To Keep the Ale Flowing, U.K. Pubs Look to Data

Numbers-savvy owners find a new way to boost sales
Photograph by Matthew Lloyd/Bloomberg

Noah Bulkin is not the man you’d expect to be pouring your next pint of ale. Oxford-educated, Bulkin, 37, spent 15 years as a mergers-and-acquisitions specialist at Merrill Lynch and Lazard before leaving last year to start his own pub company, Hawthorn Leisure. He’s acquired hundreds of struggling pubs and plans to turn them around by tracking everything from the price charged for beer to daily sales fluctuations to customers’ drink preferences.

Understanding pricing and the mix of drinks is key, Bulkin says: “A lot of pubs don’t have that data.” As he sees it, British pubs have long suffered from a lack of attention. “If you can make them the core of your business,” he says, “there’s a fantastic opportunity.”

Over the past decade, Britain’s £70 billion ($120 billion) pub industry has fallen on very hard times. About 10,000 outlets have closed since 2004, according to the British Beer & Pub Association, hit by the recession, a smoking ban that took effect in 2007, and the availability of cheaper booze in supermarkets. The volume of beer imbibed in U.K. bars has declined 45 percent since 2000, leaving large pub companies such as Punch Taverns and Enterprise Inns weighed down by debt after years of rapid expansion.

The industry is fighting back, thanks in part to investors like Bulkin. After six years of declines, sales at pubs open at least a year have grown for 14 consecutive months, according to pub industry data provider CGA Strategy. Several pub deals, valued at a total of $730 million, have been announced in the past year, more than in the prior two combined.

Britain’s 50,000 pubs fall into three categories: those owned and managed by companies; so-called tied or tenanted pubs leased by individuals who pay rent to the pub’s corporate owners; and independently owned establishments. The tied pubs have suffered the most, due to what a Parliamentary business committee in a 2009 report called “downright bullying” of tenants by owners. The committee has conducted several investigations over the past decade into claims that owners are taking advantage of tenants, withholding information about how rents are set and forcing them to buy beer from just one supplier.

Bulkin is buying up mostly tenanted pubs—he’s acquired 363 since early May. He is spending anywhere from roughly £10,000 to £100,000 per bar on renovations, including new touchscreen cash registers that are linked to a centralized database and allow Bulkin to see what’s selling and what’s not. With the help of a former banking colleague, he’s projecting potential sales and earnings at the pubs. “Applying some granular analysis of what a person might drink and what they will pay is an incredibly important element,” he says. “This hasn’t been done in the bottom end of the sector.” Two beers that are identical in price and taste similar could deliver as much as an 80 percent difference in profit per keg to the pub, he says.

Bulkin also hopes to improve relationships with tenants. He requires his managers to meet with tenants weekly—previous owners, he says, checked in only once every few weeks—to discuss which beers to offer, pricing, and how to differentiate the pub from competitors. “We can be very flexible and creative to come up with the right structure for each pub,” he says.

Another investor in Hawthorn Leisure is New York-based Avenue Capital Group. Cerberus Capital Management bought pub company Admiral Taverns last year, and Risk Capital Partners of London recently invested in Laine Pub, a 45-unit chain based in Brighton. The fresh money is inspiring new ideas and business models. Oakman Inns & Restaurants, a chain of nine high-end pubs, has expanded its dining menu and now generates 60 percent of its sales from food. Founder Peter Borg-Neal uses the same meat supplier as Windsor Castle and has spent about £1 million per pub on upgrades, adding dining rooms and outdoor seating.

Zonal Retail Data Systems, which supplies registers and databases to U.K. pubs, says it will increase sales to about £50 million this year, more than double what it sold in 2010.

Still, technology can do only so much to improve the camaraderie that attracts Britons to pubs. “I feel special here,” says Bruce Brunson at the White Horse in Welwyn, Hertfordshire. “When I walk in, it’s like I’m Norm from Cheers.”

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