The off-trade is catching up

30 May, 2008

Q

Would you say more lager is sold these days in the take-home market or

the on-trade?

A The on-trade still has the edge, but the moment is not too far off when the off-trade actually overtakes it, at least in volume terms.

According to the latest Nielsen figures, the on-trade shifted 1.8 billion litres of lager in the year to Feb 23, compared to the off-trade's 1.6 billion litres. Off-trade volumes were up, albeit by a modest 1%, while the on-trade slumped by 7%.

The more usual measure of sales is not by volume but by sales value, and it's here that a real gulf emerges. On-trade lager sales are currently worth just under £8 billion, compared to £2.8 billion in the off-trade. This of course reflects the higher cost base faced in the pub trade compared to the relatively efficient off-trade model.

To save you doing the maths: the average 50cl can of lager in the off-trade works out at something like 85p, using the Nielsen data, while the equivalent measure in the on-trade comes to £2.27.

Q I am facing a rent review after three years in my current premises. Although the area was not quite as nice as I'd been hoping for, I was persuaded by a generous offer of a year rent-free. Since then many shops in the area have closed, the area has become less lucrative

and I was hoping for a small rent increase or even a freeze. My landlord is asking for an exorbitant increase. What bargaining power have I got?

A The knee-jerk reaction would be to walk away and find alternative premises, but this can be immensely disruptive and of course there is no guarantee you would find something better at a price you could afford. Your first course of action should be a calm, formal meeting with your landlord - bring along evidence of the general downturn in the area, and also your most recent accounts, if they back up your argument that business is slowing.

It may be that you have to agree on an independent arbitrator - usually a chartered surveyor with a knowledge of local rent levels - to examine the case and recommend a compromise.

Bear in mind, though, that this could be an expensive process - you could pay as much as £1,000 for the surveyor's services,

but in the scheme of things it could be money well spent. The fee would normally be shared between you and your landlord.

When doing your calculations, you should take into account your "free year" of rent. In other words, your actual annual rent is not technically what you've been paying, but two -thirds of that figure. This could have a bearing on the final settlement, and may well make your landlord's new demands seem even more unreasonable.




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