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2026.09.22 | TB | Consumer | Young's Brewery Margins

原标题：Young & Co's Brewery – Sustaining Sector Leading Margins While the £10 a Pint Question Looms

#consumer

Third Bridge · 2026-09-22

Analyst-led • 8 Sep 2026

Companies: YNGA GB, MAB GB

Edmund Passey (EP) Director, Operations at Punch Taverns Ltd (Punch Pubs & Co Ltd)

Alex Smith (AS) — Third Bridge Sector Analyst

Agenda

Key Insights

Introduction

AS [00:00:05]: Before we start today's Interview, please state I agree or I disagree to the following statement: You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during this Interview.

EP [00:00:20]: I understand and agree.

AS [00:00:22]: Thank you very much. Welcome to Third Bridge's Interview entitled Young & Co's Brewery – Sustaining Sector Leading Margins While the £10 a Pint Question Looms. I'm Alex Smith, and I'll be hosting today's Interview. I'm very pleased to have with us today, Mr Ed Passey, Director of Operations at Punch Taverns. Could you please begin with a brief introduction to your background?

EP [00:00:44]: As you say, I've been Operations Director for leased and tenanted with Punch for 11 years, latterly running the south of the country, 470 pubs until last month, I'm now part-time partnership Operations Manager in new role. Prior to that, I've got 25 years fully managed experience in UK and European hospitality operations, trading in multiple countries under various brands, but fully managed until I joined Punch.

Questions

[00:01:18] What are the key trends in the UK's pub industry, focusing on London and the south, given that's more relevant to Young & Co's Brewery's footprint? How do you think those trends could evolve in the next 12 months?

EP [00:01:45]: We should take it as read, but it is worth noting that London is an atypical bubble when it comes to talking about the UK as a whole, followed by Manchester, but then the rest of the country you can talk about. There are clearly regional variations, but London is atypical to the rest of the business. There are well-known and well-discussed headwinds that have been faced in UK hospitality. It has been coming in waves over the past 10 years. Most recently, most notably the last year's budget, the increase in National Minimum Wage, the food inflation and also the business rates changes, which were structural in their calculation and material in their impact. The biggest impact though to any pub operating business has been the changes to pay and the impact on the payroll line for that. London is less exposed to that, is less price-sensitive. There is greater price elasticity of demand in London where all costs are heightened, but higher revenue can be derived for the same products. In terms of overall trends, there is an ongoing polarisation of consumer demand for premium and value, but mid-market is being left stranded.

We are seeing an expansion in value operations and a significant uptake by customers for premium. Basically, the demand for greater value for money and value for money being the ratio between price quality and now experience is becoming more and more apparent. In terms of micro trends, we're seeing a move towards smaller plates and sharing stuff rather than big main meals. A massive amount of the population are now jabbing for weight loss. It's not yet manifesting in results that are declared or published, but when you attend conferences or speak to colleagues, everybody's instinct is this ongoing health trend will have an impact on plate size and food spend. We talk about and we read about gen Z not drinking. Personally, I don't think that's real. They just seek their entertainment differently. They do drink, but they're more prone to zebra striping, which is where you alternate low and no products with real alcoholic products, but they want an experience drink. The drink is part of the experience rather than the sole reason to visit.

[00:05:18] Could you elaborate on your comments around the GLP-1 injections? It's the first time I've heard that in reference to the pub industry.

EP [00:05:37]: It's not so much the injections. It's the movement of the medication GLP from injection to tablet, where everybody anticipates a more significant uptick. I was at a conference last Thursday and listening to many panellist speakers and everybody is talking about this, every session had a question posted about this. It's not an issue, but it's certainly a factor that operators need to consider.

AS [00:06:07]: In that conference, was there any discussion around GLP-1s impacting alcohol consumption in a pub environment?

EP [00:06:17]: Not specifically alcohol, but in terms of consumption full stop and the appetite suppressant, so where people are having a couple of small plates rather than a monster serve, that was discussed. The bigger trend and the growing trend and the growing product choice in low and no products has exploded in the past couple of years and is now mainstream.

[00:06:53] You mentioned premium and value pub segments doing quite well, but mid-market getting left behind. Presumably you're seeing premiumisation from other dining occasions and from consumers trading down into premium pubs. Is that correct?

EP [00:07:31]: You see that. Actually, that's interesting. Specifically with Young's who, when we come to the detail of Young's, and we'll come back to that point, are on the boundary of their food cost and experience, actually crossing over with some decent restaurants. I was out literally two weeks ago in London and one of my friends who lives in Wandsworth and doesn't need to look after his pennies was saying he can, for the cost of a meal in a Young's, go into a pretty good restaurant and have a very good dining experience.

Overall, coming back to the market as a whole, you'll get people that will… The cost of living crisis is real for many, many people. Less so in London, but the cost of living in London is high and the cost of rent is eye-watering. Many people, a massive amount of the potential market, their disposable income is hoovered up in just having a place to live. Their discretionary spend and all hospitality spend is discretionary comes under pressure. You will either then go, "I'm going to treat myself, and I want to make sure I've got the best product and the best experience for my GBP 50 or GBP 100", or "I want to go out because I crave the human contact that hospitality gives at its best" – it's convivial atmosphere and it's a human interaction and we're all herd species. Then you go, "But I need to make my money go further" – you'll go into a more value proposition, which is counter-intuitive when you… We've publicly seen Wetherspoons have profit warnings and they are the vanguard of the value operation, but that's because the margin squeeze is coming through and the cost headwinds. Because they're such a big business, basis-point changes in their operating margins are significant.

[00:09:38] How should we assess the like-for-like sales growth outlook for the pub industry over the next 12-18 months? What might change compared to the last 12-18 months?

EP [00:09:56]: The big one when we think about like-for-like comparables and everybody has got to be cognisant of we're coming out of an amazing summer and a pretty successful World Cup despite the match times not being helpful. Overall, the World Cup was helpful for UK pubs. The World Cup and the summer weather was helpful. Young's had a very good World Cup and exploited their outside areas. I saw two matches at one of their pubs in Ealing, an amazing outside operation, must be 300 people, they were phenomenal. In 46 weeks, we're comping against abnormally good indicators. That would indicate that you're challenging to deliver the same like-for-likes over that period, but normalised for the World Cup and 35-degree dry six weeks, then actually, consumer sentiment is improving. You'll see that on publicly published polling. There is definite vibe uptick within pub operators, which then kicks through to customers. In consumers, we're seeing a bit of a lift and optimism. It's been tagged the Burnham bounce. Suddenly, people are talking about hope and there is a leadership in government, which talks fondly and advocates and is habitual user of pubs themselves. Those things lead to an increasing confidence.

[00:11:40] What benefits do you anticipate in the UK government's upcoming 2026 Autumn Budget? What has been flagged in terms of potential government proposals regarding business rates, alcohol duty, etc?

EP [00:12:16]: Business rates, it's been pre-flagged that there's going to be a root and branch change over and above the changes that have already been announced but yet to manifest. The business rate relief system actually benefits UK hospitality as a whole. Not in a meaningful basis, averages depending on who you speak to, something like GBP 1,000 or maybe GBP 1,500 per pub. The London pubs and where Young's are exposed here is big London properties, high rateable values, they could very well lose rate relief and face higher business rate charges under the existing system. Now we are all hoping that the budget either kicks off or announces and implements a fundamental change to the current business rate system, which is inherently unfair. We're taxing bricks-and-mortar and not warehouses that generate loads of revenue, and we're clearing the high street. There's a real consistent message, whether it's from Burnham as a person or his cabinet or Labour as is, in terms of leadership, to regenerate high streets to bring back community. I was at a panel dinner with Andy Burnham 15-16 years ago in Birmingham, he was telling the same thing. He's done this in Manchester.

If you go all the way back to his roots, he's been consistent in this, wants to bring life to the high street, understands that pubs and hospitalities is the entry-level employment experience for many, many people, including Angela Rayner. Over the past year, we've seen a significant decline in the amount of youth employment that's been generated through hospitality. Operators simply have not been taken on the people they would normally. We're hoping to see a change in there. We know that there's some business rates are coming through that will be generally positive for UK hospitality, but those operators such as Young's who are exposed to high-cost, high-value assets will be impaired by this.

AS [00:14:51]: You said there was a likelihood that Young's or people in southeast London would lose rates relief, but the new government could reverse that. Is that correct?

EP [00:15:14]: No, no, no, sorry. To be clear, on the business rates implementation, it's already been announced. There's a 15% relief for pubs and there's multipliers that are applied depending what your rateable value is on sliding scale. The cash benefit to the highest RV London pubs is excluded. This is why you won't see a unified lobbying from UKHospitality networks. You'll hear Emma McClarkin at the BBPA talking about something different from the guys at UKHospitality because Emma represents pubs full stop. UKHospitality now represents hoteliers, always has done nightclubs. The Ritz-Carltons rateable value, they're excluded from any rate relief whatsoever on the system. Now what we're hearing and hoping for is a fundamental change to the business rates process. All we've got at the minute is a revaluation on the existing system. We are quietly confident there will be a systematic change to the calculation of business rates full stop.

AS [00:16:44]: Is there any way to speculate how that might benefit a single pub? You mentioned current average business rates being GBP 1,000-1,500.

EP [00:16:58]: As a start point, the majority of UK pubs don't turn over enough money and are rural and not urbanised and don't actually pay rates. Then you get into the category of, I'm now doing enough business and my rateable value and I'm paying a percentage of business rates. By the way, it's massively complicated. I have a superficial understanding of this. I've been to presentations by experts and even they are all confused. It's so bloody complicated, which is why the whole system needs a fundamental root and branch change. Frankly, nobody understands it because you go, this is my multiplier, but this is my discount rate, and this applies for 12 months, and then we kick into the next one. Then it's revalued every three years anyway. It's just confusing. Headline, business rates relief improves from April 2026. We're already seeing some of that come through, but only if you benefit from the multipliers. I cannot remember and don't have them written down in my prep what the upper ceiling is. I'll be able to find that though.

AS [00:18:15]: You're saying there is a prospect of a fundamental change to business rates. If that were to take place, it would likely be in the UK pub industry's favour, is that right?

EP [00:18:29]: Yes, it would be big-box retailers and offshore commerce that would be then picking up some of the burden that's currently picked up by high street bricks-and-mortar is the conversations that are being had behind closed doors.

[00:18:45] What else is happening around the UK pub industry in relation to government incentives, whether it's alcohol duty or something else?

EP [00:18:55]: There's a massive campaign that's got 360,000 signatures at last count to change VAT on hospitality, bring us in more line with European. Tim Martin led this, started doing this 15 years ago and had a French VAT champion helping that. Over the past three months, latterly, spearheaded by Tom Kerridge, who's got a massive public profile under the campaign of VAT's The Problem, really making representations to drop on sales, VAT to 10%. There's a disconnect because you can go and buy alcohol in the supermarket, you don't pay VAT. If you buy it in a pub, you do pay VAT. If you buy a ready meal in a supermarket, you don't pay VAT. In a pub, you pay VAT on the sale, but the producer can't claim VAT on the input cost because there's no VAT on raw ingredients. It's punitive.

AS [00:20:00]: Will that make a meaningful difference? Would you expect that to be passed on to the consumer and encourage footfall?

EP [00:20:20]: Caveat that with the 5% VAT on children's meals over this summer, it didn't really materialise apart from the massive change about children's menu pricing changes because the print costs have changed and all that. Most people do a kids-eat-free promotion anyway in some shape or form. If it did drop, let's say if that halved, then absolutely you would see that passed on to customer in a proportion because the customers would know about it, it will be massive news and would demand it. It would not all be passed on because part of this is to mitigate the margin decrease that everybody has seen over the past two years. By the way, this is UK pubs per se, not Young's, they're in a rarefied environment, and this really doesn't apply to them, but getting a 10% VAT benefit would prevent failure in a massive amount of pubs.

[00:21:26] You spoke about the pub industry's margin squeeze over the last couple of years. What incremental headwinds, such as labour, National Insurance, etc, could pubs face over the next 6-12 months vs the last 12 months?

EP [00:21:55]: The big one is the National Living Wage increase. That went from GBP 11.5 to GBP 12.20, but it's going up again. Most London operators already pay way above the National Minimum Wage, National Living Wage. You also then get the cost inflation where for some perverse reason, human psychology means that often, if you're already quite well paid on an hourly rate compared with the most junior staff and the most junior staff get a pay rise, you want to maintain your differential. You think you're entitled to a pay rise, even though you're well above minimum wage. There's the employers' NIC, the rates increase and the threshold is lower. There's 0.75 million more hospitality workers on which employers now have to pay NIC. As we said, the business rates, the relief has gone from 75% to 40%.

Outside of that, the energy shock that we got five years ago now, at the start of the Ukraine war has gone away. Then we're all seeing what the hell is going on with the Strait of Hormuz. It's not just the energy there, it's the impact on ancillary costs such as fertiliser. We're all expecting and reading about food cost inflation because of the drought this year. Crop yields are well down. Add to that, the grain basket of Europe being Ukraine and now there's an active campaign for taking out Ukrainian cargo ships in the Black Sea, which hasn't been part of the past few years, when the supply drops, you have to see an increase in cost.

[00:23:58] Could we see a step-up in the annual inflation rate over the next 12 months? Are we talking mid-single- or high-single-digit inflation on cost of goods?

EP [00:24:19]: Honestly, I'd have to defer to economists that do this for a living rather than I'll just glean it from podcasts and whatever. It is surprising that we haven't seen a material change in inflation. It moves around something of a basis point, but we haven't seen that shock. Even Trump's tariffs, we're all saying they will manifest it at some point, but don't seem to have done so thus far.

AS [00:25:00]: What about pubs' operating cost inflation, whether that's sourcing food, energy, covering the wage increases, etc?

EP [00:25:11]: That is anticipated and baked in and cost will be passed on, whether that's GBP 0.10 per pint, GBP 0.20 per pint. I think you'll see as much shrinkflation a portion size when it comes to the menu and some menu engineering, you'll see more pollack instead of cod. You'll see less specified fish for fish and chips. In the premium side, you'll see menus that clarion or hero the fact they are serving haddock or cod and charge a premium for it or pass the price on, whereas others will just say it's fish and chips won't specify what it is, and they'll be moving into lower-grade product. Most pub operators now simply have to pass on the cost increase because they are, in many circumstances, right on the point of, if we don't do this, we're literally working for nothing.

[00:26:21] You described Young's as having a disproportionate amount of outside space. Has the pub chain been a disproportionate beneficiary from the hot summer weather and the 2026 FIFA World Cup?

EP [00:26:44]: That's my understanding from talking trade, from reading trade press. They've got peer-group-leading operating margins. They run at circa 14%, which is really good. They've got really strong comparables that they've declared about World Cup, which I say they'll be up against next year rather, massive Christmas. Then they've done some really clever acquisitions. The City Pub Group first, which seems to be fully integrated and then the really super premium operations they bought with Cubitt House. They are adding to the aggregated purchasing power of Young's, which then match up their margins on wet and dry. That will clearly help their earnings. The other absolute ace they've got in their hand is over 1,000 prime bedrooms. The keys they operate and the RevPAR they can command in London is fantastic. They have a strong representation in a fast-growing high-margin revenue stream that others don't. Fuller's in their peer group have 20-30 pubs less and today announced that they have just acquired some further pubs that have rooms. Young's are very well-placed in the most buoyant hospitality environment in the country and are in the upper echelons of operators in that environment.

[00:28:31] My understanding is that Young's had a successful Christmas or Q3 FY26. What does the pub chain execute well over this period? Is there any reason why it shouldn't have a disproportionately strong Christmas trading period for FY27?

EP [00:29:04]: They execute extremely well. They are well-versed in the procedures of marketing, of taking bookings, of making… Let me just clarify this – they operate in an environment in London. They're nearly all London, they've clearly got some outliers elsewhere in affluent areas, but it's London-centric. They operate to group bookings and office parties and environments more than most operators. Outside of that, the weekends, they do phenomenal family business. One of my old general managers from a previous life runs one of their most successful pubs. Every year, he declares a record year, a record Christmas, the biggest single day. It's relentless, their improvement. They debrief Christmas operations relentlessly and improve and set up for the next season. They've also got a reputation for delivering. As a guest, when you've gone in and had a good Christmas, you know it's a safe bet next year. I have no access to this data, but I would have a side bet that they see higher rebookings within the first month. "I'm going to rebook for next year." I'd be confident to say they have more rebookings sooner than most other operators.

[00:30:30] On the cost side, you said Young's has peer-group-leading margins. Would you agree that the chain is less exposed to incremental cost pressures over the next year vs the last year? How does it deliver industry-leading margins?

EP [00:31:05]: I think it's because they have really good pubs, really good premises that they maintain well, that they present well. The value perception and the quality of the environment is there and maintained. They don't skimp on maintenance. They also are in the privileged position with the market they're in that they can pass on price. Every time Simon got interviewed, he's asked about the GBP 10 pints. It was even highlighted, I think it was on one of our headers when I joined this call.

Now I was in the Embankment last Friday. Yes, I paid GBP 9 for a pint of Peroni. I only know that because I've forgotten to buy a pint when I bought a round. I've gone and bought a round and tapped and it was like, "That's a lot of money, but whatever." When I went and bought a single pint, it was like, "Good God, how much?" That the same product where I live, which is not far out of town, 30 miles west, you're paying GBP 7.80. It's a GBP 2 premium to local, but they can do that. There is the footfall, there is the demand, and they back it up with well-maintained premises and pretty well-trained staff.

[00:32:25] How could Young's help support its margins in the short term? The chain has benefited from the integration of City Pub, which was much bigger than its acquisition of Cubitt House London Pubs in April 2026. Would Cubitt still reap some synergies?

EP [00:32:56]: I think they will… I'm not sure that they'll be able to renegotiate again on the basis that they've got, was it eight pubs they bought?

AS [00:33:04]: I think it was a component. I think there's one more coming.

EP [00:33:09]: That's not material. However, they will be able to enhance the margins that they've paid for buying the Cubitt businesses. I'll be astounded, it's simply not possible that the Cubitt house operate on a higher margin basis than all of the Young's power and might. Those eight pubs, they will instantly add value from by bringing in and deriving those synergies. In terms of you don't hear about them automating and taking things, you've got order and pay apps, there are QR codes on tables and those sorts of things you see, which helps because it controls labour. I never hear about Young's being understaffed, undermanned and slashing headcount, which I do see in other operators. Some of the big managed operators, it infuriates me that they've clearly taken out labour cost, but what they're not realising is that they're depressing sales. For the sake of GBP 15 per hourly, they could be taking another GBP 200 per hour.

[00:34:27] How might Young's trade over the next 12 months or so? The chain probably had a very good summer, but could it generate reasonably good like-for-like sales growth?

EP [00:34:45]: You'd expect, definitely, positive like-for-likes, probably decelerating, but I would be surprised if they posted like-for-likes less than 4%, could well be 5%. Overall revenue, what's that going to grow? 5%, 7%, 8% maybe.

AS [00:35:05]: Will price be a large component of that?

EP [00:35:08]: I think that's with everybody. There will be price, yes, absolutely. What's the proportion of price vs footfall? I think in London, there's going to be a stronger move to working from desk rather than working from home. It is fascinating. You've seen this yourself – Thursday nights now are the Friday nights that were six years ago. Friday, 16:00 in the city is really, really odd. I think there's going to be more push to get people back to work. That said, the city as a whole in London is becoming busier at the weekend. Canary Wharf is as busy now on a Saturday and Sunday as it is on a Tuesday and Wednesday. They will benefit, they are well-placed to exploit tourism. There's fewer people going to the states, a lot of people that used to go to the states and the Canadians that are boycotting the states will come to London. They've got high-value rooms, cost a lot, bundled food and drink packages. I think their RevPAR will go up. They've declared over GBP 80 RevPAR, which is pretty strong. You could see that grow into near GBP 90. By the way, you're going to say what's the downside, they are exposed as every London operator is, if there are tube strikes, it really does hurt. That seems to have gone away. Industrial disputes seem to be less and you'd like to think that the unions and the current government will be in less conflict. If there were major tube strikes next year, that would affect Young's, Fullers, Wetherspoons, everybody that operates because it's massive. When the troops don't run, you see it in London tills.

[00:37:19] You've spoken favourably about Young's estate. What makes it so strong, whether it's maintenance or picking the right locations?

EP [00:37:52]: Start, it's mainly freehold. Interestingly, the Cubitt house are all long leaseholds. It's mainly a freehold estate, which is really strong on the balance sheet, but also means you're putting your money into your own bricks-and-mortar. Young's has always had a long view. The family name is still above the door. They do reinvest, they maintain their business. They've got good operational standards. It's very rare that you'll see a Young's pub looking tatty. The kerb appeal, the external signage, the cleanness, the floral decorations, they're all attractive. They all draw customers in. When you're walking down the street and you're given the choice between pubs A, B and C, they are prime to attract people.

AS [00:38:56]: Would Young's spend more than Mitchell & Butlers on its premium Castle brand pub estate? Are the two fairly similar?

EP [00:39:11]: Interesting question. I couldn't give you data points, but I would say from my experience of visiting Castle pubs, and I, in my past, visited many Castle pubs and Young's Pubs, I think Young's Pubs are better-maintained. They've either got an operator that cares more and looks after the little things and remedies before they become big things, or they are less concerned about the in-year revenue cost and more concerned about the medium-term look and feel and attractiveness of the business. I think generally, Young's Pubs are better-appointed than Castle pubs.

I actually think Nicholson's present better than Castle within M&B. Castle has always been the unbranded brand within M&B, bit shooty, a bit Boho, a bit edgy sometimes. To the detriment, I used to go to the Mornington Crescent at Camden, frankly, it was grotty. Now there's been a change in leadership there over the past two years, and they're well-regarded. If you stepped out now and you went to a Nicholson's, I'll guarantee you it would have polished brass, it would have clean windows. It would be really attractive looking, whereas I couldn't guarantee that with a Castle.

[00:40:44] What are your thoughts on the location of Young's pubs, especially specific locations beyond southeast London? Has the chain done a good job of picking the right properties?

EP [00:41:07]: They acquire great sites. They're opportunistic. They're not on an expansionary, "We've got to buy a load of pubs just for the sake of it." Generally, their locations and their assets are very good. They also divest. Some years ago, they sold a chunk of pubs and reinvested in their existing estate and premium stuff. When they sold the brewery in Wandsworth and their flagship was spread equal, they spent millions on it. Even out of town, they've got some bizarre outliers, like in Devon and Cornwall. There is a lovely story that it's because John Young used to go down there and he likely wanted pubs that you can drink in that were his down there. Basically, where he went on holiday, there's a Young's pub. I don't know if that's true or a bit apocryphal, but it's a lovely story. They've got great addresses.

[00:42:05] Are there any weaknesses in Young's current estate?

EP [00:42:16]: The inherent risk is because they're in high-value locations, they will be paying a lot in rates. The multiplier, you're really between GBP 51,000 and GBP 0.5m, you're in standard rates, you're paying full business rates, whereas you get small business multiplier, under GBP 51,000. I can't imagine there's any Young's Pubs that are under GBP 51,000 rateable value. Then you go from 75% to 40% relief where you're getting relief and you don't get relief over GBP 51,000. They're paying full fat.

[00:42:53] Should we be worried about the longer-term outlook of the property market, or do you think London pubs will always command the same value?

EP [00:43:01]: Most of those, they have freehold.

AS [00:43:08]: That's what I mean, if people look at the value of the properties on the balance sheet.

EP [00:43:11]: No, look out your window now, how many cranes are going on? There's always a demand for London properties. If you've got a pub in London that really, really isn't working as a pub, you could probably sell it to a house for GBP 0.5m.

[00:43:33] You talked about Young's being selective, it doesn't chase every pub estate for the sake of growth. Where do you see the chain's expansion strategy evolving? Are the acquisitions of City and Cubitt indicative of its expansion plans, if there is anything left to buy?

EP [00:43:55]: There always is because every owner of a small chain wants to exit at some point. Their published records says they have an acquisition strategy and it is on track. Whether they do deals for another 12 pubs, 50 pubs or whether they pick up some prime assets from the Stonegate platinum portfolio that everybody is sniffing around, a lot of which is in London, who knows. They will definitely, in my view, carry on buying, but on a… I'm just trying to think of the adjective – they will be picky. That's not the adjective I was looking for – selective.

[00:44:39] You could argue that City and Cubitt were more premium than Young's legacy estate. Could the chain buy less upmarket estates, but then transform those?

EP [00:45:08]: I don't think that's their MO. Let's say they've got an acquisition strategy, but don't publish what it is. I think they are buying businesses that up the average asset value rather than other pub companies who will look at pubs that are on their knees, "We can invest and we can make them better." I think they are confident that if they buy a cash cow and a significant proportion of London pubs are cash cows because they're busy, but they can then add them in, improve them, invest capital where needed because they're not shy of spending money, but they spend it well, and they will be looking to buy more hotels and pubs with rooms. When I say hotels, I don't mean a hotel. I mean London pubs that used to be in hotels where they can get one dozen rooms and charge GBP 110 per night. I think they will continue to buy premium operations, and I wouldn't be surprised to see them buy some small groups.

It's because they've done it now twice on group. They are confident that they can plug and play. They can integrate. City Pubs, what was that 18 months, two years ago, time flies. Fully integrated. I don't think they're going to break sweat integrating eight pubs that they've just bought because they've got the playbook and know how it works.

[00:46:45] How has Young's like-for-like sales growth strategy changed? To what extent might it differ from the strategies used by Fuller's, Mitchells & Butlers and Castle?

EP [00:47:07]: Honestly, I'm not close enough to that to give loads of insight. I don't see any of the people you've mentioned are doing things radically different. They pass on price to protect margin. I don't see any of them. None of them are known for deep discounting. None of them are known for doing value offers. They offer a product and are confident that they can command the price, which is why I say I think one potential downside is your dining guests. Food is a significant part of their income, isn't it? The anecdotal comments of, "I can go to a decent restaurant now and pay for dinner what I'm now paying in a Young's Pub." That's a different occasion. You could lose some spend back to restaurants ironically because you're passing so much price on.

[00:48:08] Are the daily pub-level economics of Young's estate different from those of Fuller's or Castle? If not, how could that differ from the national average?

EP [00:48:50]: I think they will be very, very comparable to Fuller's. If you've got a pub P&L from a Fuller's pub and a pub P&L from a Young's pub and blank them out, I think you would be hard-pushed to say, "That's Young's and that's Fuller's." I think actually, Castle probably operate with higher margins because they've got the entire M&B buying resource behind them. It's a massive business. Even though it's compartmentalised into different trading entities and brands and whatever, you can go to the market and command lower cost prices when you're buying for M&B. I don't see a massive difference. If it was match sailing, I think Fuller's and Young's are on the same tack. They're both excellent operators led by amazing people, whether it's Simon or… Both Simons, ironically. They're proud of what they do, and they've got the name above the door.

[00:49:51] How does food continue to evolve in premium pubs, either as a concept or a percentage of sales and profits?

EP [00:50:08]: This is where we look back to what the impact is GLP-1 is going to have, pills and jabs, because the logical inference if people's appetites are suppressed, they are going to eat less. It's either going to be they're going to eat less frequently or they're going to have smaller plates. You'll be hard pushed to charge for a half-sized portion next year, the same you're doing for a full price portion now. Even if you maintain your margins, your revenue is going to decline. You're going to have to replace it with other occasions or get innovative. I think we're going to see more share of plates and smaller plates and picky stuff. You see that it's not just in London. We're seeing that elsewhere. Don't get me wrong, any pub in the land, the biggest sellers are still a cheeseburger or fish and chips. If you're in the right sector, it will be lasagna. It doesn't matter where you are, the burgers will be the sellers. You'll see the burger patties shrink somewhat. It will go from a 4oz to 3.5oz or something, or they'll switch the weight to grams and make it sound bigger.

AS [00:51:17]: But this can't be bad for food margins for the pub.

EP [00:51:21]: No, no, no. I'm saying if you maintain your margins, but the revenue, cash in till…

AS [00:51:27]: Could it not even enhance your margin?

EP [00:51:29]: Absolutely, quite potentially. Then the CFOs, are you looking at are you looking at 68% on GBP 100,000? Are you looking at 65% on GBP 70,000, which that's the wrong way around? You don't want to grow your margins at the expense of your overall revenue and your overall operating profit. You go back to the '80s where you're on the curve to say, "That's okay. I'll sell one pint a year, but it will be GBP 1m." There's a tipping point, and that comes back to the price elasticity. You've got to have the right amount of labour deployment, to have the right amount of bodies in the pub that generate the atmosphere that we all go to pubs to crave and the reason you go to a pub is for the bustle and the conviviality rather than the hush dining room of a fine restaurant. You've got to have volume to maintain that. Nobody goes to a quiet pub. You don't do you? You don't. You and your colleagues won't go to the one that you know you can absolutely guarantee to sit in because it's dead. You go to the one that's got some energy and life in it. If you pass on so much price that you have fewer people in there, you're losing part of the intangible that makes a pub the magic it is.

[00:53:04] You mentioned the accommodation strategy called Young's Rooms. How big of a game-changer is that?

EP [00:53:26]: I think it's genius that they're exploiting that. It's definitely a growth engine. In a previous life, in a previous business, I ran a significant accommodation business, it's a different model. We have multi-occupancy backpackers in that, but in tourist locations, and we did well because we were in the right places in London. Young's are in the right places in London, as indeed are Fuller's. Both groups have got 1,000-and-something keys. That was going to be a significant growth area for them, I think, because if you think about actual cash takings, cash sales, putting GBP 5 on the room, that's like selling an extra pint. The people that are booking rooms aren't blinking at a price inflation on a room necessarily. When you look at Google, which everybody does these days, even if they just say, "Hey, Siri, where is a good place to stay?" Siri or whatever bot you use does all of the searching, the Young's Rooms rate well online. The Young's Pubs rate well online. You can hide price inflation in a room way more than you can put it on a pint, to spread the cost on a pint. When you then get the opportunity to bundle that within a bed and breakfast or occasions or whatever, I think it's going to be statement. UK hospitality operators that have a room revenue stream will be better-placed for growth and survival than those that don't.

[00:55:23] Would there be enough customers or consumers who choose to stay in a pub? Accommodation above a pub wouldn't be everybody's choice, presumably.

EP [00:55:35]: No, no, it wouldn't be everybody's choice. If you want room service and four-star, five-star, you're going to go to the Crowne Plaza, you're going to go to any of the multitude, let alone the boutiques and the Airbnbs. Actually, if you're a tourist and you're coming to London and part of the experience is an English pub, which is English pubs and Irish pubs, everywhere else in the world has bars. We've got pubs, there's a difference. It's what's popularised in the movies that everybody over the planet watches. They want to come to those pubs. They want to go to Borough Market, they want to go to The Wheatsheaf, they want to go to The Churchill, they want to go to The George in Borough. They want to see these places because it's living history. They've seen it, they've seen it in the movies and they want to be there themselves. The fact that you can then stay there and the quality of the rooms is really good now. Young's rooms are a pleasure to stay in.

AS [00:56:37]: Why has Young's been the most proactive with the strategy?

EP [00:56:45]: I think they latched on to it sooner than most and have driven hard on it. They also had legacy buildings. Their historical estate has been in family ownership for ages, were coaching inns, they have rooms. Often, these rooms are dormant, they're on upper floors, and they've really regenerated invested capital in them.

[00:57:05] You said Young's is quite selective when making acquisitions. The pub chain set a medium-term target of expanding its estate to 350 pubs – it currently has about 280. Is that achievable?

EP [00:57:22]: How many pubs did they buy at City Pub Group? All they need is two small group acquisitions and they made it, let alone the individual ones. It's eminently achievable.

AS [00:57:35]: We've been speaking for an hour, so we should wrap up the Interview. Thank you very much.

EP [00:57:52]: Likewise. It's been interesting. I hope it's been useful.

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