Paul Clancy — pubs need profitability

The Vintners Federation of Ireland's new Chief Executive has had a right baptism of fire: coming aboard the organisation in the middle of a global pandemic that saw pubs closed for the best part of 22 months only to witness a second body-blow in the form of astronomical rises in the cost of electricity and commodities.

Paul Clancy assumed the Chief Executive’s role last May, taking over from Padraig Cribben who stepped down after 15 years at the helm.

Paul qualified as an engineer and prior to joining the VFI worked as Chief Executive for Derry Chamber of Commerce.

“Lockdown was a massive challenge for the trade” he says, “but the good news was that there was both Government and supplier support for the trade and since reopening there’s been good bounceback.

“Draught sales are up: people miss the community vibe around the pub.”

Despite this baptism of fire, however, his priorities remain clear at this point: to rebuild the trade back to pre-Covid 19 levels and to promote sustainability for the pub trade.

“That’s no easy challenge” he points out, “particularly in light of energy costs etc.”

He lists out other challenges.

“One priority is to increase footfall, to encourage people into the pub and spend time there.”

Another priority is to revitalise the organisation itself.

“Lots of good things are going on in the 25 counties that I’m responsible for,” he says, “It’s about sharing the good things some pubs have done with other members. It’s about the revitalisation of the organisation itself and its 3,500 members – to get those good news stories out there and to ultimately improve the profitability of our members’ businesses and make them sustainable.”

The trade has indeed got some help from the Government on energy costs latterly but the opportunity is there for the Minister for Finance to review those supports in time.

“We want to be sure that when consumers have the ability to spend they’ll do so in their locals.

“We need to get supports from the Government to help us survive through the Winter period.”

Could the government do more?

He doesn’t hesitate.

“It would be great to have a Government Minister for Tourism and Hospitality that would provide a focus on what’s a critical sector employing 250,000 prior to Covid. What I’d like to see is a Minister dedicated to such an integral part of the economy, to give it the focus it deserves.”

Input cost rises

Commodity costs now need to be monitored by publicans everywhere.

“The rise of input costs has been astronomical,” he remarks, “What publicans have done is to alter their offering to make themselves more competitive in the marketplace. We certainly can’t push these cost increases onto the consumer or we’ll drive them away, so energy supports are helping balance this kind of increase. It’s about getting the balance right and making pubs sustainable.

“There’s a growing awareness that the current energy supports won’t be sufficient to save many pubs who’re already struggling. In some cases, the supports will merely delay closure.”

Customer affordability

With any cost-of-living increase – let alone the present skyrocketing one – sooner or later ‘customer affordability’ becomes an issue with sensationalist reports of €12 a pint and €60 a steak doing the rounds in the consumer press.

“That’s not going to happen in the pub,’ he states firmly, “Publicans won’t stick with that or the pubs would soon close. We need to keep it as competitive as we possibly can.

“Publicans are keeping their pints around €4.60 to €5.20 (depending on where they’re being sold) in order to encourage consumers into the pub.”

Pubs need profitability

 

The prospect of publicans keeping reduced margins is simply unfeasible.

There’s not a lot of margin to play with at present.

“Margins at the moment are in single digits,” points out Paul, “And if they were to absorb these new costs they’d be making a loss so that wouldn’t be sustainable. Pubs need profitability. It’s true to say that publicans are taking a hit on their margins to get them through this period in order to stay open but this cannot be sustained.

“At the minute we’re still experiencing the benefit of the bounceback after Covid where people want to go out and have a treat after a hard week’s work. I don’t think that’s going to change any time soon.

“But come January people may have to make decisions and we’re looking at how we can keep competitive and encourage people into the pub in Q1 of 2023.”

And this is where the Government can help.

Government opportunities

There are certain things the Government can do such as keeping the 9% VAT rate beyond February, he believes.

“This will keep inflation down and for the 50% of our members who do food this would be important.”

He also believes that the failure to reduce excise rates was an opportunity missed but feels that there’s still an opportunity to do something here.

“Pubs are an integral part of this tourist experience and so it’s important that they’re sustainable.

“From now to Christmas the feeling is that there’s still that pent-up demand there. Certain parts of Ireland will be a challenge but after that we’re very concerned about early ’23.

“It’s about disposable income. We’ll depend on a lot of the communities coming out in the Winter when the tourist just isn’t there. It’s not just all about alcohol either – the pub is the community hub.. It’s about the experience.”

Lifestyle change

Are we seeing an acceleration in Lifestyle change towards more  entertaining at home as a result of Covid and the energy/commodity crisis?

“There is an element of that,” he admits, “But since Covid restrictions ended people want to head out, which resulted in a big boost for pubs. They missed it during Lockdown. Younger people particularly want to come out and have that experience in the pub.”

Anecdotally, he’s also heard that when people come into the pub they tend to drink less as they’re chatting more to others there and so not drinking as much. Drinking alcohol is more uncontrolled at home.

Seeking a new direction

In seeking a direction in which to ‘revitalise’ the Federation Paul toured the country last June, giving 17 presentations at membership meetings held from Killarney to Letterkenny. At these, he met members and got to know their feelings about the business.

“I found them to have a passion for their business and an enthusiasm for driving their business forward,” he recalls, “They’ve a passion for their locality and within that how they could mutually help each other to grow. It was good to get a flavour of what’s going out there.”

With 25% of pubs gone since 2005 Paul knows that he can’t reverse this “… but can we stabilise the situation by ensuring pubs are more sustainable and receive the meaningful supports from key stakeholders?”

He offers an example.

“Pubs can become self-sufficient via Photo Voltaic panels and other renewable energy technologies on the road to energy independence.”

50th Anniversary

Finally, the VFI celebrates it’s 50^th Anniversary in 2023 and the celebrations take place at the Federation’s AGM in The Knighsbrook Hotel in Trim on the 16th of May.

“By then we hope to have been through the worst of the Winter and it’s also a great opportunity to celebrate what the VFI is all about.”

There will be a major consumer marketing campaign launched at the AGM.

For relaxation Paul likes to watch all sport. He also recently converted a camper van and he plays “a bit of golf” – handy in this trade.

He likes to cycle too; describing himself as a ‘social cyclist’ he cycled from Mizen Head to Mallin Head over four days in June and this ‘social cyclist’ has also cycled the Ring of Kerry and the ‘Inishowen 100’.

“Anybody who wants a challenge – do that one,” he smiles.

But for the time being at least he has quite enough challenges on his plate.