November Newsletter: ‘Getting out of the rough’

24 November 2022

Golf clubs are more renowned for stopping change, upholding the values of yesteryear rather than changing for the demands of the future. However, a recent letter from the club I have recently joined made me sit up and listen. Explaining the costs of energy to its members, it clearly outlined the problems all businesses are facing at the moment, and how choices have to be made to keep the customers happy and the company afloat.

Last year the golf club’s energy bill was £35,000. This year, at the new rates possible in April, after the government energy relief scheme ends, the bill for the same amount of energy used will come in at £155,000!! Yes, that took me by surprise too. While membership is relatively expensive, the extra £125,000 needed to cover the energy bills would either require about 70 new members or about £300 a year on the membership*. Therefore, we can expect either sharply higher annual fees next year or a more crowded course. Either way, inflation means we will be getting a little less for our money.

However, even at a very well-run club there are ways to ‘cut the fat’. And here again the golf club letter throws light on what is happening in all organisations, and importantly how they are targeting energy savings.

Thermostats down from 22 to 19 degrees. If we accept average outside temperatures will be 7 degrees over winter, a 3-degree cut could save about 20% off heating bills. Secondly, they are culling an old fridge. Turning off just the most inefficient fridge in the kitchen will save £1,500pa. And finally real ale. It is disappearing from the pump in the clubhouse. Keeping the beer at the steady 11 degrees temperature regulation required would cost a ‘cool’ (see the pun there) £15,000 a year with the new tariffs.

So why note all this in an investment newsletter. Well, all this economising indicates where money is going to be spent and where it is going to be saved. Companies providing new energy saving devices such as fridges, dryers, hot taps instead of kettles, may surprisingly see their sales go up. While real ale producers could feel the squeeze. It also points out to the good and the bad impacts of inflation. On the positive side there is nothing like high prices to concentrate the mind.  To make real change. We cut out profligate ways. That fridge should have gone long ago. The clubhouse was probably kept too warm.   As a whole, the UK saw gas consumption fall 20% in October this year versus October 2021 because of high prices. Now that can’t be a bad thing, can it? On the downside, inflation tends to eat away at the quality of the goods on sale. Despite the economising, the golf club will either charge more to maintain standards or add new members making it more crowded. Both will impact the end product a little.

Bottom line. Next time you are down your local, you are sitting in a coffee shop, or feeling chilly in the supermarket aisle, look around and see if there have been any changes. There will be obvious changes such as the price of coffee but also more subtle ones. Are the cups smaller, are there fewer choices of ale on tap, is the freezer cabinet looking a bit bare? These are all signs that businesses are adapting to inflation. Those who understand their costs, like the golf club, have the best chance of surviving.

*MVAM guesstimate