COMMENT: JD Wetherspoon - a smoking gun?
UK pub chain JD Wetherspoon is to ban smoking from its premises by May 2006, prior to government legislation that would force the company to do so anyway. The company believes that an increasing percentage of the population is giving up smoking and a significant number of people are staying away from pubs and restaurants because they are too smoky.
In acting in advance of the rest of the industry, it is an assertive stance coming a full two years ahead of proposed government laws which will impose a smoking ban on on-trade outlets from 2008. The move has already been welcomed by trade unions and health campaigners who are urging other companies to follow suit.
Wetherspoon's performance has suffered in the last 12 months with its stock losing 10%. A major reason for this could be that Wetherspoon's brand concept is no longer so well aligned to trends in the on-trade. Currently, the frequency of going out is increasing across Europe and the US by 3.5% a year at the expense of staying in to drink. This is likely to increase as the number of midweek occasions grow.
Superficially, this should be a positive trend for the pub chain. Yet the problem it faces is that consumers increasingly value quality in the on-trade as they are drinking less but switching to higher quality products. Indeed, total per capita spending in the on-trade across Europe and the US has grown at a faster rate than the per capita volume consumption. The trend towards indulgence leaves a brand such as Wetherspoon in a tricky position as it generally prides itself on its value for money offering. This is arguably the issue that Wetherspoon should be addressing with greater urgency than smoking.
Despite earning plaudits from health campaigners, the pub chain runs the risk of losing some trade to competitors as a result of the smoking ban because it alienates an important consumer group. The company could be putting itself at unnecessary risk at an uncertain time.
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