acquiescence in this process, that each year prices over the bar will go up a bit more than inflation, and if we lose a few cost-conscious customers, so what, as we want to attract high spenders. Many pubs seem to have simply given up on any attempt to compete on price on any drinks.

Over time, though, the pub trade as a whole has shot itself in the foot with this approach. I once made this point on the Morning Advertiser website, which drew howls of complaint from licensees who said “with my current cost structure, there is no way I could significantly cut prices”. Which may be true, but perhaps that whole model of running tenanted or leased pubs is ultimately doomed. No business has a right to survival if it can’t compete.

The £3 plus pint may not be too much of a problem for the upmarket dining pub where most customers will only have one or two drinks and factor it into the price of their meal alongside the £17.95 braised lamb shank, or the hipster-infested craft beer bar, but in a wet-led boozer it becomes a serious deterrent.

Wetherspoon’s, of course, have seen this gap in the market and enthusiastically exploited it. A Spoons will rarely be the most characterful pub in its location, but the odds are it will be the busiest. Sam Smith’s pubs still seem to do well out of offering conspicuously low prices, without coming across as seedy or grotty, and so do many of the more traditional Holt’s houses.

Maybe someone needs to come up with a “value proposition”, including food, but not dominated by it, that will work for smaller sites than Wetherspoons, and for locations with less footfall, and which doesn’t come across as too downmarket that it deters “respectable” customers. But the days of the traditional, unbranded, all-purpose pub on the inner-urban, suburban or small-town High Street, charging 80p a pint more than Spoons, are surely numbered. The pub market is changing, and the old ways won’t necessarily work any more.