The Pub Supply Chain: A year of knock-backs

Pub supply chain
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It is difficult to imagine now, the speed at which our lives changed almost a year ago when coronavirus started to take hold. The journey from limited restrictions to lockdown – and back and back again – has been a rollercoaster no one in the industry would want to experience again. As part of Bacta’s divisional perspectives, Steph Norbury speaks to Inspired’s Peter Davies and Dransfied’s Chris Haley about the impact the past year has had on the pub supply chain.

 

“In March 2020, we were busy integrating the Pub and Leisure operating businesses into the Inspired organisation,” remembers Peter Davies, managing director at Inspired Entertainment Inc.

“After a successful FY19, we were building on momentum, exceeding revenue and profit targets. The pandemic changed everything. The first national lockdown forced us to furlough most of our Leisure workers, leaving a skeleton crew to manage through the crisis. With no certain end to the lockdown, cash preservation was key. Our remaining management team worked closely with our most important suppliers on cost-saving and payment plan arrangements. Everyone in the supply chain pulled together, which put us in a healthy position when we got the green light to reopen in July.”

Chris Haley, managing director of Dransfields, was on a well-earned holiday when the first lockdown hit. “I was in South Africa at the time on holiday, so I was trying to handle everything via e-mail and conference calls,” he says. “I landed back on the Saturday as all my staff were frantically trying to get round to all of our customers, to do final collections and secure machines because we didn’t know how long it was going to last. We had everyone out there collecting and banking the money and they did an amazing job. It was the best we could have done in the limited timeframe.”

Of course, there followed the first lockdown – the UK baked in the sunshine and the industry missed what would have been an excellent Easter trade. However, with furlough, for the pub supply chain as it was for many other businesses, it was a case of sitting it out.

“There was very little we could do,” adds Haley. “I was holding weekly calls with my management, keeping up morale and communicating what was going on in the industry.”

Communication was also a top priority for the team at Inspired. “From day one of the first lockdown, I have chaired a daily call with the management team, and this regular cadence has been critical,” noted Davies. “Bacta has been very helpful, through John White, James Miller and the divisional and regional chairs, in gathering, disseminating and communicating the many changes announced by government. Timely information from Bacta and other trade bodies empowered us to respond quickly to these changes.”

 


Peter Davies Inspired Entertainment Inc

Peter Davies Inspired Entertainment IncCoping with illogical logistics

“As a national operator, our biggest challenge has been coping with the marked differences in approaches among the English, Scottish and Welsh governments. Add the regionalisation of tiers … and it has been extremely difficult to structure the business. Logistics, service and cash collection teams … is hard when we literally have pubs closed on one side of a street and open on the other.”

Charged without evidence

“I and many others have examined the government’s justifications for singling out hospitality and leisure venues, and we see no evidence.”


 

The real problems seemed to start with re-opening, which both parties agreed was handled badly by Government.

For Chris Haley, there was the next rush to get to the machines which were sitting on site and prepare them for operation again.

“Once more, it was quite frantic to get down to all those machines that had been stood empty, they needed to be re-floated and a lot of equipment which had been sat there for three months needed attention – batteries had failed and so on. So, we had a lot of maintenance work to do in a short period of time to get ready for reopening,” he explained.

“Rapid communication and decision-making have been essential,” according to Peter Davies. “We’ve been rolling with the punches since then. During that brief period when we were able to trade with just social distancing and hygiene regimes in place, Cat C income recovered well. Gaming and entertainment are typically resilient income streams and pub visitors enjoy playing traditional pub games. The main issue was that hygiene measures did have an effect as space became premium and machines were removed or pushed to one side, especially in venues with pool and children’s games.”

Then came August’s Eat Out to Help Out scheme, which Chris Haley believes was potentially a mistake on the part of Government, then followed by the kids going back to school.

“At the same time, we’ve got the devolved administrations, so we are trying to handle three different sets of rules,” he reflected. “We don’t operate in Northern Ireland, but we do in Scotland and Wales. On top of that, we have the tier systems. So, my depot in the North West is suddenly pretty much closed, because North Wales shuts down. Then the West follows and parts of Yorkshire, but I am still having to maintain a head office function to service the rest of the country that is still open.”

Peter Davies is in full agreement: this was the most difficult time to manage the business.

“As a national operator, our biggest challenge has been coping with the marked differences in approaches among the English, Scottish and Welsh governments. Add the regionalisation of tiers to those variations, and it has been extremely difficult to structure the business. Logistics, service and cash collection teams work across county and national borders, and resource planning is hard when we literally have pubs closed on one side of a street and open on the other.”

A phenomenal amount of time was also spent by pub suppliers simply trying to find out if venues were open or closed during this period, meaning that rents would be payable. “Even though I ask the customers to let us know when they’ll be open, they don’t necessarily do so. They’ve got so many things to think about when they’re re-opening, This was incredibly difficult,” says Haley. “We were contacting thousands of free trade customers that we hoped might be opening to try to find out. We were even looking at their Facebook pages – a costly and time-consuming process. Also, lots of customers had cancelled their direct debits after lockdown because they didn’t know what was going to happen – so they needed to be set up again. More admin!”

Throughout this period, the pub sector felt increasingly frustrated that it was being partly blamed for the second wave of the virus. “The industry had introduced so many measures to provide a safe experience for customers, so it was very unfair,” stated Haley. “Government wouldn’t publish the evidence to back up the claims that hospitality was in any way responsible. Everything I read showed that the incidents of infection were low in number and that it was primarily retail, household settings and schools that drove up the numbers again. It felt as though the Government wanted to be seen to be doing something rather than basing their decisions on evidence.”

This chimes with Peter Davies as well. “The most unhelpful aspect of the Government’s approach has been the unfair targeting of leisure and hospitality as businesses that either have the strictest requirements for reopening, or cannot open at all,” he says.

“I and many others have examined the government’s justifications for singling out hospitality and leisure venues, and we see no evidence. The argument seems based on what could happen rather than on what has happened, or is happening. With strict social distancing, regular hygiene regimes, track and trace and limitations on numbers in place, are we really more likely to be exposed to Covid-19 by visiting the pub than our local supermarket or from our kids being in school or college?”

 


Chris Haley Dransfields

Chris Haley DransfieldsThe supply chain conundrum

“The government have been quite clever in the language that they have used. They have used phrases like – ‘where your business is required to close’. So, if your venue has been required to close by law, it is eligible for help. We are not required to close, but we are closed because we have no customers that are open.”

Going backwards

“I’ve had to make 11 percent of my workforce redundant, which never had to happen. I have spent 24 years building up the business, so to see it just go backwards is just heart breaking.”


 

By the end of the year, before the third lockdown came into force, the damage of months of opening and closing and the limitations brought about by added hygiene measures and the hugely unpopular curfew took their inevitable toll on the pub supply chain.

“I’ve had to make 11 percent of my workforce redundant, which never had to happen,” reported Haley. “I have spent 24 years building up the business, so to see it just go backwards is just heart-breaking. We try not to withdraw our machines from site because we don’t want to lose the position but customers were looking to increase space for COVID distancing; it remains difficult . Where the machines are not in use, we have zero income. That translates into several million pounds a month in turnover that we are losing. And – it’s the cursory way we find out about these new rules from Governments that are having such an effect on our businesses, that’s so hard to take.”

“We have worked hard to keep job losses to a minimum, but sadly redundancies have been inevitable even with the job support scheme,” says Peter. Davies “We keep costs under close review and we may have to make tough and unwelcome decisions in the months ahead. Job losses are always the last resort. Our primary aim is to ensure the business comes out of this unprecedented period as healthy as possible. We will remain resilient and well-placed to help our customers and retail partners come out of this into a strong recovery. Leisure machine revenue will be more important to recovering businesses in 2021 than ever before.”

However, Haley fears it will be too little too late for many smaller businesses. “There was a landscape before this even happened where smaller independent operators were already finding it difficult to trade in the UK. Some were already considering trying to get out of the business. I imagine now that we are going to lose these operators as a result of this. They may struggle to sell – because how can you value a business when you don’t know what customers are going to be there at the end of this?”

Throughout all of this, there has been support for the hospitality businesses themselves that have had to close – but a similar courtesy has not been extended to the businesses supplying the pubs, as Chris Haley explains. “The government have been quite clever in the language that they have used. They have used phrases like – ‘where your business is required to close’. So, if your venue has been required to close by law, it is eligible for help. We are not required to close, but we are closed because we have no customers that are open”

“I think the most helpful initiative is the Job Support Scheme (and the various names it’s been given), which has certainly protected against permanent business closures and prevented mass unemployment in the sector,” says Peter Davies. “The extension of this scheme to April was welcome but means that we’ll soon be approaching another cliff edge.

“Without furlough it would be impossible. The majority of my account managers have been furloughed since March and are likely to remain on furlough until hospitality re-opens,” says Haley. Since the latest lockdown was introduced all employees are now furloughed.

Which leads us to the situation we are in today. “The success of the mass testing and vaccination programme will determine what happens next,” says Davies. “Pubs and leisure venues should be able to open safely and provide supervised Covid-secure environments for customers who clearly want them. We need pubs and leisure venues open again, as they were over the summer.”

As for the future – what can the pub supply chain do to protect itself should a similar situation unfold – god forbid. For Peter Davies; the answer lies in investing in technology – an option not available to every company, particularly those battered by recent events.

“Certainly 2020 has provided time to reflect on strategic initiatives that can improve our products and services,” he says. “Inspired is a pioneer in server-based gaming and we have invested heavily in digitising the pub estate, so we are ahead of the curve in this regard. Instant access to revenue and game play data together with remote content refresh and machine diagnostics will drive further improvements to the services we can provide our customers. Digital payment methods allowing customers to pay for games without using cash will become increasingly necessary as well. Further to this, providing our retail customers secure access to their own cash without having to rely on a scheduled cash collection visit will also provide cashflow benefits to publicans. Suitable technology is the driver to all of this and is a key focus for us.”


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