Pub operators may ditch food sales to hold on to smokers

The smoking-ban exemption for pubs not serving food looks set to backfire as some operators contemplate ditching their menus to allow smoking in their bars.

The exemption, announced last week in the Government's Choosing Health White Paper, is designed to help protect the pub industry from the full economic force of a smoking ban, due by the end of 2008. But pub industry leaders fear officials have overestimated the importance of food, which typically has profit margins one-third those of wet sales.

Nick Bish, chief executive of the Association of Licensed Multiple Retailers, said: "Ten or twenty thousand pubs who have a modest or recently introduced food business will have to decide whether to give it up and become specialist drinks-only bars if the White Paper becomes law."

Simon Ward, retail director at Mitchells & Butlers (M&B), added: "While food-sale take averages 30% of turnover across our estate, we have hundreds of pubs that might achieve only 10%. Interestingly, the Government seems to have recognised the possibility that pubs may drop food in favour of smokers, but the way they have then discounted this happening is fatuous."

The White Paper was also criticised by Mark Jones, chief executive of Yates Group. "I think the loopholes around food are ridiculous; it puts pub catering back 20 years. Also, if another operator on the high street is failing to compete with us on food, they can now go smoking-only and poach customers."

Both Ward and Jones believe there is now a business case to take certain underperforming food pubs smoking-only. M&B are likely to assess the performance of a third of their 2,000 pubs, while 10% of Yates's 151 bars could potentially make the switch.

A spokeswoman for the Laurel Pub Company, which has 177 pubs, confirmed it expected to look at a third of its estate to decide if ditching food would protect sales. "We think that going back to drinking-only at venues is a retrograde step. Also, if the Government changes its mind in the future and opts for a complete ban, all those pubs that have repositioned or maintained their status as wet-led businesses will be in trouble."

Adam Collett, marketing director at Greene King Pub Company, sees an opportunity, but he admits the company would probably reassess food sales performance at about 15% of its 750 pubs. "Pubs change to reflect society. It will be a hard pill to swallow for many, but an opportunity for others. It's our job to attract more of the 70% of the adult population that only visit a pub once a month. I think going smoke-free will help us do this."

Pub company Fuller's said it would probably look at the business case for food over smoking at 10% of its 231-strong estate.

• In a new report, accountancy firm BDO Stoy Hayward has predicted a smoking ban would cost the industry in England and Wales 32,000 jobs and £230m in profits.

Number of pubs that could cut food sales to permit smoking

660
Mitchells & Butlers
(33% of 2,000 pubs)

112
Green King
(15% of 750 pubs)

39
Laurel
(33% of 117 pubs)

15
Yates Group
(10% of 151 pubs)

12
Fullers
(10% of 115 pubs)

Source: Caterer & Hotelkeeper magazine, 25 November 2004