How cheap is JD Wetherspoon? There’s a simple answer — it’s the cheapest place within ten minutes of where you’re stood — and then there’s a much, much more complicated answer.
Though all Wetherspoon pubs use the same base menu, no two Wetherspoons charge the same prices. This is no secret, but neither is it made obvious. The corporate website keeps exhaustive records of ingredients, allergen information and calorific values for each and every one of the 150 or so menu items on offer, but omits any mention of prices. All of Wetherspoon’s 893 pubs across the UK and the Republic of Ireland get individual landing pages but, again, there’s nothing to indicate what things cost. What gives?
The FAQ has an explainer of sorts:
Why do prices vary across different pubs?
For various reasons, such as rents, rates, staffing, local competition and so on, food and drinks prices may vary per pub. This tends to be the case with all pubs, in general.
What we do try to achieve, however, is having the lowest prices, on average, in each location where we operate.
But what does “prices may vary per pub” mean in practice? To find out, we scraped data from Wetherspoon’s smartphone app, which can be gamed into placing food and drink orders to any bar in the country. In every pub we ordered exactly the same thing:
And here are the results. (Click = big.)
That’s 130 different prices across 213 pubs sampled, with a £10.96 swing between the cheapest (suburban Birmingham) and the most expensive (urban Manchester). Remember, that’s on just five items taken from a menu the size of a theatre programme.
Here’s how the totals look as a blob map.
Important note on methodology: that’s not all Wetherspoons up there. It’s not even close. The dataset captures less than a quarter of the total UK estate, which is on a similar density nationwide to McDonald’s. The idea here is to get a feel for price architecture, not to measure extremes of prices. The sample aims to be representative, not comprehensive.
Clusters seen above are because we scraped the app’s first hundred or so pubs (which captured the whole of Bedfordshire, Berkshire, Bristol, Buckinghamshire, Cambridgeshire, Cheshire, Cornwall and County Durham). To those we added all Wetherspoons in Manchester and Norfolk, as well as a random selection from around the country. London makes up about a sixth of the sample, which more-or-less matches the capital’s weighing in the portfolio. Excluded are Republic of Ireland pubs (which price in euros) and airport concessions (which run a very limited menu and charge nearly £5 for a pint).
All menu prices are set by head office, says a Wetherspoon flack, who highlights rents, rates and staffing as reasons for the flex. From that, you might assume all the prices go up and down in equal proportion. Nuh-uh.
Over the five items tested, drinks can be as much as 31 per cent of the total bill or as little as 21 per cent. Broadly speaking, the pubs at the very top and bottom of the pricing scale tend to charge proportionately less for food against drink, though the trend is far from pronounced.
Okay, yes, sure, but why should anyone care? Answering that requires a quick overview of the UK pub industry.
Britain’s licenced trade is fairly competitive, at least in theory, with independents and making up about half the total by pub count. Less than a fifth of the UK’s 50,000 or so pubs is controlled by the big centrally-managed chains, of which Wetherspoon is only the number-three operator.
Of course, a count of pubs ignores how much the scale operators take of the profit pool. It ignores that Wetherspoon is big in other ways, including reach (2m customers per week) and scale (a per-pub average of 4,000 to 4,500 square feet of customer space, which gives it a total area about equal to two Grand Central Stations).
That long tail of independents and tenancies limps along at or below breakeven on annual turnover averaging £140,000 (as per a 2015 Oxford Economics report). Meanwhile, Wetherspoon did turnover of about £1.8m per pub in its last financial year, on which it made a 7.7 per cent operating margin.
Perhaps the better comparison is with supermarkets.
The UK on-trade looks not dissimilar to the UK grocery sector, which too has a few dominant operators that take share from a weak underbelly of independents and supplier-tied franchises. The big grocers resemble the big pub chains inasmuch as they are all about buying power, efficient logistics, wage capping, centralised cost savings and economies of scale. It might also be noted that Wetherspoon’s 4m square feet of productive floor space is about equal to the whole Tesco Express estate. And while Wetherspoon’s revenue of £450 per square foot or thereabouts is half the level expected from a big-four grocer, its 7.7 per cent operating margin compares pretty well to Tesco’s 1.8 per cent at group level last year.
It’s a comparison endorsed by Tim Martin, Wetherspoon’s founder and chairman, who is often found astride his hobby horse that supermarkets and pubs should be taxed equally. Mr Martin has been less vocal on whether pubs and supermarkets should be regulated equally.
Because here’s the thing with supermarkets: they can’t engage in local price wars. Every single UK branch of Tesco Express has to charge the same. That’s because since 2002, the supermarkets have been bound by a code of practice drawn up in response to a Competition Commission review a couple of years before. The CC found:
[T]he practice of varying prices in different geographical locations in the light of local competitive conditions, such variation not being related to costs (which we termed ‘price flexing’), […] contributed to a situation in which the majority of their products were not fully exposed to competitive pressures and which distorted competition in the supply of groceries. We conclude that the practice, when carried on by Safeway, Sainsbury and Tesco, who have market power, operates against the public interest because their customers tend to pay more at stores that do not face particular competitors than they would if those competitors were present in the area.
Nearly all the UK leisure trade uses price flexing. Mostly it’s framed around the supermarket model of running diffusion formats — so, just as Tesco charges more in an Express than an Extra, a pint sold by Mitchells & Butlers will cost more in an All Bar One than a Harvester. Berenberg analysts show the diffusion-pricing thing elegantly by bubble charting the price of a burger across the five big chains. (Size of bubble = that brand’s contribution to group sales).
In this context, Wetherspoon’s “one brand, one thousand prices” model might begin to look a bit sharp. However, as the FAQ says, the prices are set around “rents, rates, staffing, local competition and so on”. Is there a way to isolate targeted undercutting from the rent, rates, staffing and so on? Maybe.
Oxford Economics estimates (and the BBPA agrees) that Corporation Tax and miscellaneous business rates add up to about 7 per cent of a pub’s turnover. That’s not far off the value of a Moretti in our price basket. And since the wholesale cost of a bottle of beer should vary hardly any across a pub fleet, we can use its menu markup as an approximate sort of guide to variable costs in each location, which can then be offset against the other stuff.
Or to put it another way: food benchmarked on lager.
Mostly, the Fig. 4 trend echoes Fig. 2: a city centre location means you’re paying more for drink relative to food. Pubs in the bottom left corner are optimised to be food-led whereas the ones in the top-right are, in industry jargon, wet-led. None of that’s a big surprise.
More interesting are the outliers, the pubs furthest away from the diagonal. These are places taking a margin hit on the curry relative to the burger, or vice versa. Outliers are, in effect, an indicator of targeted predation.
One noticeable feature of the data is that curries tend to be priced more aggressively around Birmingham, where more than a quarter of the population identifies as Asian or Asian British. Other outliers demand a more granular type of research. Take for example The Edwin Waugh in Heywood, Greater Manchester, which is middle of the pack nationally for burger value and among the very cheapest for a curry. It’s probably not coincidental that Tripadvisor finds four Indian restaurants within ten minutes of The Heywood, and no burger joints.
Most likely, Wetherspoon’s many fans will dismiss this kind of analysis as poncy, ill-informed, overblown nonsense. No one in their right mind orders a tikka masala except on Thursdays, they’ll point out, because Thursday night is Curry Club. And no one orders one brownie at £3.85 because two brownies cost £5.
Except that’s not quite true, because two brownies might also cost £6, or £7, or whatever a multiple of brownies would routinely cost. Turns out the price architecture for promotions is even more complicated than the regular menu.
Here, for example, is the blob map for gammon, egg and chips (available weekdays 2pm till 5pm in 192 of the 213 pubs sampled).
Or — brace yourself — the Pornstar Martini, which in deference to web censorship filters we’ll initialise to PSM.
A majority of pubs in the sample offer a single glass of PSM at £6.30 or two pitchers for £12. But the same offer also costs £6.99/£12, £6.70/£13, £7.70/£14, £6.99/£13, £8.60/£15 and myriad small variations thereof. Northern Irish pubs advertise PSM at £6.70 or “two for £10 and £14”, which defeats all explanation, and in 48 of the pubs there’s no twin-pitcher deal available at all — including, curiously, the whole of the Scottish fleet. Among the no-deal pubs the cost of single glass of PSM sprawls between £5.35 (Windsor) and £10.35 (Camden).
The picture emerging here is of obsessive menu engineering and predatory cynicism. Many pub and restaurant chains do this kind of thing a bit, but none does it with the ruthlessness of Wetherspoon, whose grand, cavernous spaces fill up each day thanks in large part to a menu that reads like several hundred carefully targeted microaggressions against the immediate community.
And it works. Centrally managed pub chains account for close to half the UK market by revenue, Berenberg estimates. It’s assumed that, as the weak independents fall victim to slower consumer spending, the chains will keep gaining power.
Is this a problem? Chances are we’ll never know. The CMA, the Competition Commission’s successor, has been reticent to make waves for the pub trade, the grocery trade, the junk food trade and pretty much any other trade. The CMA’s acquiescence makes it unlikely that we’ll ever have an enquiry on whether hospitality chains ought to adopt the same kind of flat pricing its predecessor pushed on supermarkets. That’s a pity, because the arguments look equally valid. Because it’s far from obvious how consumers benefit from Wetherspoon always being the cheapest place within ten minutes of where they’re stood.
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