Drinkers call time on the era of the cheap and rowdy boozer

The days of the cheap boozer are numbered, as you may have noticed. "Two pints of lager and a packet of crisps" is an order you are unlikely to hear much in future. As the march of the gastropub continues, you are more likely to hear "Two glasses of fine red wine and moules mariniere, please."

Regent Inns, the company behind the Australian-themed Walkabout and Jongleurs comedy club chains, suffered a fall in annual profits yesterday as it paid the price for beefing up its door security and turning away people without ID in the wake of last year's licensing reform.

Walkabout, famed for its sports bars which metamorphose into big, rowdy party venues at night, is cleaning up its act, under pressure from local authorities and police. Where one doorman used to be enough for every 150 people, one is now needed for every 100 people. In Glasgow, drinks handed out after 11pm have to be in plastic bottles and cups, and big CCTV screens have been installed in venues across the country.

Fears of a surge in binge drinking have proved unfounded since the new drinking laws were introduced, allowing pubs to stay open beyond the traditional 11pm chucking out time. This is partly because people are more relaxed in their drinking, and because the Government has introduced tighter security measures.

Regent Inns has suffered a double blow because the new licensing laws have increased competition on the high street and landed the company with a big bill for security measures. Regent Inns' chief executive, Bob Ivell, said: "We want to be a place where people feel safe. We have taken a responsible approach, while others have not taken that approach and have run the gauntlet."

Times are clearly changing, said Ted Tuppen, who runs the 8,000-strong Enterprise Inns group. "There were too many irresponsible promotions going on a couple of years ago like 'as much as you can drink for a fiver'." He said the industry - pubs and supermarkets - was working in tandem with the Government to fight under-age and binge drinking.

Another big challenge for the pub industry has been the smoking ban in Scotland, which is to be extended to the rest of the country next summer. Pub chains have responded by switching their focus to food, seeking to cash in on the growing trend for eating out. With beer sales in terminal decline, pubs are also serving up more wine and liquor.

Mitchells & Butlers, which runs the All Bar One, O'Neills and Harvester chains, confirmed its leading position in the rapidly growing pub food market yesterday when it posted 3.8 per cent growth in like-for-like sales in the 18 weeks to 16 September.

Food sales were 7.4 per cent ahead in the past 50 weeks, helped by new summer menus. The company has become bolder, offering more unusual salads like chicken and sweet mango, and goats cheese and beetroot as well as a variety of fish dishes, which have proved very popular in its London pubs. It is also plugging into the growing trend for "ethnic" food, offering World tapas sharing plates at All Bar One.

Wayne Brown, at Altium Securities, said: "Food is where it's at. It's the big driver of growth for M&B, Wolverhampton & Dudley and Greene King." JD Wetherspoon, for one, recently started serving breakfast for just £1.99.

Enterprise Inns also sounded an upbeat note yesterday, and expects to meet City expectations for pretax profits. It saw average earnings before interest, tax, depreciation and amortisation per pub rise by more than 5 per cent over the past year. Meanwhile, Regent Inns saw its profits before tax and exceptional items fall to £10.6m in the year to 1 July, from £10.8m the previous year.

Unlike some rival bar operators, the company did not gain extra trading hours as most of its Walkabouts already had licences to stay open until 3am or 4am. It has also been hit by the shift away from the high street towards community pubs.

Mark Brumby, at Oriel Securities, judged: "The group has indicated that it is available either for sale or to make acquisitions, but trading is tough. The World Cup wasn't quite the windfall that one might have hoped."

Not surprisingly, Regent Inns is trying to transform itself from a late-night bar operator and recently snapped up the Old Orleans restaurant chain from Punch Taverns for £26m. The deal has raised the share of sales made up by food from 6 per cent to 17 per cent. That's still low compared with M&B, which derives 35 per cent of its sales from food, rising to 40 per cent once the recently acquired 239 pub restaurants from Whitbread have been converted to the M&B chains. Enterprise Inns generates 30 per cent of its sales from food.

But Mr Ivell said he was looking for further acquisitions in the fast-growing casual dining market. "We're gradually changing the shape of Regent Inns," he said.

Supermarkets, with their aggressive discounting on alcohol, are adding to the woes of pub operators. While the World Cup in Germany certainly delivered a big uplift in sales for the pub industry, it seems supermarkets benefited even more from the drinking bonanza.

Executives, however, think that the policy of supermarkets to flog vast amounts of alcohol at below-cost prices cannot continue. Tim Clarke, the chief executive of Mitchells & Butlers, said: "The Government was shocked by the sheer scale of promotional, aggressive discounting by the supermarkets during the World Cup. They are very aware of the social issue."

Clearly, with a nationwide smoking ban taking hold next year, these are difficult times for pub chains which are also absorbing higher labour and utility bills, after a rise in the national minimum wage, and soaring energy prices. The smaller companies that cannot cope will inevitably be gobbled up by the larger chains.

"Operators must consolidate in order to protect business value," Mr Ivell said yesterday.

Regent Inns had a takeover approach from the private-equity house Alchemy Partners in April, though talks were terminated about six weeks later. The 2,000-strong M&B estate has caught the eye of the property entrepreneur Robert Tchenguiz, who tabled a £2.8bn bid for the group in May but was rebuffed. He has since built a 13 per cent stake in the company.

The biggest deal in the sector was pulled off by Punch last December, which fought off Mr Tchenguiz to acquire the privately owned Spirit Group for £2.7bn. The deal put it ahead of Enterprise Inns as industry leader. Pub estates have frequently been changing hands, ever since the industry was partially deregulated with the 1990 Beer Orders, which weakened the brewers' traditional hold on pubs and led to the rise of independent operators.

No doubt the pub will be a different place in a couple of years. It is likely to become a cleaner, more family-friendly venue, giving restaurants a run for their money. Mr Clarke warned that pubs without a strong food offering would "take a hammering" when the smoking ban starts. For many pubs that means "change or be eaten".