Greasy spoon or Wetherspoon? Pub chain starts breakfast and coffee price war
Pub company to sell 99p coffee and £2.99 breakfast in bid to offset fierce supermarket competition on cheap alcohol
he pub chain JD Wetherspoon has kicked off a coffee price war as part of a drive to offset fierce competition from supermarkets selling cheap alcohol.
Wetherspoon, founded by Tim Martin in 1979, said it now sold 50m teas and Lavazza coffees a year and about 24m breakfasts – more breakfasts than are sold by Caffè Nero or Pret a Manger, according to research by CGA Peach.
From next Wednesday, the 936-strong pub chain will sell Lavazza filter coffee for 99p (a price cut of about 20p), with free refills, between 8am and 2pm at 880 pubs. A small latte or cappuccino will cost the same. The pub chain is also introducing a new traditional breakfast at £2.99, in addition to its other 10 breakfasts, as it tries to grab a bigger slice of the booming coffee and food-on-the-go market.
“Our aim is to triple coffee and breakfast sales over the next 18 months,” said Martin, who chairs the company.
The pub chain will also introduce several drinks offers (though not at breakfast), “reflecting greater supermarket competition”. Drinks include Magners Cider and Punk IPA at £1.99.
Martin has been a vociferous critic of the way supermarkets and pubs are taxed. Supermarkets pay no VAT on food, which allows them to subsidise alcohol, while pubs pay 20% VAT on food. Pubs also pay 15p per pint in respect of business rates, while supermarkets pay only about 1.5-2p per pint.
He said: “As previously highlighted, the biggest danger to the pub industry is the continuing tax disparity between supermarkets and pubs ... There is a growing realisation among politicians, the media and the public that pubs are overtaxed and that a level tax playing field will create more jobs and taxes for the country.”
Wetherspoon’s profits before tax and one-off items slipped 0.9% to £37.5m for the half-year to 25 January, with revenues up 9%. Like-for-like bar sales were up 1.5% while food grew by 10.1%. Higher utility bills and wages pushed down the group’s operating margin, a measure of profitability, to 7.4% from 8.2%. The chain expects a “reasonable outcome” for the year as a whole, despite rising marketing and wage costs.
Sales at Wetherspoon pubs open more than a year were up 1.6% in the six weeks to 8 March, down from 4.5% growth in the first half of the year.
Mark Brumby, an analyst at Langton Capital, said: “We have little doubt that Wetherspoon will be outperforming its competitors – and particularly those without access to the funds to invest – and longer term, it should draw clear from the pack.
“But in the short term, of course, it could be accused of kicking off another price war and there will be some concern as to margins.”
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