Giant companies and big brands will increasingly dominate the licensed retail market, just as they already do the grocery market, an audience of senior industry figures heard last month.

In a presentation to the Key Issues for Licensed Retail 2004 conference, organised by Martin Info in London, Jim Fallon of the corporate finance adviser McQueen said a clear gap has already opened up between the "first division" pub companies, Punch Taverns, Enterprise Inns and Mitchells & Butler, the second division and the rest.

As retailers have consolidated since the Beer Orders of the early 1990’s into larger and larger groups, so suppliers have had to consolidate as well, Fallon said.

Now, with the very strong premier division retail groups and a consolidating supplier base, "a grocer market-style industry structure is becoming a more likely end game in licensed retail than any other", with a few big firms dominating the landscape.

The result, Fallon said, is that just as in the grocery world, pub retailers will have "must stock, category killer" brands, such as Stella and own-label. "It is not difficult to foresee a scenario whereby the big retailers in the pub sector have ’own label’ standard products sold at relatively low prices," Fallon said.  "They will continue to stock category killers, the brands which are heavily supported and therefore draw customers.  However, the third strongest brands could very soon find themselves marginalised."

On the retailing side, with a small number of groups so dominant, "the key to success for all but the largest operators is going to be retailing innovation," Fallon said.  "This may prove a challenging time for many operators and producers, but it should be good news for consumers".  Already, he said, retailing innovation has taken the pub business into a new dimension, "greatly improving what was on offer to the consumer in most cases".

However, he warned against a repetition of the strategies of the last decade: "The High Street saw far too much capital chasing a reducing number of 18 to 24 year olds in the latter part of the 1990’s and we have seen a painful fallout from that sector since then.  The stock market encouraged rapid roll-out concepts when many of them did not have strong enough formats to stand out from the crowd.  In any event, the total market size was not in significant growth, and supply far outstripped demand.

"This does not mean that the sector is doomed, merely that a check and balance is sometimes introduced by capitalism when something appears to be good to be true."