With unemployment among 18- to 24-year-olds at 20 percent, nightclubs are closing and pints are going domestic
A British tippler who opts to drink beer at home spends as little as 79 pence—$1.22—for a pint. At a British nightclub, a pint usually goes for £6.
That simple math appeals to young British consumers (18- to 24-year-olds) suffering from 20 percent unemployment among their age group. A growing club scene in Britain once thrived on affluent young consumers. Now many of those clubgoers are on the dole.
Luminar Group Holdings, the U.K.'s largest club owner, has shut at least 11 venues since February. Its shares have dropped 74 percent this year. Brook Leisure Holdings, which operates in northern England, has had to close two clubs and a bar in the past four months. "This year has been particularly tough," says Cameron Leslie, co-founder and managing director of two London clubs, one of which he closed in June. "Undergraduates are not finding jobs, creating a huge strain on our core target market."
The number of U.K. clubs has fallen 21 percent since 2006, a decline of 622 venues, according to CGA Strategy, a supplier of trade data to the industry. "It has been happening for the last five or six years, but it has been accelerated by the recession," says Jonny Forsyth, a beverage industry analyst at Mintel International in London. "Suddenly, young people have no choice but to stay in." Average weekly household income after essential costs such as food and utility bills will be $266 in September, down 4 percent from a year earlier, according to the Centre for Economics & Business Research. Britain's worst recession is also accelerating the decline of the pub. In 2009 pubs closed at a rate of 40 a week, reports the British Beer and Pub Assn.
Dwindling disposable income has forced clubs to try desperate strategies. "No one likes going to empty nightclubs, and cutting admission prices to attract customers indicates you're in trouble," says Simon French, a London-based analyst at Panmure Gordon. "If a club is empty for one week, no one will come back the next."
Instead of a night out, many are lugging a case of beer home from Sainsbury's or Tesco and watching football on TV. That 79-pence pint, for example, comes from Tesco, which sells its store-brand lager at rock-bottom prices. Supermarket beer sales rose 4.4 percent from the second quarter of 2009. Says Peter Marks, chief executive officer of Brook Leisure: "When the economy is tight, punters always look for value."
The bottom line: Young Britons are doing their drinking at home as unemployment among 18- to 24-year-olds hits 20 percent.