The National Brewery

2

• MMC - Big 6 too powerful• Breweries required to sell or lease proportion

of pubs• Lessees allowed to sell guest beer and be

released of tie on all other products

• Many breweries sold their pubs• NB chose to lease 2300 of their pubs• Lessees run the business• NB sell lease, charge rent, sell beer• Tenants invited to take the lease or leave!

THE NATIONAL BREWERY:

3

• Regulatory Change• Reduced ties for lessees

• Fire sale!• NB chose to lease 2300 of their pubs• Lessees run business• Take it or leave it!

THE NATIONAL BREWERY:

4

POWER SHIFT

NSS PRODUCTS AND SERVICES

• Call cycle

• Promotions

• Discounts

• Catering

• Property adviser & suppliers

• Security

• Financial Planning advice

• Legal support

• Quality standards

• Training

The NSS Package?

• Visits

• Free stuff!

• Advice

• Standards

• Training

What’s on offer?

National Brewery:three pub types

9

To lease or not to lease?• The deal ...• option to assign lease on open market after

3 years• must sell NB beers, may introduce one

guest beer• no tie on any other NB products• rental income payable to NSS: 50% of net

profit• free access to NSS products and services• expected equity growth in lease after 5

years: £70,000-£200,000

10

To lease or not to lease?

• The deal ...• option to assign lease• must sell NB beers• no other tie• rent 50% of net profit• “free” access to NSS• equity growth

to lease or not to lease?

Surnames A - M

You are on the management team of either the Castle / Oak / White Lion. You need to:Do a SWOT analysis from the lessee's perspectiveEvaluate the service package that NSS will be offering: what are your expectations of NSS? Which elements of the package will be of most value to you?Your decision as to whether or not to go ahead with the lease.

to lease or not to lease?

Surnames N - Z

1.You are the NSSMs for the Nottingham area, each providing support to around 35 pubs. The pubs include the Castle, Oak and White Lion. You were previously area managers. You need to:Do a SWOT analysis of the new leasing arrangements from NSS’s perspectiveEvaluate the implications of the new lease for the relationship between NSS and the lesseesReview the service package NSS will be offering: how will you manage the relationship with each of the lessees?

Room Plan

NSS Managers

White Lions

Oaks

Castles

Your right Your left

Back

Front

SWOT ANALYSIS FROM:WHITE LION / OAK / CASTLE / NSS * PERSPECTIVE

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

* Delete as appropriate

Write pub type at the top!

SWOT ANALYSIS FROM:NSS MANAGER’S PERSPECTIVE

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

* Delete as appropriate

Experience and existing relationships with tenantsmore competition amongst landlords (less for NSSM to do)keep my job!reduced financial riskAllows me to focus

Not all licensees are cooperativeWhat if pubs successful without NSS support? Invalidates my purpose / existence.Charges too high - incentive for pubs to cheat in other ways.pub failure = reputational risk for me

Pubs don’t have to sell NSS extra servicesDelivery of service not cheapCould spend a lot of time and energy on pubs that are not making profitsFunding dependent on previous year’s profitReduced control over pubsType of advice I can give will be constrainedI represent MB, but have little power actually.Pubs cheat - misrepresent profitSOme pubs will make no profit at all!

Manager can attempt to offer more products and servicesBecome specialist advisor - develop expertise; learn from lesseesPotential to sell services more generally - outside NB chain?I can become a pub consultant?

SWOT ANALYSIS FROM:WHITE LION PERSPECTIVE

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

* Delete as appropriate

LocationEstablished clientele - “loyal customers”Word of mouth - custom through generationsIncreased freedom

BankruptcyEconomic downturnIncreased competition? - Food pubsFewer customersDeath of community pubsIncreased customer expectationsCheaper alternatives

Have to share profitDeclining revenuesPoor facilities - old / tiredLocal economy in bad state and getting worse - clientele income reducingLocked-in to the deal! 3 years!Not much daytime custom & Small marketOld-fashioned - middle-aged men only

Better than nothing!Ale reputationTraditionalists (CAMRA types)Sky TV / SkySportsDarts Competitions / Pool EveningsSpecials - e.g., St. Patrick’s day offer, Bonfire Night

SWOT ANALYSIS FROM:CASTLE PERSPECTIVE

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

* Delete as appropriate

Strong and well-developed brandGrowing marketmodernmanagement team know what they are doingContinued association with NB - help reputation?Discounts / promotions

Changing rent (going up)Long LeaseWhat if NB run into problems? I loose by association.Decrease in overall demand hurting profit still furtherNew entrants into pub-market

Loss of 50% of profit (we are fairly high profit at mo.)Some loss of flexibilityprice of the dealMaybe too much standardisation - of products for example

Buy and develop own foodMore premium beersintroduce new products (wine, cocktails), broaden menularge expected increase in equity growthCan put lease on open market

SWOT ANALYSIS FROM:OAK PERSPECTIVE

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

* Delete as appropriate

NSS “holds my hand”:financialsecuritypromotions (expand customer base)Association with NB brandLocation, Identity & HeritageFree access to lots of services

Bound by ties - only one guest beer!New pub-types (Castles)Market declineBuyoutHealth campaignsRegulation

50% of profit to NSSIndependence is illusoryLow bargaining powerPoor / limited management skillsTight cash flowIn need of innovation!

Experience and existing relationships with tenantsProduct variety - new beers?SupportBuyout potentialMove into niche?equity growth

What can we distil from National Brewery?

Operational and market segmentation?

What can we distil from all this?

Relationship

Castle: Business Partnership

NSS Service Package

• Business development services

• Focus on expanding range, future investment

• Supporting services

• Nurture entrepreneurship

• Business rescue!

• Focus on cash flow

Coach

Facilitator

Consultancy

NSS Concept“one-word summary”

Oak: Supportive

White Lion: ‘Samaritan’

What should the service concept(s) be?

Relationship

Castle: Partnership

NSS Service Package

• Business development• Expanding range,

investment

• Support

• Nurture entrepreneurship

• Rescue!

• Cash! Coach

Facilitator

Consultancy

Concept“strap-line”

Oak: Supportive

White Lion: ‘Samaritan’

Operational Segmentation

Which pub makes most money from wet turnover?

White Lion Oak Castle

Income £150,000 £320,000 £450,000

% Sales 90% 83% 35.5%

based on liquor

Wet sales £135,000 £265,600 £159,750

Liquor margin 45% 53% 58%

Profit based

on liquour £60,750 £140,768 £92,655

“Wet” turnover

White Lion Oak Castle

Income £150,000 £320,000 £450,000

% Sales 90% 83% 35.5%

based on liquor

Wet sales £135,000 £265,600 £159,750

Liquor margin 45% 53% 58%

Profit based

on liquour £60,750 £140,768 £92,655

“Wet” sales

NSS: IMPROVEMENT IDEAS?

• Focus on lessees’ needs: current focus is on product range and functional expertise

• Introduce different service packages for different types of pub?

• NSSMs need to develop skills in the different types of consultancy required

• NSSMs need to have diagnostic skills to match service package with each pub

• Organisation structure based on package type rather than regions/ functions?

• Measure lessee satisfaction

NSS - A WAY FORWARD?

• Focus: service packages appropriate for different pub types?

• NSSMs - new skill-sets• & diagnostic skills• Move away from region/

function organisation?• Lessee satisfaction?