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Business strategy

In spring 2016 we completed a review of the strategic options available to us, the focus of which was how we can best generate long-term value for our shareholders, whilst balancing our obligations to our bondholders and the Trustees of our pension schemes in a challenging environment.

Our review has concluded that we can best generate future shareholder value through accelerating the level of innovation and investment in the business, and through only carrying out selective site acquisitions and disposals.

We are in the fortunate position of having a fantastic estate across the country, and recognise that this strategy is an opportunity to generate strong returns from these assets. We will manage our estate by increasing the number of conversions towards our growth concepts, whilst accelerating the level of remodel activity, ensuring we remain competitive and are best able to leverage our brands through consistency of amenity. The plan will increase our exposure to premium offerings, matching demand in the market whilst also providing a commercial response to what we believe will be an inflationary wage environment.

We have a clear plan, which aligns to our three priority areas and delivered through a number of critical workstreams:

Building a more balanced businessInstilling a more commercial cultureIncreasing the pace of execution and innovation
Estate planSales cultureDigital marketing
Guest careTechnology
PricingBrand and product development

The workstreams within each priority area are outlined below.

Building a more balanced business

We consider that we have the best estate in the industry, with an outstanding array of outlets across the country. However, we recognise that elements of this estate have been underinvested in recent years, with capital expenditure having been directed towards necessary investment in technology and kitchens, rather than guest-facing areas. We also need to ensure that we make best use of our strong brands, by matching them individually to the right sites.

We have completed a full review of the estate, with a plan for every individual site to be achieved by 2020. This plan is aimed at building a more premium estate, by converting sites where appropriate towards growth concepts, and by developing a new concept solution for our retail park offerings.

A key feature to the estate plan is the level of investment in remodels. In order to remain competitive in this environment, and fully leverage the power of our brands, we must invest in improving and maintaining the amenity of the estate. As such we intend to accelerate our investment in remodels, to around 350 per year, or a five-year investment cycle.

Clearly a better-invested estate will result in a lower level of ongoing maintenance capital expenditure.

Instilling a commercial culture

As a business we need to return to some fundamental principles of trading. Our plans in this area have now been broken down into a number of key workstreams.

Building a sales culture
We are building more of a trading mentality throughout the business, by reinforcing the importance of delivering profitable sales growth. This focus is wide-ranging across all areas of the business, with some signs of early progress already evident.

We have installed a dedicated sales team in London, to focus purely on selling some of our fantastic trading spaces. These teams are not aligned to individual brands or sites, rather they are in place to provide a single point of contact and consistent approach to working with third parties to drive new sales into our locations.

We have introduced a sales incentive scheme for the second half of this financial year, with each of our sites able to achieve bonus payments on a weekly basis for delivery of stretching targets.

We are also committing to dedicated sales training sessions for all of our house managers and area managers within the next two months.

Guest care
One of our most powerful ways of delivering sales growth is by engaging more closely with our guests, and we are looking to reinforce that understanding with all of our teams. We are driving significant focus in the business on the speed of complaints resolution, aiming to have all guest complaints resolved to a satisfactory level within 24 hours.

We are also empowering our outlet managers to engage with guests on social media sites; notably access to individual TripAdvisor sites has been granted, allowing local management of guest reviews. This will be followed up with other social media channels in the coming months.

We are reviewing our pricing strategies across all of our brands, and ensuring that this is consistent with a company level approach. This includes simplifying some of our existing structures, for example significantly reducing number of active price bands we have from the more than 1,000 that currently exist. We are also facilitating a greater level of flexibility, by encouraging innovative pricing trials.

We are also looking carefully at how we best exploit laddering opportunities, by ensuring an appropriate level of price is attached to more premium products.

Our procurement workstream is tasked with continuously challenging the business to make the most of its scale. In June this year we are launching an online ordering platform, aimed at increasing efficiency and compliance among our teams. We are looking to optimise the frequency with which we deliver food and drink to our sites, with a trial under way. On an ongoing basis, we are then trying to use innovative ways to use our scale, through exploring integration opportunities along the supply chain, and co-procurement with some of our larger suppliers where possible.

Increasing the pace of execution and innovation

We set out in November an intention to increase the pace of activity, and to foster more of an innovative environment within the company. We have worked at pace to begin making progress across a number of initiatives, and our workstreams in this area are set out below.

As we have laid out previously, digital marketing offers us a significant opportunity to engage with our customers, leverage our strong portfolio of brands, and build loyalty for the longer term.

In the latter part of last year our focus was on consolidation of our guest database. This was completed in December, with around 8m guests now recorded in a single customer warehouse. This provides us a fantastic platform from which to develop future digital marketing opportunities.

Our future digital marketing plans look to build on this foundation, via a MAB-wide digital roadmap. This roadmap works across five key pillars: guest acquisition, user web experience, CRM, guest loyalty and social media. Across these areas we will have an increased level of partnership activity with booking providers, promotional activity tailored to individual guests, and the development of brand loyalty apps.

Our technology workstream is clearly closely aligned with our digital roadmap, aimed at facilitating delivery of the digital initiatives. This includes linking our existing table management software with third party booking providers, to fully realise the value of our full table inventory and to allow short-term optimisation of inventory, through last-minute promotional activity where appropriate.

Technology will also work alongside digital activity on new guest-facing initiatives, such as payment technology, pre-ordering, improving our takeaway offer and increased level of guest personalisation.

Brand and product innovation
As well as having an estate plan to improve the level of amenity in our sites, we recognise the need to continuously innovate in our brands, particularly within the current competitive market. This is an ongoing process, with varying levels of innovation required at different stages for individual brands. Some recent examples of developments are included below.

The Vintage Inns offer has been repositioned, with a focus on an accessible mid-market country pub. Food and drink offers have been revised, with a new menu and drinks range. Pizza ovens have been installed at all sites, with a low level of capex delivering strong returns.

We have also carried out work on a number of our existing offers, including a trial concept for a new O'Neill's format in Birmingham, the testing of new designs, food and drink in the Ember Inns through the 'Emberlution' project and partnering with branded coffee providers to offer a consistent and high-quality coffee offering across entire brands within the estate.

In addition to developing our existing brands, we are also continuing to explore a number of opportunities for new concept development to complement our existing activities, and will update on this as they progress further.

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Contact Us

A photograph of Tim Jones
Tim Jones Finance DirectorCarlie WakefieldPA to Finance Director +44 (0) 121 498 6112
A photograph of Denise Burton
Denise Burton Deputy Company Secretary +44 (0) 121 498 6514
A photograph of James Cooper
James Cooper Head of Investor Relations +44 (0) 121 498 6514