Spirit Pub sees food sales driving full-year growth

Tue Mar 18, 2014 12:38pm GMT

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(Reuters) - Spirit Pub Co Plc is betting on patrons having more food along with their pint to drive sales in a year that includes one of Britain's warmest winters and the football World Cup.

The company said it was selling as much food as drinks in its pubs such as John Barras, Fayre & Square and Flaming Grill as cash-strapped Britons opt to eat at pubs, shunning the more expensive eateries.

Spirit Pub's like-for-like net sales at the roughly 800 pubs it directly manages rose 6.1 percent in the eight weeks ended March 1, with food sales outpacing drinks sales.

The company said it still expects like-for-like sales in the managed business to rise 3.0 to 3.5 percent this year, helped in part by the government's extension of licensing hours during the football World Cup starting in June, allowing fans to spend more time at their local watering holes.

"A lot depends how well the English team does. The more we progress, the happier I'll be, not just from a national pride perspective, but from a sales perspective too," Chief Executive Mike Tye told Reuters.

Tye also said he saw no "logic or reason" for the government to ease the controversial "beer tie" law that forces tenant pubs to buy beer from their leaseholders, often at rates above market prices.

A change in the law could stymie growth at the company's roughly 470 leased pubs along with those at other pub owners such as Enterprise Inns, Greene King and Punch Taverns - the former parent of Spirit Pub.

"The majority understand that it's a benefit to all parties not just one," Tye said.

FOOD PUSH

Spirit Pub, which intends to open 4 to 5 new pubs this year, was one of the first among British pubs owners to put more food item on their menu, aiming to lure customers looking for value-for-money meals.

The company's Fayre & Squares and Flaming Grill pub chains are known for their "easy-on-the-pocket" menu, with deals such as 2 dishes for 5 pounds and 5.99 pounds lunch club offer.

"One of the key reasons of Flaming Grill's success, is that we've been converting old community pubs into an exciting food concept," Tye said.

Spirit Pub's sales growth continues to outpace that of its rivals, according to data collected from 27 of Britain's larger pubs and restaurants by market research company Coffer Peach Business Tracker.

Restaurant Group, another pub owner betting on selling more food, last month reported a 3.5 percent rise in like-for-like sales in the eight weeks to February 23.

Spirit Pub did not disclose margins in its trading update on Tuesday. However, Numis Securities analysts said that "as volumes, prices and average spend are all in growth and net cost inflation is at just 2 percent, margins should be up."

Numis has a "buy" rating on the company's stock and a price target of 110 pence.

Shares in Spirit Pub were up 1.2 percent at 82.75 pence at 1214 GMT on the London Stock Exchange. They rose almost 5 percent to touch 85.50 pence earlier in the session.

(Editing by Mathew Veedon, Gopakumar Warrier and Savio D'Souza)

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