M&B sets out two-year targets: Mitchells & Butlers chief executive Alastair Darby has set out a target to grow sales derived from three key “more attractive” market segments to 70% of all sales by 2016 – the three segments accounted for 57% of sales in 2010. The three growth segments are Upmarket Social (Nicholson’s, All Bar One, Castle and Alex), Special Occasions (Vintage Inns, Browns and Miller & Carter) and Family (Toby Carvery and Harvester). Darby said that market analysis had shown that four brands within the growth segments – All Bar One (currently at 50 sites), Harvester (currently at 213 sites,) Miller & Carter (35 sites) and Toby Carvery (158 sites) had the market opportunity to grow to 1200 sites from the current combined 455 sites. Darby said there were no guarantees that the four brands would grow to 1200 sites but the market analysis showed the brands’ potential. Darby reported that its two other less attractive market segments – Heartland (Crown Carveries, Oaktree and Sizzling Pubs) and Everyday Social (Ember Inns) – are expected to see contribution to overall sales reduce to 30% of sales in 2016 from 43% in 2010. Darby said the business should be judged on five criteria over the next two years as it attempts to complete the progress from ‘good to great’ set in motion by chairman Bob Ivell in November 2011: whether M&B is able to achieve like-for-like sale growth ahead of the market; can maintain robust margins; make attractive investment returns; can reduce its net debt to Ebitda and can reinstate the dividend. “Reinstatement of the dividend will be a critical moment,” said Darby.

New consumer mindset: Darby said strategy at M&B will be guided by the new consumer mindset that has been created by austerity conditions in recent years. He said: “There is a need to deliver great value guest experiences – there has been a permanent change in consumer behaviour. People want more for no more.” Darby also argued that consumers are saying goodbye to formal meal-times and there is a need to provide flexibility by extending offers to include all-day eating and drinking occasions. Finally, Darby said, consumers felt a new need for reliable brands. He cited the example of Aldi now offering cut-price premium wine as the response to consumer demand that is required. “Aldi is a great-value retailer.”

The growth of breakfast: The growth of breakfast sales, due to hit 11 million a year by the end of this financial year, is an example of M&B extending its offer times to meet consumer demand, said Darby. Toby Carvery is now selling 60,000 breakfasts a week (three million a year) with an unlimited £3.99 offer seven days a week and Harvester, the company’s largest brand with 213 sites, is selling five million breakfasts a year.

Evolution of Toby Carvery, Harvester and All Bar One brands: Alistair Darby reported that M&B is evolving its brands and investing more in remodeling of existing sites. The company spent an average of £182,000 on 97 remodels last year, producing an average Ebitda return of above 30%. This year saw an average of £202,000 invested on 174 remodels, also producing a return of more than 30%. Next year, the number of remodels would increase to 200. Darby told analysts how Toby Carvery, Harvester and All Bar One are being evolved. Toby has the highest Net Promoter Scores in the estate and turnover, on average, of £28,000 per week per site. The brand image was being reinforced with a “Home of the Roast” tagline and clear branding messages that reinforce the homely attractions of the roast. Harvester, meanwhile, has introduced a £9.99 meal deal, new menus with a stress on freshness, quality and value. A dozen sites had been remodeled with a more contemporary look that had been met “with huge enthusiasm”. This will be rolled out across the estate. All Bar One had seen a six points increase in its Net Promoter Score in the past year. The brand is now opening earlier with a modern breakfast offer, including the unusual Boost Breakfast for £6.50, and had evolved its menu and offer with sharing plates, plus wine and cocktail masterclasses. Darby reported its new 02 site had taken £225,000 in a single week during a recent tennis tournament.

Freeing up managers to find their own solutions: Alistair Darby reported that the ‘good to great’ programme, whereby managers were allowed to find their own solutions to problems, was producing results. He cited the example of a Vintage inns pub, The Calverley Arms, which had struggled to cope with demand on hot days as a destination venue. Darby reported that six members of staff had reported in sick at the start of one hot day, unwilling to face the stress of keeping up with demand. Its site manager had sat down with staff and come up with a series of commonsense solutions, including having the kitchen prepare packed lunches for staff to remove the extra pressure of providing staff meals during busy lunchtime sessions. He reported like-for-like sales growth at the site now stood at 14.8% and staff turnover is now 16 percentage points better. 

Chairman Bob Ivell – it was frustrating not seeing the results coming through: Chairman Bob Ivell described the most recent financial year at M&B as “frustrating”. “There was lots of progress but results had not come through quite as quickly as we would have liked.” He argued that delays in progress translating into like-for-like sales growth, now evident in the first eight weeks of the current financial year, was linked to having 15 different brands. “It takes time to invest with 15 brands,” he said. Ivell acknowledged that M&B had faced having to catch-up with competitors that had “perhaps caught up with us”. With the consumer increasingly value-driven, M&B had spent the last year “getting back in shape as far as value is concerned”. Across the 1,591-strong estate, current average weekly takings are £23,200 per pub.