Wetherspoons pulls in the punters after beer duty cut

The pub chain has reported a 6% increase in like-for-like sales in the last three months. 'Not having to whack up prices just to cover duty has definitely helped us,' says founder and chairman Tim Martin.

by Rebecca Burn-Callander
Last Updated: 13 Sep 2013
George Osborne isn’t popular in many circles right now, but he’ll definitely be given a free pint or three over at Wetherspoons. His decision to cut beer duty by 1p has allowed the UK pub chain to freeze prices, tempting in more punters than during the same period last year.

The government’s ‘duty escalator’ usually hikes up the tax on beer by 2% above the rate of inflation. It would have been disastrous for Wetherspoons’ margins – they’ve already shrunk from 9.3% in the first quarter of last year to 8.4% ish in the last, mainly down to competition from supermarkets, the ongoing downturn, and stiff competition from snazzy bars and clubs. Indeed, despite the brief duty respite, it’s still tough to make a crust, even as one of the nation’s more successful publicans.

Speaking exclusively to MT in a recent interview, Sir Martin admitted that spiralling supplier costs and massive taxes were an ongoing struggle for the firm. ‘On the wall of my office I've got a picture of Sisyphus pushing his boulder uphill,’ he said. ‘That's what running a pub is like.’

Out of every pound Wetherspoons makes, 45p goes to the Treasury (the comparable figure for Barclays Bank is around 25p). So why does the Wetherspoons’ founder bother to get up in the morning? 'Because if you push the boulder uphill for eight or 10 hours a day you feel justified in stopping for a pint or two at the end of it,’ he quips.

And Martin has a few achievements to drink to this quarter. Operating margins at the chain have increased 0.2% to 8.5% year-on-year for the 13 weeks to 28 April, while like-for-like sales are up 6.3% year-on-year for the quarter. Total sales have jumped 9.3% year-on-year including new-pub openings.

While beer association Camra estimates that 26 pubs went out of business each week between September and March, Wetherspoons has managed to open 16 since the start of the financial year. This year, Martin intends to open a further 30 pubs, and another 20-25 in 2014.

So, what’s Martin’s secret recipe for success? ‘It’s the thousand components,’ he says opaquely. ‘We’re trying to work on the nuts and bolts and get a small advantage. Sir Dave Brailsford [head of the Tour de France-winning Sky cycling team] calls it the ‘aggregation of marginal advantage’ – it’s a bit poncy, but it’s what counts over the long run.’

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