BECOMING THE BEST PUB AND BEER COMPANY IN BRITAIN
Our overall vision is to be the best pub and beer company in Britain and our mission is to be the best for our customers, our employees, our shareholders and our communities. The five key pillars of our long-term strategy are to:
- Build brands that customers admire
We will focus on four brands going forward.
A. The Greene King pub brand has significant untapped provenance based on 219 years of history and we have redeveloped the brand’s proposition to reflect its ambition to be ‘the best pub in the neighbourhood’. We are extending the brand into more food-led pubs where appropriate and, in addition, both Pub Partners and Brewing & Brands will continue to play an important role in supporting the delivery of the Greene King brand proposition through our branded tenanted and leased pubs and through our beer range.
B. Chef & Brewer is our country pub brand with its focus on both the ‘chef’ and the ‘brewer’ essential for success. It caters effectively for customers looking to refuel on a casual basis, as well as customers treating their visit as a special occasion.
C. Farmhouse Inns is our out-of-town, food-led brand where families and friends can ‘feast together’ from either our carvery offer or our main menu. It is an extremely popular brand with customers, as shown by the latest MCA Pub Brand Monitor in which customers placed Farmhouse Inns first across all large pub brands for food quality, drink quality, friendly service, menu choice and value for money.
D. Hungry Horse offers ‘generous value, every day’. It is located in both local communities and in destination sites and is able to cater for a broad set of customer occasions ranging from adult football watching to family dining due to the average pub size and internal segmentation of the pub.
All our other pub brands have either been replaced (e.g. Fayre & Square) or will be subsumed into these four brands over the course of the new year. This emphasis on four brands will help to deliver significant business simplification and efficiency improvements while at the same time allow us to continue tailoring a pub’s offer to local customer needs. Using this simpler brand structure will help us keep a tighter focus on the four brand propositions and drive up Net Promoter Scores (NPS) and customer satisfaction.
- Provide offers that deliver compelling value, service & quality
Increased consumer expectations, combined with the growth in alternative dining opportunities such as takeaway and delivery, mean that all eating and drinking out providers need to deliver more compelling experiences to customers. We continue to monitor the success of our £10m customer investment as we look to strike the right balance between the inherent value of a pub brand and the requirement to target specific customers through promotional activity. We increased the emphasis on delivering better service this year, incentivising pub teams on TripAdvisor scores, guest satisfaction reviews and mystery guest scores which all improved against the previous year. We also increased the frequency of food quality benchmarking and we are increasing our focus on drink quality with an integrated end-to-end plan covering all three of our businesses.
- Develop people who exceed expectations
Running pubs is primarily a people business and having a team that not only meets customer expectations, but consistently exceeds them, will stand us apart from our peers and create material competitive advantage. Our 39,000 employees will start to see changes in the amount, the quality and the effectiveness of their training programmes over the next two to three years. We are addressing our recruitment capabilities and skills, investing in improving core management and front-line service skills, and focusing on further developing leadership skills throughout the business.
- Maintain a well located and invested estate
Our pub estate is 82% freehold or long leasehold and we are committed to ensuring in both Pub Company and in Pub Partners that the core estate is well invested (on a five to six year cycle) and that we constantly improve the overall quality of the estate. We spent £193m in the financial year on our estate, covering core capital expenditure, new builds, brand conversions and freehold reversion purchases. We expect to spend between £180m and £210m in the new financial year. All investment options create value for shareholders including delivering normalised core capital investment returns of 25% and new build returns of 17%. Our new build programme, which has previously been focused on Farmhouse Inns, will diversify to include lodges, Chef & Brewer and specific formats within the Greene King estate. In addition, we will continue to make a small number of single site acquisitions and opportunistic freehold reversions. The other important element of our strategy is to dispose of non-core pubs. This has been a successful programme to date, having sold 295 pubs over the last three years raising proceeds of £288m at an average multiple of 14x EBITDA. These pubs are mainly tail pubs that we do not believe have a long-term future within Greene King, but are also ‘gold bricks’ where a buyer places a materially higher alternative use value on a pub.
- Manage our finances prudently
We have a long-term track record of generating enough cash, pre-disposals, to cover our debt servicing obligations, our core capex requirements and our attractive dividend. Our balance sheet and cash flow management is aimed at continuing this into the future. As a consequence, we believe a net debt to EBITDA ratio of between 4 and 4.5x is the right range for our predominantly freehold estate and strong cash conversion.