Carlsberg UK Carlsberg UK Smoking Ban updateSmoking Ban update

Simon GibsonSimon GibsonRegional Marketing ManagerRegional Marketing Manager

The lawThe law

• A smoking ban in all enclosed, or substantially enclosed, public places or places of work is being introduced in 2007– Wales from 2nd April 2007– Northern Ireland from 30th April 2007– England from 1st July 2007

• The ban includes ALL licensed premises, including members clubs– The only exemption is for rooms set aside solely for

accommodation and clearly signed as a ‘Smoking room’ i.e. a hotel room

• Further information and resources can be obtained from www.smokefreeengland.co.uk

The regulationsThe regulations

• The regulations are almost identical to what has been implemented already in Scotland and so it is fair to assume will be approved in England & Wales

• Some already published, others awaited including;

– Signage & Penalties

• The draft regulations cover 4 main areas

1. Definition of a public or work place where smoking is permitted - any roofed area where not more than 50% of the perimeter comprises walls, windows and doors

The regulations cont.The regulations cont.

2. Exemptions - hotel rooms that are clearly marked as ‘Smoking Rooms’

3. Signage requirements - A5 sign prominent in each entrance area including the international no smoking symbol and the words “No Smoking. It is against the law to smoke in these premises.”

4. Penalties will likely be enforced by local authorities• Failure to display a valid sign – fine up to £1000 or a £200

fixed penalty (£150 if paid within 15 days)• Smoking in a smoke free area – fine up to £200 or a £50

fixed penalty (£30 if paid within 15 days)• Failure to prevent smoking in a smoke free area – Fine up to

£2500 with no fixed penalty option

• Licensees may also need to apply for planning permission, license variations, building control etc and should contact their local planning officer and licensing board to discuss their plans as soon as possible

Mixed Experiences so farMixed Experiences so far

“Having reviewed the situation in Scotland after six or nine months, we think the smoking ban is a tough transitional period for pubs, but pubs will definitely continue to thrive thereafter if they’re well run”

Tim Martin, Weatherspoon’s Chairman – BBC Radio 4 24 Jan 2007

A survey by the Scottish Licensed Trade Association said sales of alcohol appeared to have fallen by more than 10% since the ban was introduced.Scottish Licensed Trade Association – August 2006“I thought we’d lose customers in droves but my sales increased and the only added cost is £4 on a brush to keep the outside area tidy!”Ken Storrie, landlord of small landlocked boozer Pot Still, GlasgowPubs that were prepared got the extra business – and those that weren’t lost their businessPat Nolan, editor of Drinks Industry Ireland

How will it affect your Drinker’s behaviour ?How will it affect your Drinker’s behaviour ?

1. Experimentation (0 – 3 months)– Smokers – their routine is severely disrupted as they are forced to smoke

outside. Some will try alternative outlets to seek the best facilities. Others will stay at home.

– Non smokers – a considerable amount of trialling of what were the smokier pubs and clubs from both regular and non regular pub goers.

2. Adjustment (4 – 12 months)– Smokers – start creeping back to see familiar faces and surroundings.

They do however spend less time and money.– Non smokers – most have found that they just don’t like pubs/clubs.

Those that are converted do not become ‘regulars’.

3. Re-basing (1 – 2 years)• The way customers use licensed premises is permanently changed and

focuses increasingly on ‘food’ and ‘event’ led visits.• Some outlets have closed down forcing their customers to drink in the

remaining outlets.

The likely impact of the smoking banThe likely impact of the smoking ban

• Public place smoking bans have already been implemented in many countries and cities around the world but closest to home are…

– Ireland in March 2004– Scotland in March 2006

• Key learnings from these markets:-– Outlets with outdoor facilities perform better than average– Outlets with a higher proportion of their sales as food perform better than

average– Pro-active licensees outperform the market– The number of smokers in the population is unaffected by the ban and

they continue to visit and spend more in pubs than non-smokers– Spirits are the hardest hit drinks category with beer relatively unaffected– Gaming income is severely affected– Hospitality sector employment declines– Some weaker outlets will close but may have done anyway

• If an outlet cannot provide an outdoor facility or increase their food offering -plan to offer something different and shout about it

Opportunity or threat the smoking ban is going to

happen and

WHAT WILL THE COST BE TO YOU OF

DOING NOTHING ?

Consider the impact on your Pub or ClubConsider the impact on your Pub or Club

Weekly Monthly Yearly

Turnover £7,500 £30,000 £390,000

Margin (50%)£3,750 £15,000 £195,000

• On average 43% of customers are smokers

• From research we know they drink more, gamble more and visit more frequently • For every one you lose, you will need two or more non- smokers to replace them

• How much are smokers worth to your business ?

• What % of these smokers will you lose ?

Just a 20% drop in Smokers ?Just a 20% drop in Smokers ?

Adjusted Weekly Monthly Yearly

Turnover £6,600 £26,400 £343,200

Margin (50%)£3,300 £13,200 £171,600

LOSING Weekly Monthly Yearly

Turnover-£900 -£3,600 -£46,800

Margin (50%)-£450 -£1,800 -£23,400

What will you do ?What will you do ?

DO NOTHING

• Provide no facilities for smokers

• Attract non-smokers ?

• Introduce or improve “food offering” ?

• Become more family friendly ?

MINIMAL INVESTMENT

• Permit smokers

• Low cost and may mitigate losses

• Short term solution

• Long term smokers will move to outlets with better facilities

REASONABLE INVESTMENT

• Retain smokers

• Maintain trade

• Balances risk versus reward

• Can attract non-smokers as well

• Possible to increase trading area and/or broaden appeal i.e. to women

LARGE SCALE INVESTMENT

• Retain & attract smokers & non-smokers

• Create more trading area

• Higher cost, but returns may be significant

• Likely to be similar number of smokers in population, who continue to visit and spend more in pubs/clubs

TOP TEN TIPS from AIRTOP TEN TIPS from AIR

1.Don’t wait to apply…

2.Don’t repeat investment

3.Don’t push the limits

4.Don’t build smoking “ghettos”

5.Don’t skimp on the extras

6. Add or extend services

7. Consult the neighbours

8. Consider smoker behaviour

9. Think positive…

10. Think about the practicalities

How Carlsberg UK can help youHow Carlsberg UK can help you

• Provide business advice to you regarding how you could approach the smoking ban

• Updating you as soon as there are any further developments regarding the smoking ban i.e. confirming the regulations, further insight from Scotland etc

• Suggesting reputable suppliers (the final decision rests with you)

– Key partners in the Morning Advertisers ‘Plan for the Ban’ campaign - Crown Awnings (outdoor facilities) and Brake Brothers (food)

– Other Carlsberg UK approved suppliers - Inn Fresco, Parasolar and Twinfix

– Contact details for many other suppliers

• Loan assistance where appropriate and if normal lending criteria met