The Licensed Houses Sector Review

Michael CommonLorelle Stroud

Akiko KobayashiCoris Leachman

Nick BrookesDebbie Mitchell

Introduction Definition

Topics Covered

Conclusion

DefinitionAn establishment retailing alcoholic beverages either on or off premises

On Licence: Definition“…this allows the holder to sell intoxicating drink for the consumption on or offthe named premises. It may be restricted dependent upon the public need.”

Off Licence: Definition “…this allows the sale of intoxicating drinks for consumption off the named premises only.”

An alcoholic drink: DefinitionAlcohol free: Must contain NO MORE THAN 0.05% a.b.v.

Low alcohol: Must contain NO MORE THAN 1.2% a.b.v.

Topics Covered

• P.E.S.T.E analysis• Consumer trends• Key Markets• Competitive structure• Competitors• SWOT analysis• Scenario Analysis• Future?

P.E.S.T.E AnalysisPolitical• Legislative changes• Licensing laws

Economical• Economic state has an effect on people’s willingness to travel and spend• Cheaper imports – booze cruises

Social• Growing concerns about health issues and drink-driving• Larger disposable income amongst young people• Social trends are being catered for by the market. I.e. more women drinking now, more Alco-Pops

Technological• Internet, WAP,& Palm top act as promotional and recruitment tool• Computers have also increased efficiency in till, reception, office and security systems

Environmental• Weather conditions affect people decisions to go out or stay in.• The climate can cause damage to property in serious storms

Consumer Trends

Expenditure on Alcoholic drinks in & out of HomeBeer

£-

£2

£4

£6

£8

£10

£12

£14

1994 1995 1996 1997 1998 1999

Year

Bili

ions

Spe

nt (£

)

In home

Out of Home

Expenditure on Alcoholic drinks in & out of HomeSpirits

2.62.72.82.9

33.13.23.33.43.5

1994 1995 1996 1997 1998 1999

Year

Bili

ons

Spen

t (£)

In HomeOut of Home

Expenditure on Alcoholic drinks in & out of HomeWine/Cider

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

1994 1995 1996 1997 1998 1999

Year

Bil

lio

ns

Sp

ent

(£)

In Home

Out of Home

Key Markets• Town / City Pubs (e.g. Hogshead, Yates, O Neills)

A, B, C1 + C2 (18-44 years)• Rural Public Houses (Predominately tenant run e.g. Queens legs, Cockwell

Inn)A, B, C1 + E

• Urban Public Houses C1, C2 + D (18-34 years)

• Family Focused Public Houses (e.g. Brewers Fayre, Harvester, etc.)A, B, C1 + C2 young families

• Wine BarsABC1 (working females)ABC1 25-24 year male

• Chameleon BarsOver 25s

• Night Clubs15-24, and over 25s

Jicnars social grading system

A- Upper Middle classB - Middle classC1 - Lower Middle classC2 - Skilled working classD - Working classE - Lowest income

Future Key Markets

Town/City Public Houses• Working women from the ABC1s• Older middle youth • Grey marketRural Public houses• ABC1 + EUrban Public Houses• C1, C2 + D (predominately male)Wine Bars• Working women from the ABC1s• 25-44 ABC1 male

Chameleon BarsOver 25sNightclubs15-24sFamily Focused pubsYoung families Grandparents with grandchildrenGrey market

Jicnars social grading system

A- Upper Middle classB - Middle classC1 - Lower Middle classC2 - Skilled working classD - Working classE - Lowest income

D

BA

C

Competitive Structure

Marketing Intensity

Geo

grap

hica

l C

over

age

A –Multiple pub operator mostly non-branded e.g. NomuraB –Multiple pub brand e.g. Whitbread, BassC – Smaller Entrepreneurial operators e.g. YatesD – Independent Pubs e.g. The Xchange

Growth in the pub market

Growth in pub turnover

Competitive Rivalry

Potential Entrants

BuyersSuppliers

Substitutes

Bargaining Power

Threat of Entrants

Bargaining Power

Threat of Substitutes

Porters Five Forces Analysis

Reference: M.E. Porter, Competitive Strategy, 1980

(With specific application to Licensed Houses)

S.W.O.T. Analysis

Strengths•Constant demand•Customer focused•Social Experience•Ability to cater to a specific market •Branding and merchandising

Weaknesses•Competition for independent licensed houses•Opportunity Costs, e.g. drugs, cinema•Booze cruises•Drink driving promotion•Negative public image – e.g. alcoholism and violence.

Opportunities•Relaxed licensing laws•Grey markets•Food sales•Cannabis toleration•Diversification/differentiation•Internet, WAP, Palm - (promotional, info and recruitment tool)•Market penetration

Threats•Cannabis toleration•Booze cruises•Home entertainment•Economies of scale from larger companies•Public Health conscience

Scenario Analysis

Optimistic

Realistic

Pessimistic

Future Analysis

Licensed Houses