Following the busy summer months of July and August, the pub and hospitality market approached the autumn/winter with a cautious sense of optimism.
The results of the general election and reduction in interest rates has helped to put more money back into consumers pockets. Along with a summer full of sports events, including Wimbledon, European Championships and the Olympics, we’ve certainly seen people come together.
After the Covid-19 pandemic, the pub and hospitality sector saw a long period of instability. Not to mention the economic impact of Liz Truss and Kwasi Kwarteng’s minibudget – and the subsequent rise in interest rates that brought about a ‘cost of living crisis’ within the UK.
However, the economic outlook is looking more positive as time passes – with inflation falling to 1.7% (as of October 2024) and easing costs for operators. This, paired with a decline in interest rates in October to 4.75%, has helped to put more disposable income back into the pockets of consumers and trigger a ‘return to leisure’. The initial interest rate cuts in August, prompted consumer spending, notably over the August 2024 bank holiday. Market intelligence firm Oxford Partnership showed that 45.3 million pints of draught beer and cider were served over that weekend – a 3.3% growth compared to the equivalent 2023 bank holiday.
Despite the macroeconomic challenges of 2023 and the increase to the national living wage in April 2024 – the ONS highlights that the number of job vacancies has declined between 2021 and 2024, back to pre-pandemic levels.
The hospitality market was further boosted by a ‘summer of sport’ – with the Wimbledon Tennis Championships, Summer Olympics and European Championships bringing increased footfall and revenue to pubs. The England vs Spain final alone contributed an estimated £120 million to the hospitality sector. Data from Barclays (who track 40% of the UK’s credit and debit card transactions) showed that pub transaction volumes more than doubled on the day of England’s semi-final match against the Netherlands. On the day of the final, they increased by 195.6% (compared to the same day in 2023). All in all, the ‘summer of sport’ was definitely a welcome additional summer boost for the sector.
Separately, a change in consumer preferences is helping to drive an increase in sales for soft drinks and low alcohol alternatives. This change is mainly due to the younger generation – as OPUS data shows that 74% of the younger demographic (18-24 year olds) want to pursue a more health conscious lifestyle, as shown by Diageo. The company also owns alcoholic brands such as Baileys, Johnnie Walker and Smirnoff – and revealed that sales of Guinness 0.0% alcohol increased 5% in Great Britain and doubled in Europe over the 12 months from June 2023 to June 2024.
The pub market and hospitality operators have clearly reacted to this change in consumer preferences. In particular, we’ve seen Carlsberg’s £3.3 billion acquisition of Britvic – the company behind many popular soft drinks such as Robinsons Squash and J20. This might be a trend we see more of in the future, as operators seek to reduce cost pressures and improve the bottom line, following on from the difficult trading conditions the sector has faced in the past few years.
As winter approaches, the points above offer a level of growing optimism within the sector. Falling interest rates and inflation, coupled with changes in consumer patterns, are helping to open up new opportunities for operators.