UK: Comment - Wetherspoon/Yates: fighting for the bargain basement
UK pub group Wetherspoon has seen Q1 sales up 27%, but will face increased competition from Yates. Yates plans to target cost-conscious consumers with aggressive discounting in its quiet afternoon and early evening periods.
While the cheap drink, cheap food, no frills approach is continuing to work well for JD Wetherspoon and should improve Yates' sales to some degree, it may not be the best tactic to turn around the struggling group's fortunes.
JD Wetherspoon is still on the rise, reporting 6% growth in like-for-like sales in the 13 weeks to October 38. The same, however, can't be said for rival pub group Yates. Its stuffy image has been the bane of its existence over the 18 months, as it watched customers tail off to trendier locations.
Now Yates Group has decided to take a leaf out of Wetherspoon's back-to-basics approach, announcing plans to launch its own range of drinks promotions to attract the cost-conscious consumer. The aggressive discounting program focuses on attracting customers in the quiet afternoon and early evening periods. Yates says it will not hit margins, with drinks suppliers picking up the much of the tab.
Yates is making major moves in an effort to boost sales. A GBP8.7 million charge on the closure of 18 underperforming pubs pushed its results into the red, with a loss of £3.98m (US$5.76m) in H1 and a 2.6% fall in like-for-like sales. Yates is trying to change its image, moving from wine bars decorated with fake Victoriana to something more modern. The bulk of its expansion plans have been put on hold, and a refitting program is already underway.
Whether it's enough to turn around Yates' ailing fortunes is another matter.
Drinks promotions have worked in providing Wetherspoon with its simple, no frills image. But Yates' core customer is not the music-shy regular at Wetherspoon's pubs. If Yates wants its customers back, it needs to focus on why they have deserted its bars, rather than cutting prices and hoping they return.
With this in mind, squeezing discounts out of suppliers may also be a bad move. A wide range of drinks is a good way of drawing in customers, but requires good supplier relations. The more Yates pressures its suppliers, the more reluctant they will be to provide a good range.
In short, drinks bargains will always draw in some trade, but Yates would be better off focusing on improving its pubs' quality.
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