The four largest pub companies in the UK are expected to hold a combined market share of 25.5% in 2019, a new study suggests.
JD Wetherspoon is top of the pile, with an anticipated 8.8% share of the market, followed by Mitchells & Butlers with 7.3%.
Greene King (5.8%) and Stonegate Pub Company (3.6%) sit just behind, although Stonegate’s share does not take into account the fact that it recently struck a deal to take over 4,000 Ei Pubs.
The figures are revealed in a new hospitality report by accountancy firm Gerald Edelman, which also demonstrates the dramatic level of M&A activity that has occurred in the pub and bar sector since the start of last year.
“The prospect of strong returns from high quality managed pubs and bars presents an attractive opportunity for investors. This opportunity, alongside a wave of consolidation from existing firms within the sector, such as Greene King and Stonegate Pub Company, has helped fuel a surge in M&A activity,” the report explained.
Two of the largest ever pub and bar transactions have been announced in the last few months. Hong Kong-based CKA announced plans to acquire Greene King and its 2,700 pubs for £2.7 billion in August 2019, and Stonegate Pubs agreed to buy rival Ei Group, the UK’s largest pub operator, formally known as Enterprise Inns, for £1.3 billion in July 2019.
The past five years has seen the level of consolidation increase, with Greene King acquiring Spirit Pub Company in June 2015 and Mitchells & Butlers acquiring a significant number of establishments from the Orchid Group.
Stonegate Pub Company has also expanded rapidly in recent years, acquiring 48 establishments from Be At One and Novus Leisure in July 2018.
“With Brexit uncertainty driving lower domestic consumer spending within the UK, share prices for pubs and bars have fallen since the 2016 referendum. However, the industry has remained attractive, playing a prominent role in M&A. This has stemmed from an appetite for growth by existing businesses in the sector, and a strong private equity (PE) interest, with lower share prices creating a ’Brexit bargain’ for investors,” continued the report.
The PE interest in the sector, alongside the strategic consolidation, was evidenced by Simmons Bars being acquired by Lonsdale Capital to enhance its roll out and growth.
Investment activity has mainly focused on established chains, which grants more opportunities to strengthen market share, and less exposure to industry headwinds and Brexit when compared to smaller independents.