Top executives of two of the UK’s pub-owning chains have indicated that they are not unhappy with the enforced 8.7 per cent rises in AWP (Category C) machine rents by Sceptre Leisure, which has since been endorsed by other leading operators.
The executives, who felt compelled to remain off the record for the moment, confessed that they had no problem with the apparent squeeze being applied to the supply chain, which they said was largely due to a change in the perceived status of the machine in the British pub.
For many years the machine was always treated as a valuable profit contributor to the business; effectively in itself a small but significant individual “profit centre.” However, changes in recent years have seen the whole of the licensed trade react to the recessionary pressures and place a spotlight on areas of their businesses with a view to cost reductions. These reductions would help to minimise the squeeze being placed on their margins.
This procurement efficiency drive somehow encompassed the machines. As one of the licensed retail executives put it: “It may be that as the law at the time demanded a straight rental for the product that this in itself would to the untrained eye appear to be a commodity that was being purchased, rather than a variable income source.”
He added: “By switching the emphasis from profit centre to cost centre the inevitable push has been for a reduction in the headline cost, which inevitably fails to take account of the nature of the commodity you are ‘purchasing.’”
The other retailer executive focused on the potential damage that a one-sided treatment of the contract to supply has had in the industry. “No-one can deny that innovation and development has been squeezed until it squeaks as the price paid to operators has created a downward pressure throughout the chain.”
It was plain from the comments that, while not representing the whole of the retail sector, it was clear that the executives were very concerned and felt it was time to start supporting the supply chain to prevent a future potentially fatal breakdown in processes that ultimately lead to cash generation.
“It is relatively easy to produce a very cheap product that generates no revenue,” one said.
