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17 October 2012 | Adam Leach
Spirit Pub Company has used its scale to get better deals from smaller breweries, asking for lower prices in return for marketing opportunities.
In the past year, the business has worked with cask ale breweries, such as Black Sheep and St Austell, and it has been able offset costs against the benefits suppliers receive. “If we put [their beer] in 100 pubs then that gives them so much more coverage. We can trade off, against cost price, the benefits that they’ll get and the marketing that we can put behind it,” a spokesman told SM. “We’re now able to stock more local brands and more seasonal brands… it’s driving up the cost margin by offering the guests a better range.”
Yesterday the pub company, which was spun off from Punch Taverns last year, reported a 16 per cent increase in pre-tax profits in its first set of annual results as an independent entity. But while profits were up, the company said it faced “significant challenges on cost inflation”. Over the year, it saw beer duty, raw materials, energy costs, business rates and the national minimum wage all contribute to rising costs.
It mitigated the costs by reducing staff numbers and changing the way it buys its food and drink supplies. Its annual results statement said: “[We have] been able to mitigate the impact of these margin pressures through a combination of further labour efficiencies [and] much improved category management through leveraging our new drink contracts post de-merger.”
When the company was tied to the pub leasing side of Punch Taverns, the approach to drinks contracts was to get the “maximum amount of volume at the lowest cost”. This meant that the pubs it managed were tied into buying the same beers, which the leased pubs on the other side of Punch were also tied to. “What that meant for our managed range was we were quite restricted,” said the spokesman.
As Spirit, it has renegotiated those contracts, which has resulted in the costs going up. But its greater freedom has opened up a new market of suppliers and new opportunities to negotiate down cost.