Banker bets bonus on 400 flagging pubs22nd July, 2014 by Lauren Eads
A former UK banker has bought nearly 400 struggling pubs believing he holds the key to returning them to profit and to reviving the British pub industry.
British pubs are currently closing at a rate of 26 pubs a week with a total of 10,000 outlets closing since 2004, according to the British Beer and Pub Association, while overall beer consumption has dropped 45% since 2000.
However one investor believes he has the answer.
Noah Bulkin, a former acquisitions banker for Merrill Lynch and Lazardor, launched his own pub company, Hawthorn Leisure, last year after leaving the firm at which he had worked for 15 years, as reported by The Telegraph.
The entrepreneur has already bought 363 pubs this year and has his eye on a further 1,000, believing effective pricing, big data and careful stock management is the key to success.
The former banker has built analytical models for each pub tracking prices charged for beer, daily sales fluctuations and customers’ drink preferences in order to estimate a pub’s potential sales and earnings and guide pricing and stock choices.
“Understanding pricing and the mix of drinks is incredibly important”, he told the paper.
“A lot of pubs don’t have that data. If you can make them the core of your business, there’s a fantastic opportunity.”
He added: “Applying some granular analysis of what a person might drink and what they will pay is an incredibly important element.
“This hasn’t been done in the bottom end of the sector.”
Nick Zarb, director at global pricing consultancy Simon-Kucher and Partners, agrees that tailoring price and stock to individual pubs vital.
Speaking to the drinks business, he said: “In the pub industry price is the strongest profit driver over cost and volume. This is why pricing is so important. There is no one size fits all. Pubs are unique in that each individual pub has a variety of factors (e.g. location, competition, décor) that contribute to the prices customers are willing to pay. Prices must reflect these factors to be revenue optimal and not leave money on the table.
“Data on pricing is notoriously incomplete, inaccurate and hard to get. However, with the right investment in electronic point of sales software and supporting data infrastructure, it is possible to get exciting insights on price sensitivity by product, product type, purchasing habits at different times of the day, and cross purchases with food etc. All of which can be used to optimise revenue and margins at the individual pub level.”