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Brewer will put £40mn annually into refurbishing its UK estate as pub groups regain confidence
Heineken is reopening 62 UK pubs it had closed in recent years and will put about £40mn annually into refurbishing its estate in the latest sign that pub groups are regaining confidence as cost of living pressures ease.
The move by the world’s second-largest brewer, which owns 2,400 pubs in the UK through its Star Pubs and Bars arm, will restore the number of operating outlets in its estate to pre-pandemic levels.
“Now is clearly a significant moment in terms of the resilience of pubs coming back and showing how they can still work very well for consumers up and down the country,” said Lawson Mountstevens, Star Pubs’ managing director.
Heineken, which leases out most of its pubs, has spent more than £200mn maintaining them over the past five years and plans to continue investing at a similar level.
This year it will put £39mn into the reopenings and makeovers across 94 outlets, mainly in suburban areas where more people work from home. The spending will include increasing kitchen space and improving gardens, as outdoor space has become more popular since the pandemic. A total of 612 pubs will benefit from investment.
“I would envision us investing at around those levels for the next four years or so,” Mountstevens said. Continued investment was Heineken’s “massive vote of confidence in the longevity of pubs in the UK”, he added.
Britain’s hostelries have been hard hit by the cost of living crisis; consumers are spending less money in pubs and bars than at any time since Covid lockdowns ended, according to recent research by Deloitte. Beer is one of the consumer goods they have particularly cut back on, FT research recently found.
Rising operating costs and financing challenges have also affected the sector. But the bullishness of Star Pubs is the latest sign that large players in the industry are shifting to the offensive. The pub sector expects improvements in trading and financing this year.
Greene King announced last week that it would invest £40mn in a new brewery in Bury St Edmunds, with plans for this to replace the existing brewery there in 2027. Punch Pubs announced last week that it had acquired 24 pubs from the Milton Three pub group, which fell into administration in November. The deal is believed to be worth about £15mn.
“Consumer confidence is beginning to return, which is reflected in the tentative signs of an uplift in pub sales,” said Emma McClarkin, chief executive of the British Beer and Pub Association, the industry body. “Investors are making big investments into the UK in our sector and confidence in the beer and pub sector for the long-term is strong.”
The UK has 45,300 pubs but 530 of them shut their doors last year, according to the BBPA. The number of closures was higher than even the height of the pandemic in both 2020 and 2021 when the government provided support.
Peel Hunt analyst Douglas Jack warned that borrowing costs still remained high for many private companies but added: “Confidence is improving as real disposable income is growing and interest rates are forecast to fall.”