Youth is Wasted… on the Expensive Beer and Shots

One demographic we all know about is the Baby Boomers. Many of them are well-heeled, own their houses outright, have pension pots to piss in, and children who have had quite easy lives thus far. That may change for the kids, but for the moment large parts of London and the South East are awash with post gap-year 20-somethings with good jobs, earning say £50k plus. Of course they can’t afford to buy somewhere in the parts of London where they live. In my West London suburb it will set you back a minimum of £325k for a less desirable location but just as easily £500k+ for a one-bed in a new development – I’ve seen them, they’re not worth it.

So, they still live with the folks, and have an awful lot of cash spending money. Those that have been lucky enough not to wind up under the wheels of an artic while cycling to work want fun too. What they really want is the 60s/70s like their parents had, but that’s been and gone. As a result though, you can see many, many pubs now have live music, all manner of craft beers and menus often better than the restaurant up the road. On Saturday I found 330 pub gigs within 20 miles of my house using the LemonRock.com gig site.

These groovers think nothing of paying £5.50 for a beer, or a small glass of wine, and ordering rounds of shots. The beers are the chasers really, so they gulp what is often a really nice single malt in one. An insult to fine whisky! This may be another reason many Scots would like independence. Pubs are keen to compete for their business, hence the live music and other entertainment like the ubiquitous pub quiz and often borderline illegal poker games. These pubs are far from being spit-and-sawdust. They’re high class hookers compared to what used to be knee-tremblers of pubs. The self-same pubs quite often, now re-modelled with a smoking area, preferably in a beer garden, with neighbours who, for some reason, don’t complain. Or at least not enough for it to be a problem.

They are all things to all people. Often a big sports screen with the sound off while a pub quiz or blues jam rings out and others play board games or just drink and joke and smoke. These pubs cleverly make themselves family friendly during the day too. So those that have survived in the leafy parts are now quality pubs that cater to all the middle class locals no matter what their family status, or entertainment preference.

How can we jump all over this? Well the most direct beneficiaries are the local London breweries. Young & Co (YNGA) must be doing quite well out of Generation Z. And the share chart shows that they are, and there’s probably more to come. A new ATH is always a good sign (old one marked with blue line). Timing is a tough one. It’s often wise to await a buying signal, like a pull-back, especially to a bounce off the previous high from 2007.

There are a few other players, and I’m basing this on my own experience of pubs in London and the fact that I am, and have been, involved in selling entertainment to pubs for many years now. The Spirit Pub Company (SPRT) has a well-oiled branding machine that is working very nicely. I don’t know much about their food-based brands, but the pub chains, like Taylor Walker and John Barras, are the very pubs I’m talking about. They seem to be spending on refurbs too. As a fairly new listing there’s not much to say except what’s not to like about this chart?

Fuller Smith & Turner (FSTA) look great too. Very strong upward trend, and what I like about this chart is the long congestion area that has just been broken. It is not unreasonable to expect a measured move here. You can see that the rally started from around £3. Congestion between £9-£10. Ok, that took since 2009, but over the coming years if we do see a measured move then the target would be (£9-£3) i.e. £6 and add that to the top of the congestion £10, making a £16 target. It’s presently around £11. That’s a lot of upside.

JD Wetherspoon (JDW) has a nice looking chart too. Their business is no frills cheap beer and food. And that is soaking up the business from the less well-heeled and those who are reticent to be entertained. Presently there’s congestion around the ATH: if this one breaks up it should go a long way. I would like to see a convincing buy signal though before wading in.

So the government’s attempts to reduce alcohol consumption, and in turn destroy British drinking values, by increasing duty have been totally ineffective on the comfortably off in the ‘burbs. In fact they’ve created a situation where the breweries can make super-profits quite easily. Of course if they are one day successful then they’ll have to replace the revenue by legalising drugs. Just saying.