Struggling pubs target the restaurant trade

As they search for new sources of revenue, pubs now make more money from food than drink. Martin Hickman reports

Drinkers entering the Dog and Duck these days are more likely to encounter rack of lamb with minted peas or a Thai green curry salmon than the hefty cheddar cheese sandwich that passed for pub grub years ago, and food in Britain's inns is taking an ever bigger share of pub-goers' spending.

According to The Publican, the country's 52,000 pubs have passed a landmark that could make them increasingly resemble restaurants in the 21st century. For the first time, the trade magazine reported yesterday, alehouses now rely more on food than drink for their sales.

Trumpeting a poll of almost 1,000 publicans showing pubs relied on food for 52 per cent of sales, the magazine said: "Pubs are now officially food-led businesses."

The finding is further evidence that publicans are embracing plates rather than the ale pump, amid a long-term decline in the £28bn-a-year industry that has led thousands of inns to call last orders for the last time. Pubs have been hit by a wine lake of troubles, including the smoking ban, rising alcohol duty and falling beer consumption, competition from supermarkets, and the recession. Although closures have slowed from the record rate of 52 a week in the first half of last year, one in 10 pubs has shut in the last five years and Britain's tally is 6,100 down on the 58,600 in 2005.

Pub bosses have identified food as their salvation. During the past two decades UK spending on eating out has doubled to £43bn, while drinking out has stayed static at £29bn in the past five years, despite price rises.

Pub owners have fitted out kitchens, extended menus and developed specialist chains. Greene King, a brewer since 1799, bought the Loch Fyne chain of seafood restaurants for £68m in 2007 to facilitate its entry into the "branded food segment" and has created the family-orientated 147-strong Hungry Horse chain.

The £1.9bn-a-year Mitchells & Butlers has split its public houses into two groups: 1,065 "pubs and bars" and 814 "restaurant" pubs, including the Harvester brand.

Last November, M&B told investors why eating out was such a good bet. "Growing wealth, increasing distribution, and a number of social factors, particularly the increase in the proportion of working women – which now stands at 70 per cent of the adult female population, up from 56 per cent in 1971 – have all contributed to this growth," it said in its 2009 annual report.

It added: "In the past year the eating-out market has declined ... However, we expect the market to return to long-term growth as the UK economy emerges from recession."

Many individual entrepreneurs have converted traditional "spit and sawdust" boozers to gastro-pubs, which seek to serve affordable food in a less formal setting than a restaurant. This year the Michelin Guide bestowed its fine-dining stars on several of these, including the Royal Oak in Bray, Berkshire, and the Star Inn at Harome in North Yorkshire.

Overall, the British Beer and Pub Association estimates that pubs sell over one billion meals a year, more, it says, than Britain's restaurants.

The Publican suggested that the downturn had "forced licensees to look at growing more profitable sides of their trade" and accelerated the move into meals. Its editor, Caroline Nodder, said: "Publicans are now offering quality food and drink to a more diverse group of customers than ever before."

Sales may not be quite as high as that implied by the publication. Mark Brumby, an industry analyst at Langton Capital, advised clients that the figures "presumably include drink sold with food because otherwise the numbers would not add up". Chains such as Marston's managed outlets and M&B had food levels around the 35 per cent to 40 per cent mark, he wrote, meaning "there's no way to come out with 52 per cent when thousands of tenanted houses' idea of a food offering is a pickled egg with your crisps".

Mr Brumby told The Independent that food-only sales in pubs were probably running at 26 per cent. However there is no doubt they are increasing year after year, perhaps by one percentage point of revenue share annually. While alcohol sales are marginally more profitable – excluding running costs, about 73 per cent for booze, compared with 68 per cent for food – wet-led sales are drying up. Food is the future. "Overall the trend for the 52,000 pubs is away from the wet sales and towards food," Mr Brumby said. "They're after the same pound and they're offering the same thing. The pub companies are better financed, so the restaurants have got a job on."

Restaurants and pubs are converging. As restaurant companies move away from fine-dining, they open middle-priced eating venues which serve alcohol. As pubs move away from alcohol-only masculine boozers, they create family-orientated places for a meal and a drink.

Traditionalists may baulk at the prospect of characterful pubs being "blanded" into restaurants, but that is what modern consumers seem to want. Anyone for the pubstaurant?