The National Brewery THE NATIONAL BREWERY MMC Big

The National Brewery

THE NATIONAL BREWERY: • MMC - Big 6 too powerful • Breweries required to sell or lease proportion of pubs • Lessees allowed to sell guest beer and be released of tie on all other products • Many breweries sold their pubs • NB chose to lease 2300 of their pubs • Lessees run the business 2

THE NATIONAL BREWERY: • Regulatory Change • Reduced ties for lessees • • Fire sale! NB chose to lease 2300 of their pubs Lessees run business Take it or leave it! 3

POWER SHIFT 4

NSS PRODUCTS AND SERVICES • Call cycle • Promotions • Discounts • Catering • Property adviser & suppliers • Security • Financial Planning advice • Legal support • Quality standards

The NSS Package? • Visits • Free stuff! • Advice • Standards • Training

What’s on offer?

National Brewery: three pub types

To lease or not to lease? • The deal. . . • option to assign lease on open market after 3 years • must sell NB beers, may introduce one guest beer • no tie on any other NB products • rental income payable to NSS: 50% of net profit • free access to NSS products and services • expected equity growth in lease after 5 years: £ 70, 000 -£ 200, 000 9

To lease or not to lease? • The deal. . . • option to assign lease • must sell NB beers • no other tie • rent 50% of net profit • “free” access to NSS • equity growth 10

to lease or not to lease? Surnames A - M You are on the management team of either the Castle / Oak / White Lion. You need to: Do a SWOT analysis from the lessee's perspective. Evaluate the service package that NSS will be offering: what are your expectations of NSS? Which elements of the package will be of most value to you? Your decision as to whether or not to go ahead with the lease.

to lease or not to lease? Surnames N - Z 1. You are the NSSMs for the Nottingham area, each providing support to around 35 pubs. The pubs include the Castle, Oak and White Lion. You were previously area managers. You need to: Do a SWOT analysis of the new leasing arrangements from NSS’s perspective. Evaluate the implications of the new lease for the relationship between NSS and the lessees. Review the service package NSS will be offering: how will you manage the relationship with each of the lessees?

Room Plan Your right Your left White Lions Back NSS Managers Oaks Castles Front

SWOT ANALYSIS FROM: WHITE LION / OAK / CASTLE / NSS * PERSPECTIVE STRENGTHS WEAKNESSES Write pub type at the top! OPPORTUNITIES * Delete as appropriate THREATS

SWOT ANALYSIS FROM: NSS MANAGER’S PERSPECTIVE STRENGTHS Experience and existing relationships with tenants more competition amongst landlords (less for NSSM to do) keep my job! reduced financial risk Allows me to focus OPPORTUNITIES Manager can attempt to offer more products and services Become specialist advisor - develop expertise; learn from lessees Potential to sell services more generally outside NB chain? I can become a pub consultant? * Delete as appropriate Pubs don’t have to sell NSS extra services Delivery of service not cheap Could spend a lot of time and energy on pubs that are not making profits Funding dependent on previous year’s profit Reduced control over pubs Type of advice I can give will be constrained I represent MB, but have little power actually. Pubs cheat - misrepresent profit SOme pubs will make no profit at all! WEAKNESSES THREATS Not all licensees are cooperative What if pubs successful without NSS support? Invalidates my purpose / existence. Charges too high - incentive for pubs to cheat in other ways. pub failure = reputational risk for me

SWOT ANALYSIS FROM: WHITE LION PERSPECTIVE STRENGTHS Location Established clientele - “loyal customers” Word of mouth - custom through generations Increased freedom WEAKNESSES OPPORTUNITIES THREATS Better than nothing! Ale reputation Traditionalists (CAMRA types) Sky TV / Sky. Sports Darts Competitions / Pool Evenings Specials - e. g. , St. Patrick’s day offer, Bonfire Night * Delete as appropriate Have to share profit Declining revenues Poor facilities - old / tired Local economy in bad state and getting worse clientele income reducing Locked-in to the deal! 3 years! Not much daytime custom & Small market Old-fashioned - middle-aged men only Bankruptcy Economic downturn Increased competition? - Food pubs Fewer customers Death of community pubs Increased customer expectations Cheaper alternatives

SWOT ANALYSIS FROM: CASTLE PERSPECTIVE STRENGTHS Strong and well-developed brand Growing market modern management team know what they are doing Continued association with NB - help reputation? Discounts / promotions WEAKNESSES Loss of 50% of profit (we are fairly high profit at mo. ) Some loss of flexibility price of the deal Maybe too much standardisation - of products for example OPPORTUNITIES THREATS Buy and develop own food More premium beers introduce new products (wine, cocktails), broaden menu large expected increase in equity growth Can put lease on open market Changing rent (going up) Long Lease What if NB run into problems? I loose by association. Decrease in overall demand hurting profit still further New entrants into pub-market * Delete as appropriate

SWOT ANALYSIS FROM: OAK PERSPECTIVE STRENGTHS NSS “holds my hand”: financial security promotions (expand customer base) Association with NB brand Location, Identity & Heritage Free access to lots of services OPPORTUNITIES Experience and existing relationships with tenants Product variety - new beers? Support Buyout potential Move into niche? equity growth * Delete as appropriate WEAKNESSES 50% of profit to NSS Independence is illusory Low bargaining power Poor / limited management skills Tight cash flow In need of innovation! THREATS Bound by ties - only one guest beer! New pub-types (Castles) Market decline Buyout Health campaigns Regulation

What can we distil from National Brewery?

Operational and market segmentation?

What can we distil from all this?

What should the service concept(s) be? Relationship NSS Service Package • Business development Castle: services Business • Focus on expanding Partnership range, future investment Oak: Supportive • Supporting services White Lion: ‘Samaritan’ • Business rescue! NSS Concept “one-word summary” Consultancy Facilitator • Nurture entrepreneurship • Focus on cash flow Coach

Operational Segmentation Relationship NSS Service Package Castle: Partnership • Business development • Expanding range, investment Oak: Supportive • Support White Lion: ‘Samaritan’ • Rescue! Concept “strap-line” Consultancy Facilitator • Nurture entrepreneurship • Cash! Coach

Which pub makes most money from wet turnover? White Lion Oak Castle Income £ 150, 000 £ 320, 000 £ 450, 000 % Sales 90% 83% 35. 5% £ 135, 000 £ 265, 600 £ 159, 750 53% 58% £ 140, 768 £ 92, 655 based on liquor Wet sales Liquor margin 45% Profit based on liquour £ 60, 750

“Wet” turnover White Lion Oak Castle Income £ 150, 000 £ 320, 000 £ 450, 000 % Sales 90% 83% 35. 5% £ 135, 000 £ 265, 600 £ 159, 750 53% 58% £ 140, 768 £ 92, 655 based on liquor Wet sales Liquor margin 45% Profit based on liquour £ 60, 750

“Wet” sales

NSS: IMPROVEMENT IDEAS? • Focus on lessees’ needs: current focus is on product range and functional expertise • Introduce different service packages for different types of pub? • NSSMs need to develop skills in the different types of consultancy required • NSSMs need to have diagnostic skills to match service package with each pub • Organisation structure based on package type rather than regions/ functions? • Measure lessee satisfaction

NSS - A WAY FORWARD? • Focus: service packages appropriate for different pub types? • NSSMs - new skill-sets • & diagnostic skills • Move away from region/ function organisation? • Lessee satisfaction?