M&B pursues food focus

Mitchells & Butlers is shifting its focus to become a more food-led business, following a thorough strategy review during the first quarter of 2010.

The news follows a tumultuous start to the year for the pub group, which saw an aggressive overhaul of its board led by major shareholder Joe Lewis.

The main conclusion of the review will see M&B speed up its withdrawal from the more price sensitive drinks-led business as it seeks to improve net operating margins and achieve a better return on capital expenditure. Major drink-led brands within the M&B portfolio include All Bar One and O’Neills.

The group, which currently operates over 900 pubs and restaurants across the UK, will now seek to sharpen its focus on a smaller portfolio of brands.

This will see expansion within its food-led, mid-market brands, with plans to develop smaller high street variants of Harvester and Toby Carvery.

Future acquisitions will see M&B targeting high traffic locations such as leisure and retail parks. The group hopes this will enable it to achieve the aim for each of its brands to grow to over 100 outlets or deliver earnings before interest and tax of more than £10 million in order to offer an acceptable return on investment.

As a result of the review, M&B will also seek to reverse the gross margin erosion of the past three years by recovering this from suppliers, as well as pricing and menu engineering. The group calculates that these steps will deliver an extra £30m by 2014.

John Lovering, who took over in January as chairman of M&B, offered a confident vision of the company’s future, saying: "I am delighted with the cohesion and effectiveness of the new board which has quickly concluded on a highly attractive growth plan for the business.

“We are already implementing the plans with targets being cascaded through the business.”

The M&B share price leaped by nearly 5% following the announcement.

Gabriel Savage, 30.03.2010