LONDON (MarketWatch) — Brits may love their bitter ales and strong lagers, but one pub chain has turned to an all-American brew, Coors Light, to stem a downturn in the market.
JD Wetherspoon (JDW) on Friday joined rivals like Punch Taverns (PUB) and Greene King (GNK) in reporting downbeat results, hurt by a combination of a sagging U.K. economy, rising prices and the introduction of a smoking ban in England and Wales.
The numbers for Wetherspoon showed profit in the year to July 27 dropping 24% to 35.5 million pounds ($62.4 million).
Revenue edged up 2% to 907.5 million pounds, but same-pub sales dropped 1.1%.
For the year, Wetherspoon kept its dividend unchanged at 12 pence a share.
Wetherspoon shares edged 3% higher on Friday but are down over 50% over the last 12 months.
The 694-pub chain’s revenue held up a bit better than rival Punch Taverns because it sells more food. Same-food sales shot up 7.9% on the smoking ban. The problem with selling more food, however, is that margins aren’t as strong, because preparing food is more expensive than pulling a pint.
In the five weeks to Aug. 31, Wetherspoon same-pub sales rose 1.1% and overall revenue grew 5.5%. It’s going to need same-pub sales growth of around 3% to counter rising energy, food, labor and tax costs, the company said.
The pub chain said lager sales returned to growth in its fiscal fourth quarter, which it credited to the introduction of Coors Light, a product of Molson Coors
Coors Light is now Wetherspoon’s third-best selling lager, and the pub chain is now the largest retailer of the product in the U.K.
Tim Martin, chairman of Wetherspoon’s, told MarketWatch in an interview that the company has made it clear that the brew isn’t light in terms of alcoholic content.
“I think people are confused by the term light, they think it’s very low in alcohol, so we made it clear it’s 4.5%,” Martin said. “People have tried it, and they like it.”
Coors Light is now outselling Stella Artois, a popular beer from InBev (000379310), by a 2-to-1 ratio, Martin said.
Martin said the beer fills a good niche in the market between beers with 4% alcohol content and those with 5%.
Molson Coors also supported the launch with roadshows, staff training, advertising spending, a good selling price and staff incentives, the chairman said.
“We haven’t just stacked it on the bar and hoped it would sell,” Martin said. He noted that the beer doesn’t give quite the same margins as other lagers.
“We’ve probably sacrificed a bit of margin as our contribution to the show,” he said.
On the performance more broadly, he said it was good for sales to fall 1.1% in a year the smoking ban was introduced.
“The worrying factor is the plethora of tax and government legislation, that’s the big cloud on the horizon, they won’t leave things alone,” Martin said.
“I’m worried Britain’s becoming like France, which is overregulated. That will have a long term impact on the economy.”
View more information: https://www.marketwatch.com/story/british-pub-chain-says-coors-light-helps-revive-lager-sales