#4 Greene King CEO, Nick Mackenzie: No More Budget Surprises, Chancellor

0:17Hello, welcome to Big Boss Interview from your business team here at the BBC. We've heard from those big bosses right at the top of online shopping, the tobacco industry, banking. And Fliss Hanna has been speaking to our latest chief executive, Fliss. Hello, who have we got today? Well, we've got another big boss, unsurprisingly, Sean. It's Nick McKenzie. He's CEO of Green King. Now, you might know Green King, the pub chain, but it's so much more than that. They own thousands of pubs. They've got tens of thousands of staff employed by them, employed by their landlords. They've also got their own brewery.

0:53They brew their own beers. They've got restaurant chains. They've got some hotels. They've got their fingers in a lot of different pies. And I think some of them serve pies. But they've also got their fingers in lots of different areas that are seeing some of the challenges that we talk about so much. The challenges with rising national insurance contributions. The challenges with the business rates that those venues have to pay. So I think that perhaps they are some of the industries that are most under pressure. And that's what made it a really interesting interview for me. Did you manage to wangle this interview in a pub for this or was it just in a nice, calm, quiet BBC studio?

1:28Yeah, sadly, sadly, not a quick trip to the pub for me. No, it was very much in a BBC studio. But what was really interesting was asking Nick about how often he goes to the pub, because obviously for him, that's his day to day work. He's got to visit loads and loads of the thousands of pubs that come under the Green King umbrella. And I did try to press him, Sean, on which one was his favourite. But I suppose it's a bit like having a favourite child. When you've got thousands, you can't single one out and say that one's the best. I'll tell you what, let's hear from him, shall we? Chatting to police.

2:01Nick McKenzie, welcome to Big Boss Interview. Thank you for having me. It's really, really great to be here. It's very, very good to talk to you. I'm a big fan of the pub. Tell me then, from your perspective, why the pub matters. Well, the pub, I think, is massively important to this country. is certainly part of our DNA. They've been around for hundreds of years. But it isn't just about economics. It isn't just about jobs. I think it's really, really important for communities, for people to come together. And that is the place to come together, right? Whether that's watching a sporting occasion, whether that's having your first date or maybe meeting up with family and friends and having a meal.

2:38There are so many different reasons why you would come to the pub. And I think the really important thing for us to remember about the pub, and I think that came out during COVID when the pubs were closed I think people have reconnected with the importance of the pub to communities and the importance of pubs for creating community cohesion somewhere where people can go maybe it's the only social contact that they have is in a pub when they can meet people and talk and and that is a real advantage for this country and and I think it's really important that we protect the pub for the long term and everything that it brings it It brings great jobs, great careers for people, and also creates, obviously, amazing amounts of value to this economy.

3:19We have 45 ,000 pubs around the UK, and they are doing amazing things in the communities all around the country. Now, you mentioned jobs. Are they good jobs? Can someone who's, I don't know, collecting glasses in one of your venues tonight progress into your corporate structure and end up working alongside you? Yeah, they can, and they do. and I've spoken to so many different people within our business and around the industry where people who started at their very first job in a pub have become senior leaders in the industry. One of my very first jobs was in a bar and I guess that's where I got my love for the pub as well working with around friends and around colleagues and people I've known for many many years now and you know they are good jobs.

4:03They are great for people starting off in employment and And certainly they give people confidence. Young people, when they come into work, give them confidence. And then maybe they progress either in the industry or beyond. Or you can have an amazing career within the industry. And there are so many people who started off maybe on a part-time role who are now general managers of really big individual businesses. I was with a young lady actually a couple of months ago who worked in the business. She decided not to go to university. She decided to do an apprenticeship with us. and within three years whilst her friends were just about to come out of university she was a general manager in one of our pubs and that is incredible progression and that's what pubs in our industry can do is people can progress really really quickly and they can get education as they go through the process with apprenticeships we've done about 18 000 apprenticeships in our business since 2011 and those people have had education but working at the same time and learning how to be really, really effective in their roles in our pubs.

5:10What are your apprentices learning to do? Because I also worked in a pub as a teenager and it took me a couple of weeks and I knew what I needed to do. What developments are they having? What skills? We have about 50 different courses that people can do through apprenticeships. It isn't just about within the pubs. We have apprentices who are brewers within our breweries. we have about 1600 managed pubs those are the ones that we operate with about 38 000 employees we also have two breweries and we also lease pubs out to pub partners but our pub tenants as well so we have quite a broad business and within that there are so many different opportunities whether you want to do property whether you want to do obviously i said brewing whether you want to learn about operations, how to manage people, finance.

6:00So all the different things that people can do in lots of other businesses, there's the opportunity to do that as well within our industry. As I say, we can start people young, they can start working in a pub from 16, and they can progress through different levels of apprenticeships and other training that they can get within the industry. So it is a fantastic industry to start a career and then grow a career and take lots of different turns, if you like, as you go through your career into different areas of the business. Is it a changing industry? What does a pub goer expect in 2025 that's different to 5, 10, 15 years ago?

6:39It's certainly evolving. And, you know, people talk about young people maybe not drinking as much these days or different factors affecting the industry. and the pub has evolved over many many years i go back to i think it was about 2009 when the smoking ban came in obviously that affected pubs and pubs had to adapt and innovate which i think is really really important um so you have to adapt to trends every day yeah you know maybe slightly less younger people are drinking now but my experience and certainly from my own uh family um i know young people are still out going to pubs and drinking but also having to adapt to trends around well-being so we know a real trend towards low and no alcohol um and again we are adapting our offer to reflect that so if you go into one of our pubs now you don't just have to lean over the bar and just look for a bottle of low alcohol beer there's no draft zero zero beers coming in you can get um no alcohol cocktails no alcohol um spirits as well so the offer is adapting and continuing to adapt and our industry is really really good at that but are people still wanting to come to the pub even if they're perhaps not going to drink because there was one survey carried out january 2000 people 43 percent of 18 to 34 year olds said they don't drink at all yeah i do think people want to come to the pub not just to drink but they want to come to socialize they want to come for a meal um so we are having to adapt to that but what one survey that we've done and i think this sort of counters that in a little way is that 70 percent of people still want to connect personally with people rather than connecting just through social media and i think And that's really encouraging.

8:26And I think the best place to do that is in a pub. And so many people do want to do that. It isn't just a pint and a burger in a pub. There's so much more to do in a pub. There's so many more things you can do in terms of entertainment, live music. We very recently had an event where we had 800 of our pubs having live music on on one day, which was unbelievable. We had a competition after that. and we managed to get some rider involved in that. And that really brings people into the pub for other reasons. Same with football. You know, we're one of the biggest providers in terms of showing football in pubs.

9:04And if you go in to watch football in a pub, the atmosphere is incredible. So that's the reason why people go. You've got more competition though as well, don't you? I saw one stat that reckons there were 11 ,000 coffee houses in the UK at the start of this year. That's up 16 % in just 24 months. is your industry simply facing more competition from other places where people can gather where that alcohol isn't the kind of expected backdrop yeah and i say that i mean alcohol isn't always the expected backdrop to pubs but yeah it's associated though isn't it quite quite strongly yeah but food as well uh yeah look it is and and i get that and there is a is competition and you know again what we have to do is adapt to that and make sure it is great to come to the pub and maybe have a coffee as well so we sell way more soft drinks way more hot drinks than we ever used to do and then we also adapt some of our offers around trends around food so we invest in or invested in a business called hickories um just a few years ago now had about 18 sites when we invested in it uh it now has over 30 sites these are and you've got house restaurants and really really good in terms of the offer you get so we are adapting but we are aware of competition and we know we have to face into that because you've actually you've closed some pubs haven't you to turn them into hickories?

10:18Yeah, well, we've closed them and then invested a significant amount of money in them to be able to adapt them into hickories. Now, there are bars in hickories as well as food, but that is adapting to consumer demand, in this case for a smokehouse offer. And actually, the jobs that creates, the extra jobs that creates in those communities is fantastic for the economy as well. I think one of the really big challenges our industry is facing, and maybe some other industries aren't, is the cost-based increases that we've had since 2019. Whether that has been taxation and the level of taxation we face, and I think that is a fair point, that pubs face a higher level of taxation than many, many other businesses.

11:00But we've also faced increased in food costs, increased in energy costs, and increased in labour costs. And that has been the biggest challenge for our industry over the last few years. You have country pubs and you have city centre bars. Which area do you think is facing the most challenge? So I think you have to look at this at a macro level. The challenge we are facing is predominantly around cost base. Our revenue is higher now than it was pre-COVID in 2019, but our profit is not there yet. and the importance of... In quite a staggering way. So in 2024, you took revenue of just under£2.5 billion, which was an increase in revenue.

11:43You made a net loss of almost£150 million. Yeah, but look, we are still a profitable business. That is a statutory loss, so that was to do with impairments. Actually, if you look at our EBITDA, our EBITDA is well over£300 million, pounds and that enables us to invest in our business and that's the importance of pubs being retained but us also being profitable to able to to be able to invest we last year invested 150 million pounds in our pubs which obviously helps us then grow we also committed to building a new brewery for 40 million pounds in burryst edmund so the importance of being able to generate that cash to be able to then invest is important i should i should i should just just for listeners who don't live and breathe this every day.

12:28EBITDA, of course, is the earnings before interest, taxes, depreciation and amortisation and essentially how much money a business makes just running its day-to-day operations. Yeah, and I think the industry has struggled over the last four or five years to be able to grow that profit and that is because of the cost increases. And our business has been hit by over£300 million worth of additional costs since 2019. So we're fighting against that. our push and this is the ask of of government is to back pubs and pubs will deliver for this country they'll deliver growth they will deliver jobs that we've already talked about and they will deliver that community cohesion what we have to do is get the right environment and that in the short term is about making sure taxation is fair for our industry and we've called for government to reduce the multiplier on business rates which is a big cost to our business and also support us with duty.

13:24So back pubs will deliver for the country, but we need the right cost environment to make that happen. And I want to talk more about what you're hoping to see from the Chancellor in the budget. But before we get there, you've talked about pubs being in this very challenging time. 360 of them closed last year, 200 closed in the first six months of this year. This sounds like an industry that's really struggling. Are you putting all that down to what we've seen in recent budgets? Yeah, I think I mentioned this fact earlier. There's still 45 ,000 pubs in the UK. So it is really an important industry for all the reasons that I've spoken about.

14:01You know, the revenue and the profit and the investment that we bring is really, really important. But we are facing those challenges. We do have to face into that. And I don't think it's necessarily about providing support. It is not a failing industry. 45 ,000 pubs is evidence of that. but we need the right environment and the layering of costs that have hit us continually over the last four or five years has been the challenge we're facing into so that call to government that ask of government is to do something now to start to write that you know business rates is a big issue we pay about 2.1 percent of business rates whereas the revenue we generate is about 0.4 percent so it is unfair the same with duty duty is one of the highest in europe on alcohol and actually if you reduce that we can grow we can create jobs we can deliver investments and that is all about you know I think what the government wants to do and they want the economy to grow we can support them to do that.

14:57What did the last budget mean for your business is that where those a chunk of that 300 million pounds and additional costs came from? Yeah that was significant and I think it's been well reported the impact on many many businesses of the national insurance increase at the last budget and it certainly has impacted lots of things it has you know affected profitability has affected pricing um in our pubs it has affected inflation and and it was i think certainly in relation to the threshold for national insurance alongside the national minimum wage increases it was a big shock to the industry and we've been dealing with that for the last 12 months which is again why we're saying now give us some breathing space think about all the potential costs that could hit business but if you give us that breathing space with business rates then we will then invest and grow and we've proven we can do that.

15:47In fact you and more than 600 of your landlords wrote to the Chancellor last month you called for lower business rates for pubs is that the silver bullet for you would that solve your profit problem? Look I don't think it's the silver bullet but it's the thing firstly they've promised to deal with so it was a manifesto promise to reform the business rate system which we certainly backed as an industry and also we know it's something they can do right now and they've actually talked about reducing the multiplier for hospitality retail and leisure at this budget so it is something that could be done now is it the long-term silver bullet no what we have to do is to create the right environment and i think that is about government understanding when they are from all the various departments that have initiatives across government understanding the impact of the changes that they make and the unintended consequences sometimes.

16:40And I think we as an industry are fully prepared to work with government to help them understand that as we go through the next few years. But what we need is a positive economy, an environment where people want to go out and spend, and then the right cost environment to support us to grow for the long term. And we can do that. Take me back to Budget Day. That increase in employers' national insurance contributions was a surprise wasn't it what did it mean for you were you all sort of standing around watching the chancellor's speech and frantically making notes i have to say i was listening to it um and i actually remember where i was when i was listening to the budget i mean i think a lot of what happens normally you know that we know is going to come or has been trialed and across media so you start to understand it i think what businesses struggled with is the surprise and i think that national insurance threshold move was a surprise and i think our big call is to say you know don't give us surprises business needs certainty business needs to be able to plan and think about investments and you know if you do get surprises like that you do then have to react as a business and plan for the year ahead in terms of what you're going to do around your business strategy and you know there was a time when we had to think on our feet about how we were going to react to that now we we have reacted we've been able to do that and we've been able to talk to government about how that has impacted us over uh over the last 12 months and continues to do so not only for big business but also for smaller business and as i said we have about a thousand tenants who lease or rent our pubs and we support them and we're also you know putting their case across for the cost increases that they've had to deal with as well so yeah look i think less surprises give us some breathing space but actually do the things that that you said you were going to do in manifesto about solving the business rates issue.

18:28When you say when you talk to government, what do those conversations look like? How often do they happen? Who are you talking to? I think across the industry, we do engage with local MPs. We do engage with government ministers where we can. And I think that one of the good things about pubs politically is politicians like to go into pubs. They are customers themselves. They love that shot, don't they? Behind the bar, pulling a pint. And I have to say, I've had a few of those shots myself in time. It is a good picture. But look, and I think they do that because they recognize the importance to the people, you know, their constituents, the people who vote in this country.

19:03They are important to the country. And therefore, you know, I think they are prepared to listen to us about how we want to maintain and back pubs for the future. so those conversations happen and i get involved in some of those conversations um and the governments you know this government the last government do engage because it is about pubs it's then about actually what happens um and you know we provide a lot of support provide a lot of information to make sure the right decisions are made and the understanding of the consequences of certain decisions so and i think that's all we can do as an industry is provide that information I chair the British Beer and Pub Association.

19:42Our members get heavily involved in trying to paint the right picture for pubs and brewing particularly. And I think that's the right thing to do. What do you feel about the date of this year's budget? Because December is obviously an enormously important month for your industry. And now we have a budget screaming towards us on the 26th of November, very late in the year. yeah yeah well look it is tough but you know they're not going to set the date of the budget because it affects how i run my business uh however you know we do we are going to have to react to to what happens um you know and my hope is that we get some support on business rates we've talked about that a lot i won't mention that again but also other areas as well and you know i I think government do recognise how business has to react.

20:30But actually, in the end, it's about how we then implement some of the changes that get made during a budget. And we will react to that. Are you delaying decisions because of the budget? No, look, I think you make decisions on an ongoing basis. There isn't set points in the year where we make decisions. Clearly, we've got to set budgets for the following year. But we know the budget's coming and we know and we think about what is going to happen in the future. And, you know, I hope the taxation situation, the rates situation gets solved. And one of the facts that I quote quite a lot, and I think this really brings this home, not only to people around the country, but to governments as well.

21:06That, you know, if you're having a pint in a pub, only 12p of that ends up in the hands of the publican. Whether that's the cost of labor, the cost of production, taxation, 12p. and we need to make sure that level of profit is there for publicans to be able to create jobs and to be able to invest. And I think that's quite a stark number. And hopefully, with the changes that are coming down the line, we can see some help there. Some people listening might think, well, hang on, knowing what we know about the country's finances, knowing all the support that hospitality received during COVID, maybe it's a bit much to suggest what you've said would be a 10 grand tax cut for each of your pubs?

21:50I think it's got to be put in context of how much tax is generated already through pubs and through brewing. And it is about proportionality. You know, I said, and competitiveness. If you look at Europe, for example, taxation on hospitality is much, much lower. I think, you know, you look at VAT, for example, Ireland has just reduced their deviated level for food in hospitality to nine percent which is very different to where we are right now so i think with a second highest tax uh in terms of duty uh on beer uh in europe so you know it is writing some of those things that i think have been wrong with the taxation system and trying to do that um over a period of time we're not expecting that straight away but i think it's the other side of what you lose if you don't have pubs that people i think understand and i think we're really important and that is that community cohesion there is a story that i actually told at the british beer and pub association annual dinner this week which i think really brings this to life and it was about it was a guy who wrote to us it was a compliment so we get compliments as well as complaints coming into the business every now and again um the it was his uncle who was in his 80s he was looking after uh his wife uh who had dementia was in and out of hospital he was spending a lot of time in hospital um and he was driving home from hospital one night he'd forgotten that it was his birthday so much going on and he decided to go to his local pub and the team understanding that basically sat with him for the evening they bought him a cake over the whole team came out and sang to him happy birthday and then the team bought him his meal.

23:31And that for me is what pubs are all about. It's about supporting communities, supporting people. And you don't want to lose that. And that is really, really critical to this country. Would it be a support for those communities if pubs were to stay open longer? Because we've heard that pubs and bars in England and Wales could potentially see their opening hours extended. There's a review happening at the moment into licensing rules. Would you want your venues to be able to stay open until the small hours? I don't think it's about that. And actually, I think to some degree this has been misreported.

24:05I've been involved actually in the review with government and I co-chaired a licensing task force to look at the licensing process, which has a lot of red tape in it and has a lot of cost in it for making licensing applications, making amendments to licensing and applying for licenses for events. So I think actually what the review is about, and there is a call for evidence being put out to the country as of now, to actually look at some of the changes that we can make to cut out cost and to enable licensing authorities. and they've been involved in the process, as have the police, by the way, looking at this to make sure, A, you can protect communities and protect residents, but B, make sure that you give the right offer and the right commercial opportunity to pubs in communities to get their licenses.

24:55Not just about extending them, but maybe having more event licenses or maybe having less cost in their business to be able to get a license and a bit more proportionality in the way decisions are taken around licensing. So that review is never really about extending licences. It's been picked up in the press as being that. But the call for evidence basically looks at nine individual changes that can be made to help promote growth, to help promote the vibrancy of communities, as well as protecting local residents and individuals so things are done in the right way. So you wouldn't be necessarily planning to sell alcohol much later into the night?

25:35As a generality, no. I think on occasion you go for later licenses. That is right. But that's consumer demand driven, not a blanket, we're going to extend licensing hours. Actually, a lot of pubs don't need to stay open a lot later because of the type of pub they are. so actually this isn't about that it is about making sure that we we cut red tape we make it easier and quicker not only for publicans but also for local authorities and licensing authorities and police to make sure the licenses are effective and the conditions are effective and the conditions are relevant for today's consumer the licensing act came out in 2003 as you said earlier things have changed significantly since 2003.

26:19And actually, we need a licensing system that can really reflect that. You've talked about the trend for no and low alcohol beers. What other trends are you seeing? Is Guinness still the big booming drink? Is lager making a comeback? What are your customers ordering? Yeah, look, trends are happening all the time and they get accelerated at certain periods. The Guinness trend is really, really interesting. Lots of new people who probably weren't drinking Guinness and other drinks four or five years ago are now uh and now drinking Guinness which which is great great for Guinness great for us um certainly a trend towards world lagers um which is has certainly been happening over the last couple of years you know there are trends happening all the time low and no is really interesting i mean it's still a relatively small proportion of the overall offer but actually people are really innovating around low and no So, as I said, you'll start to see draft.

27:11You'll start to see more no-alcohol cocktails. And I think that's a really good thing. And as I say, it means that if you don't drink, you can come to the pub. You can meet friends. You can do the things that everybody does in the pub. So, yeah, a lot's happening. And we keep a constant eye on those trends. And then we do try to adapt to it, as does the industry. And as I said before, the industry's good at that. You took over Green King less than a year before COVID. So you faced, what, the lockdown, then the cost of living crisis. now these profit challenges you're talking about. What's that like?

27:42What do you wish you'd known when you first came into this industry? I think it's a really good question. I mean, I'd worked in the industry. I started my career in the industry, actually, back in the 90s and loved it. I came away in the late 90s, worked. I've always been in hospitality, worked for Merlin Entertainments for 17 years and then really wanted to come back into pubs. And I'm incredibly glad that I did, despite some of the challenges that we faced during COVID. um and that's because i love pubs i mean i it's in my dna it's in the dna of the country and i do love it and i love the people um and i love the spirit of the people and you know when you go through something like covid it does bond teams it brings people together and honestly you saw how passionate managers and teams were about the industry when we went when we went through something like that so while some people might go that was a difficult time and it was actually you saw the best of people and you saw the best of the industry coming together to really make sure that we supported it through that and you know I love my job I love the industry and I am really proud to be part of a business like Green King which has been around since 1799 it's got a real heritage and a real history and I'm I'm really proud to be part of something that's so important to this country you don't long for the piece of the old roller coasters that you were you were working with theme parks yeah i love my time there um you know my kids uh benefited from when they were younger in life they uh they had theme parks to go to and when they hit 18 i got into pubs so they were quite happy about that i think but but yeah look i mean i love i love hospitality but you know i one of the things that's really important to me about a business i work in is having a passion for um for what that business does and and that's what keeps me going it keeps me getting up every day is to be able to get out into pubs talk to people talk to to customers and do and do some good stuff and i think you know i'm really proud of some of the initiatives we we've done within green king one of our um programs called releasing potential is about bringing people out of prison giving them an opportunity actually training them before they leave prison to have meaningful employment um in our pubs after they come out and we've helped about 300 prison leavers over the last few years to get into into jobs and those sort of things means something and I'm really proud to be associated with that and to be involved in it and to have the opportunity to help people.

30:04Do you have to drink quite a lot in your job visiting pub from pub and bar from bar? No look I don't I don't when I during the day and going around and visiting the pubs I don't drink I think that's a good thing but I do visit our pubs on a regular basis we we have a pub very very close to me that's one of our pubs that me and my family go in quite a lot I'm sure the manager is slightly less happy about the fact that it's very close to my house. But yeah, I mean, look, visiting Puds is great. It's about talking to teams and understanding the challenges they go through and trying then to help fix some of those challenges.

30:38I'd ask what your drink is, but you're probably contractually obliged to say Green King IPA, aren't you? Well, no, and you could get into a lot of trouble actually at work by having favourite beers within our portfolio. But clearly I like our beers. I like a Green King IPA. I've recently been drinking Hazy Days, which is one of our one of our newer beers really enjoying that and look of course I do I drink other beers and make sure that I understand what our competitors are doing as well so there's some amazing products out there across the whole of our industry and as I said I do try to taste some of it as much as I can but it's you know it's an important part of the job to understanding what competitors are doing What's the issue that keeps you awake at night?

31:21I get asked this question quite a bit and I'd Not a lot actually keeps me awake at night because I know I've got a really good team and I've got great people who solve issues in our business. So I don't worry about specific issues. Clearly from time to time, things can get a bit higher in your mind and your thinking. But I don't lay awake at night thinking about it. The important thing for me is making sure that the culture of the business is right. And what happens for me is when maybe things are a little bit off, then I do worry about that. And I think getting the right culture in a business is really, really important.

32:00And making sure we've got the right people and giving those people really good opportunities. And I think that's something that I think about quite a lot. Because if you have the right people in business, serving customers, doing a great job for you every day, then that leads to success in my view. And I've always felt that culture is really, really important. It is hard. And it's something that takes a lot of work and a lot of time. And you don't always get it right. But I think about that a lot. You've talked about your pride running a business that's been around since 1799, and the sort of historic significance of Green King.

32:30You've also, as a boss, had to reckon with that past, haven't you? Your founder, Benjamin Green, owned slaves on plantations and was a huge advocate of slavery. And under your leadership, the businesses apologised. And I think in 2020, you promised a substantial investment in work to benefit affected communities. What did that work look like? How much money did you spend? Yeah, look, at the time, I think it was back in 2020, this was reported and we were very clear. You know, we said we were sorry for one of our founders and their involvement in the slave trade. And we said we thought that was abhorrent.

33:06And, you know, we certainly believe that. And at the time, we were very, very clear. We said, you know, we can't do anything about the past, but what we can do is impact the future. and that is about trying to make our business as inclusive as it possibly can and we invested significant amounts of money how much in training i'm not going to say now what the numbers were but we invested significantly on training our people around creating an inclusive business and about what that means you know we've made we had support um for uh the slave trade museum in liverpool um we also went out to educate ourselves and again that was an investment um i got involved something that i think changed me actually in lots of ways in in doing a reverse mentoring program um where you know we got people from our business who were from the black community or asian minority ethnic community um to come and mentor the leadership team of the business around understanding what they go through on a daily basis, whether that's discrimination or other issues that are put in front of them.