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Final orders for pub trade
23 July 2010
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Claire Hartnett talks to Padraig Cribben, chief executive of the Vintners' Federation of Ireland, about how the recession is affecting Ireland's publicans.
Traditional wisdom would have us believe that we drink more during a recession, with people pounding pints and propping up bar stools to forget their woes. We might be drinking more, but Ireland's publicans sure ain't the ones who are benefitting.
A host of pubs collapsed over the past two years as the downturn ravaged the hospitality sector.
In March 2009, the Thomas Read Group entered receivership after an investment plan for the chain of pubs fell through. Earlier this year, the Waterford-based Tweedy Group, one of the largest pub groups outside Dublin, collapsed into receivership when the High Court rejected a rescue deal for the group and final orders have been called on hundreds of smaller pubs across the country.
While economists herald signs that the economy is slowly beginning to emerge from recession, the forecast for publicans isn't good.
Last November, the Drinks Industry Group of Ireland (DIGI) published a report which revealed that between 2004 and 2009, employment in the trade decreased, sales revenues fell and labour costs rose.
The decline in the sector accelerated sharply in the past two years, according to the report, and the economic downturn and lifestyle changes combined with high alcohol taxes to put the wider drinks industry under immense pressure.
The report predicted that more than 2,000 rural pubs would close their doors in the next decade – this is on top of the 1,500 pubs which have already stopped operating over the past five years.
And the situation hasn't improved since then, despite signs that the economy is beginning to emerge from recession, according to Padraig Cribben, the chief executive of the Vintners' Federation of Ireland (VFI).
"Unfortunately, those predictions [in the DIGI report] were quite accurate. Sales were down 15% in the first five months of this year compared to last year. In the last five years, 1,200 − 1,500 pubs have closed and 10-12,000 jobs have been lost and there's also a possibility of another 4-5,000 job losses in the next 12 months."
The VFI represents around 4,500 publicans outside of Dublin. The organisation protects the interest of its members through lobbying government and regulatory agencies for legislative reform, while also offering advice and information to its members.
Cribbin says there are a number of factors which have contributed to the dramatic decline in the Irish pub trade.
"The single biggest factor is the lack of consumer confidence," says Cribbin. "But there are so many people out there without jobs or in negative equity that it's very understandable that people want to hoard money rather than spend it."
Lifestyle changes have also contributed to publicans' problems – "people were cash rich and time poor but now they're time rich and cash poor," he says.
The cost of business is another big issue and the VFI wants to see a substantial reduction in local authority commercial and water rates. "The level of rates and the cost of services in the past seven to eight years has gone up in multiples of the rate of inflation. It's an area that needs to be reviewed but there's no appetite for it at present."
Below cost selling is also bringing the pub trade to its knees. The VFI has repeatedly claimed that supermarkets are increasing the price of staple food products like bread, milk and meat to allow them sell alcohol below cost as a loss leading marketing strategy.
"You need a licence to sell alcohol because it's a mood altering substance but now we're in the situation where you can now buy alcohol cheaper than water. The real answer to the problem is to ban below cost selling or bring in a minimum pricing on alcohol."
The increasing number of pubs being placed into receivership is also affecting the profitability and capital values of the wider pub trade, according to leading figures in the industry.
In March, the chief executive of the Licensed Vintners Association – the organisation which represents Dublin publicans – wrote to the six main banks complaining that long receiverships are "destroying the turnover and profitability" of the pubs concerned.
Receiverships are "ultimately severely reducing the capital values of these pubs" and in turn have a "negative impact on the profitability and capital values of the wider pub trade", wrote Donall O'Keeffe.
Cribben agrees that receiverships are having a negative impact on publicans: "The problem is a bigger issue in Dublin but it's a total distortion of the trade and it seriously affects regular pub operators."
But what about the world cup? Surely that must have lined the coffers of publicans around the country?
Not so, says Cribben.
"The World Cup didn't have a particular impact on trade. Ireland wasn't there and I think some people had a bit of soccer burn out. Anecdotal evidence from our members has suggested that there was very little bounce from the world cup."
The next twelve months will be particularly challenging for the trade, says Cribben.
"People have referred to it as a perfect storm – the lack of consumer confidence, the high levels of unemployment, high levels of regulation – a lot of which is unnecessary – while banks have also significantly reduced the level of overdraft facilities.
"We're looking at a very challenging 18 months. But we're also hopeful. There's a great resilience amongst publicans – a lot of publicans are looking at different ways they can attract trade and are looking at putting on different events. It will be challenging but not totally doom and gloom."
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