Pubs and brewing group Marston's - formerly Wolverhampton and Dudley Brewery - hit out at the Government today after it said a hike in alcohol taxes had compounded current trading pressures.
The Pitcher & Piano and Two for One owner, which has around 2,300 pubs, said it was "disappointed" with the Budget move to increase alcohol duty at a time when pubs are already under strain from rising costs and the smoking ban.
Announcing a 15.9% drop in interim underlying profits, following the impact of a £150 million share buy-back last year, Marston's said it had put in a "resilient" performance, with a continued rise in food sales helping offset a decline in beer trade seen after the introduction of the smoking ban.
Underlying earnings increased by 1.8% to £72.6 million, said Marston's.
It said an 8% rise in food inflation would cost it an extra £1.5 million in the second half and £3 million next year. Marston's is also facing a further £3 million a year in electricity costs across its estate as it renews an existing contract, which expires next month.
The group said it was also "cautious" about being able to pass on its cost increases to cash-strapped consumers. Like-for-like sales at its 553-strong managed pub estate, Marston's Inns and Taverns, rose 0.3% in the half-year, with food sales up 7.8%.
The group, which changed its name from Wolverhampton & Dudley in 2006, said that food now accounted for more than a third of all sales, at 35%. Marston's Pub Company - its tenanted and leased arm comprising 1,721 pubs - saw like-for-like profit per pub drop by 0.6%.
It said it was clear that the smoking ban had had an effect on dragging down beer sales volumes and gaming machine revenues, down around 9% in recent months compared with a previous 2% to 3% drop.
However, Marston's said it was combating the sales woes by shutting pubs in poorly located areas and converting managed pubs to the leased model where possible, with a further 47 pubs from its Inns and Taverns arm to the Pub Company at the beginning of last month.
It is also looking to promote its bed and breakfast lodgings business, with 1,300 rooms available across 200 pubs in the Pub Company.
"Pubs without food or accommodation can also prosper provided that they are well located, with good retailers and a first class offer," said Marston's.
"Pubs that do not have these attractions struggle to compete against lower supermarket prices, which are contributing to industry-wide pub closures estimated to be running at around 30 pubs per week," it added.
Marston's is also the UK's largest brewer of premium cask ales, including Marston's Pedigree and Jennings Cumberland Ale. It said higher costs had hit underlying earnings from the brewing arm, down £400,000 from £7.4 million last year, with sales volumes of its own brands down 2.5% in the first half year, although this was up 0.5% on an annualised basis. Premium ale sales grew 7.2%, said the group.
Chairman David Thompson said: "The recent increase in beer duty by the Government has added further costs to pubs in already challenging trading conditions, and has contributed to the widening price gap between pubs and supermarkets.
"As a pub operator and brewer we promote the responsible, supervised retailing of alcohol and are disappointed that the effect of the Government's tax increase is likely to undermine this objective."