Food now accounts for about a third of pubs’ revenues, the annual Benchmarking Report from the Association of Licensed Multiple Retailers (ALMR) reveals.
It continues a steady growth in food sales through pubs over the ten years of the report, sponsored this year by Christie & Co. Food sales now stand at an average of 32% of turnover, while wet sales take 61%—the lowest proportion in the report’s history.
The report also shows that the costs associated with running a pub have climbed to a seven-year high. Operating costs now take 49.3% of turnover, up from 47.7% in 2015, with payroll (27.8%) the most significant contributor to that. Pub’s average profit margins are now between 8 and 12%. Gross profit margins on food sales stand at 61.5%—a figure that is down year on year because of rising costs.
The payroll figures will spark more debate about the impact of the new National Living Wage levels, and the ALMR said rising costs were threatening to undermine growth in the eating and drinking out sectors. Chief executive Kate Nicholls said: “These are encouraging results for the sector, but evidence of rising costs coupled with uncertainty following the EU referendum, threaten to undermine the good work businesses are carrying out and could potentially derail investment in venues and staff.”
The ALMR wants the government to be mindful of the cost burden on pubs and bars now. Nicholls said: “Businesses need confidence and certainty in order to plan and invest, but uncertainty over the UK’s exit of the European Union could undermine confidence in the sector and threaten investment… the Government will need to take this on board as it considers placing additional financial burdens on businesses which could undermine investment in venues and staff members.”
Neil Morgan, managing director of pubs and restaurants at Christie & Co, said: “In all sectors, operators who can adapt will be the winners going forward. High street venues are evolving, and their unique presence in the centre of the UK’s towns and cities allows savvy operators to promote daytime trade, whilst simultaneously positioning themselves to benefit from the vibrant evening economies on the circuits in which they are located. However, as these segments become increasingly competitive, we may see operators having to fight harder to maintain their market share, which in turn could reduce margins and profitability.”
The full Christie & Co Benchmarking Report is available from the ALMR now.