Economist; 9/18/2010, Vol. 396 Issue 8700, p71-71, 2/3p
TAKE a morning stroll past the Jack Phillips in Godalming, a prosperous commuter town in Surrey, and you might well not realise that it is, in fact, a pub. Traditionally, pubs do not open before about 11am, and the first customers through the doors are often the local alcoholics. But the Jack Phillips has been open since 7am, serving cheap coffee and hot breakfasts to a clientele comprising young parents with pushchairs, pensioners and a sprinkling of besuited office types grabbing a quick coffee (and checking their e-mail using the wireless internet connection) before work.
The multifaceted hostelry is run by J D Wetherspoon, a biggish pub firm that owns 775 low-cost alehouses. The company posted good preliminary results on September 10th, with revenues up 4.3% on last year to £996.3m ($1.56 billion) and pre-tax profits up 34%, to £60.5m. Its success rests partly on its strategy of diversifying away from selling beer in the evening.
Since its pubs began opening early in the morning last year, sales of breakfasts and coffee have risen by about 40%. J D Wetherspoon reckons that it sells 400,000 breakfasts a week, second only to McDonalds, and 600,000 cups of coffee, behind only Starbucks and Costa Coffee. It now in effect runs two businesses from each of its premises: a family-friendly café by day, and a budget boozer by night. Its method suggests that, rather than being ousted by coffee shops, the non-alcoholic rivals that have proliferated on British high streets since the 1990s, pubs can incorporate them. Other firms, such as Enterprise Inns and Punch Taverns, are watching closely.
This sort of innovation is a response to harsh times in the pub industry. Every week 39 pubs close their doors, according to the British Beer and Pub Association (BBPA), a trade body. In 2005 there were 58,600 pubs in Britain; now there are around 52,500. Many publicans principally blame competition from supermarkets, whose buying power (and tax advantages) allow them to undercut pub prices. Tim Martin, J D Wetherspoon's founder and chairman, bemoans the interference of government. The previous Labour administration imposed a ban on smoking in public venues in 2007, plus above-inflation rises in beer tax (though its reform of licensing laws in 2005 enabled J D Wetherspoon and others to open early).
Social changes compound the problem: Neil Williams of the BBPA points out that alcohol consumption has fallen by 13% since 2004, partly due to tax rises but perhaps also because public-health messages about the risks of heavy drinking have got through. Meanwhile, the growing British taste for wine, often consumed in swanky bars or with a meal at…