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Shepherd Neame chief executive Jonathan Neame says premiumisation key to business in future as the company invests in hotels and its pub portfolio

11 December 2013
by Chris Price

As fewer people head to their local and fewer consumers drink beer, there has been a lot of doom and gloom headlines concerning the pub and brewing industry.

Chris Price caught up with Shepherd Neame chief executive Jonathan Neame to find out how his firm has kept pulling in the punters.

As waves gently wash onto the sandy shore of Botany Bay below, Jonathan Neame enthusiastically unveils his plans for the Fayreness Hotel on the cliffs of Broadstairs.

Jonathan Neame in the Bell Hotel in Sandwich, which is getting a £300,000 facelift

Jonathan Neame in the Bell Hotel in Sandwich, which is getting a £300,000 facelift

There is a glint of optimism in the Shepherd Neame chief executive’s eye as he points out the various features of the renovation, the blueprints of which are pinned on the reception walls for guests to see.

The brewer is investing £1.4m redeveloping the building which will be renamed the Botany Bay Hotel. Everything will change.

Its 1980s brickwork exterior will be replaced with Kentish weatherboarding; its 30 bedrooms will be renovated and its dated conservatory dining area turned into an orangery.

It is the latest in a series of renovations being undertaken by Shepherd Neame, as the company tackles the biggest problem facing its business – a 40% decline in beer consumption over the last 10 years.

The Fayreness Hotel in Broadstairs, which will be renovated at a cost of £1.4m by Shepherd Neame

The Fayreness Hotel in Broadstairs, which will be renovated at a cost of £1.4m by Shepherd Neame

“We have the strategic challenge of being in a market where our core activity of beer consumption is declining quite fast,” said Jonathan, the fifth generation of his family to run the centuries-old brewer.

“So we are constantly evolving our strategy to find the right way to develop our business.”

As he lays bare that strategy, one slightly cumbersome word stands out: premiumisation.

Whereas chains like J D Wetherspoon and Harvester have stuck to their value-based offer, Shepherd Neame’s goal is about a top-notch service.

The new look Fayreness Hotel in Broadstairs will be renamed the Botany Bay Hotel

The new look Fayreness Hotel in Broadstairs will be renamed the Botany Bay Hotel

That comes in the traditional pub form but also in its food, hotels, and through expanding its exports.

Jonathan said: “It is about a traditional premium offer in great buildings and great surroundings, hopefully with a more personalised experience.

“It is not all about hotels. It is about investing to raise the quality of experience for our customers – it is the premiumisation of going to the pub.

“Overall the market is in decline and we have been developing our portfolio in growth areas such as craft beer, exports, food and premiumisation.”

Shepherd Neame has invested more in developing its premium beers, like its Classic Collection

Shepherd Neame has invested more in developing its premium beers, like its Classic Collection

So far that strategy appears to be bearing fruit. While overall profits were down, in its end of year results in September, the company reported like-for-like sales of food were up 5% and accommodation up 7.9% year-on-year.

Meanwhile, competitor Bramwell Pubs and Bars fell into administration in October, selling three of its five Kent pubs to rival Stonegate Pub Company.

“The recession was a good opportunity for us,” said Jonathan, without a hint of irony.

“Too many people had taken on too much leverage up until 2007. What happened after that was asset values dropped and money became harder to get.

“We were fortunate enough to have a strong enough balance sheet to keep investing throughout that period.”

The Bell Hotel in Sandwich is undergoing a £300,000 refit

The Bell Hotel in Sandwich is undergoing a £300,000 refit

The company has certainly put its money where its mouth is. As well as the revamp of the Fayreness – set to take place from January to Easter next year – this month it will bring the Bell Hotel in Sandwich up to date with a renovation costing £300,000.

In Easter it re-opened the Marine Hotel in Tankerton after a £1.6m facelift. The George Hotel in Cranbrook was also given a spruce-up worth £75,000 in 2009. It has just announced the Royal Hotel in Sheerness will get a £100,000 makeover next year.

Since the global recession of 2009, the firm has also had a clearout of its portfolio. In five years the company has sold 51 pubs and bought 26.

The Royal Hotel, Sheerness

The Royal Hotel, Sheerness

Jonathan said: “Over the last five years we have been investing at a higher rate than any other period.

“Many of our major competitors have also been selling off high-quality pubs.

“We have been able to buy high-quality outlets individually and cherry-pick them. In the previous years, people may have been selling 30 pubs and you had to buy them all, even if you only liked three.

“In the last five years we have bought 26 pubs and every one has been individually selected. That has given us the chance to get rid of the weaker 51.

"Now we are entering a new phase to bring our existing pubs up to a premium standard.

“The economic circumstances of the last few years has been great opportunity for the company at a time when many of our competitors have not moved their offer forward at all.”

And with that a large wave crashes onto the beach below the Fayreness and that glint in his eye returns.

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