Marston's, the Midlands-based pubs and brewing company, today gave warning that cash-strapped consumers would continue to be cautious about discretionary spending, noting a continued decline in beer sales and flat sales growth overall.

Marston's, which has has an estate of more than 2,000 pubs of which just over 500 are directly managed including the Pitcher & Piano chain, also said it would spend £2 million assisting landlords to remain competitive with discounting rivals.

The company said full-year results would be broadly in line with expectations, saying there had been no improvement in second-half trading. Sales in its managed pub division were tracking 0.6 per cent below the same 43 weeks to July last year.

The tougher trading environment for beer was underlined by figures released today by the British Beer and Pub Association that showed beer consumption at its lowest level since 1930. Total beer sales fell 2.8 per cent to 8.7 billion pints in the 12 months to the end of June.

Pubs operator Mitchells & Butlers last week said beer market volumes had fallen by 10 per cent over the past quarter.

Marston's said food sales at its pubs continued to increase, despite reduced sales from drinks and gaming machines. Customers are looking more and more for value for money and we’re competing with other value-for-money competitors,” said Ralph Findlay, Marston's chief executive.

"Although the market is difficult, and we do not expect any improvement in the economy in the short term, we are still seeing growth in eating out in Marston's pubs, despite the squeeze on discretionary expenditure and weaker confidence.

"Cost inflation remains a significant challenge, but we are controlling our costs well and are taking appropriate actions to offset some of the increases in the costs of brewing raw materials, food supplies and utilities. We are relatively well positioned as a result of sustained investment in our food offers, the improvements in our range of beers and premium brands, and our freehold pub estate."

Like its competitors, Marston's has blamed the downturn in beer sales on the impact of the smoking bans in England and Wales and the worsening economic environment that has reduced discretionary spending.

Marston's, which produces its own range of beers, including its Pedigree label and the Banks's range, said volume sold remained below last year, although the company had increased market share overall.

The slump in sales is not just confined to beer. Last week Britvic, the soft drinks maker, cautioned that pub sales of its beverages were under pressure as more people chose to save money and stay at home.

Enterprise Inns, the tenanted pub operator, warned recently that its profits were under pressure from sharply declining beer volumes and the need to provide financial support to its hard-pressed tenants.

Likewise, Marston's said it was spending £2 million supporting tenants in the form of rent concessions, subsidising drinks discounts and meal offers.

In Marston's pub company, the tenanted and leased pub division, like-for-like profit was approximately 1.2 per cent below the same 43-week period in 2007, with growth in rental income offset by weak volumes and machine income in line with market trends. The company had disposed of 18 tenanted pubs in the year to date.

Marston's said the cost of brewing raw materials, food supplies and utilities were rising but had been "well controlled".

Group turnover was approximately 2 per cent ahead of last year for the 43-week period.

Capital expenditure this year is expected to be around £115 million. "In 2009 we expect to reduce capital expenditure to around £65 million, with fewer pub openings in new housing developments anticipated as a consequence of significantly reduced investment by housebuilders," the company said.

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