This excellent article hereunder entitled “Is the grass greener on the other side?” first appeared in the Publican’s Morning Advertiser (www.morningadvertiser.co.uk) and is reproduced here with the kind permission of the author, Robert Sayles, and the Editor of the Publican’s Morning Advertiser:
Is the grass greener on the other side?
There’s been a fair bit of scaremongering in the press of late with regard to MRO (Market Rent Option). If we believe the hyperbole then dire consequences lie ahead. Pubco investment will dry up, jobs will be lost and many more pubs will disappear from the landscape. Does such a negative assessment have any credence?
It would appear the recent government defeat brings MRO one step closer to reality. The focus now inevitably turns to what will it mean, not just for the industry but for licensees and of course the consumer.
The sanctioning of MRO was welcomed by many in the trade, particularly those who’ve campaigned vociferously for much needed reform to the pubco’s rapacious modus operandi.
Unsurprisingly, the major brewers and pubcos have been somewhat less enthusiastic. If the BBPA’s chief executive Brigid Simmonds is to be believed, pubcos won’t be incentivised to invest in their estates; resulting in additional pub closures and job losses.
It seems some in the mainstream press have swallowed this hook line and sinker. Allister Heath writing in the Daily Telegraph states, “Far from helping small landlords and improving the diversity of beer and food on offer, the so-called “market rent option” for tenants will lead to yet more public houses closing and accelerate the catastrophic decline of a once great British tradition”.
So let me get this right. Empowering tenants with the ability to pick and choose which beers to sell and allowing them to develop their businesses so as to reflect the needs of customers will somehow result in 1,400 more pubs closing? I’m sorry, but I’m not seeing it.
Such scaremongering shouldn’t fool anyone. It is something we’ve long been accustomed to hearing from an organisation that finds itself increasingly on the back foot.
Let’s not forget that since 2004, four Select Committees have convened to look into the way pubcos treat their tenants. A whole host of recommendations have been put forward, all aimed at ensuring greater protection for licensees. To date none have been implemented.
It’s obvious to all that the industry has been content to drag its feet in the hope everyone would eventually lose interest and move on. Thanks to a small number of committed reformists, as well as the dedicated efforts of a certain group of MPs, pressure has remained intense; ensuring the plight of pubs and licensees remains at the forefront of media attention.
What everyone now finally recognises is that above all else tenants need flexibility – being dictated to in terms of what they can and can’t sell is no longer a viable option.
Without MRO large numbers of tied pubs will continue to close. One of the primary reasons for the high rate of closures is the failure of tied pubs to meet the expectations of customers, both with regard to product range and price.
For this unenviable legacy licensees can thank their supposed ‘partner’. The reality is that pubco price lists are not a reflection of current consumer demand, rather a testimony to the products which guarantee the largest returns.
Tenants by contrast need to offer products customers want to drink not products pubcos want them to sell.
This conflict of interest illustrates the extent to which decision making is pubco-driven not market-driven; a mind-set that goes a long way to explaining the demise of so many tied pubs.
The implications of this are all too apparent. The current arrangement incentivises both pubcos and brewers to hike prices, enabling pubcos to profit handsomely as a result of the tie whilst allowing big brewers the opportunity to offset the financial impact of falling volumes as micro-brewers make substantive inroads into a declining market.
It also ensures tied tenants are unable to compete with their free-of-tie counterparts or supermarkets. In fact quite the opposite – the annual beer price hike, to which tied tenants have become accustomed, merely ensures the price differential between tied pubs and the rest of the market continues to widen. When you factor in the added obstacle of restricted product range it’s not difficult to see why so many tied pubs are falling by the wayside.
Of course, pubcos maintain the tied tenant is compensated by a below market rent. The feeling amongst many tied tenants I’ve spoken to is they’re paying a market rent as well as inflated prices for their products.
Little wonder so many see so little reward for so much endeavour.
The New World
The arrival of so many new brewers and beers on the scene illustrates the extent to which the archaic tied model has lost touch with the realities of a rapidly changing market place. The BBPA is stuck in a time warp – content to continue promoting a business model that is simply no longer sustainable.
In the halcyon days when consumers felt less inclined to question the need to go to the pub, the range of products on offer were perhaps less significant. Those days are long gone.
The customer has evolved to become much more discerning, far more choice orientated.
A cursory glance at the range of products on supermarket shelves tells us two things – how far the world has moved on and the extent to which tied pubs have been left trailing in its wake.
Contrast the supermarket offering with a visit to a tied pub. As you enter a tied pub you’ll be confronted by many of the branded fonts you’d have seen twenty years ago. The tied pub is quite literally a place where time has stood still.
The problem is that in today’s world there’s no place for institutions that fail to move with the times. A stroll down any High Street testifies to that fact all too vividly.
What I find particularly puzzling is that whilst the BBPA are quick to cite all manner of reasons why pubs have become less attractive, (supermarket pricing and the recession) they refuse to acknowledge that it is those very factors that dictate reform is now inevitable.
Is it not odd that an organisation that purportedly represents pubs seems so bereft of ideas? Little wonder Greg Mulholland MP labelled them “thoroughly discredited and not trusted in Westminster”.
So, assuming it comes into being, what will MRO ultimately deliver?
MRO will give fledgling brewers access to hitherto closed markets, enabling them to invest with confidence and giving additional momentum to the unprecedented growth achieved thus far.
In fact there is evidence to suggest this process is already underway – many micro-brewers are already widening their distribution network by swapping beer with counterparts in other parts of the country.
MRO will give impetus to this process, allowing it to be expanded and refined.
Needless to say, Brigid Simmonds has been keen to play down the significance of MRO.
If she’s to be believed then “the grass is always greener – this could not be more true for proponents of free-of-tie who maintain their beer would be automatically cheaper and the choice wider. This is not necessarily true and if it was, it is highly likely that they will be tied to a different distributor or wholesaler, who in return for cheaper drinks will insist on loyalty to their brand or range of products”.
The reality is MRO will give licensees what they’ve desperately needed for some considerable time – unlimited access to the full range of products currently available to their free-of-tie counterparts.
In addition market conditions will be permitted to prevail, allowing licensees to negotiate prices/discounts with brewers keen to grow market share. The price at the pump will reflect the market, not extortionate mark-ups applied by pubcos desperate to service unenviable debt mountains.
(It’s possible licensees could take a leaf out of the pubco book by coming together to form buyers’ clubs – thereby increasing their negotiating power).
Once licensees begin to make a decent return, they can begin to legislate for the long-term rather than the day-to-day existence that is the current reality for many. The confidence generated will convince many to begin investing in their businesses, re-assured by the fact that they’ll be the primary beneficiaries of any additional turnover derived from that investment.
Consumer perceptions of tied pubs are frequently negative – limited choice and eye watering prices at the pumps invariably result in many being spurned by cash strapped consumers in favour of cheaper alternatives.
MRO will put pubs on an equal footing; ensuring a level playing field so that all licensees have the opportunity to be competitive.
This will in turn benefit the consumer.
Freed from the constraints of the tie licensees will be able to focus on utilising their undoubted entrepreneurial skills, making their businesses attractive to new clientele rather than fighting protracted battles with their so called ‘partner’.
This will in turn benefit the consumer.
So, is the grass greener on the other side?
In an industry where corporate greed has been permitted to hold sway for far too long, the answer to that surely has to be an emphatic yes, doesn’t it?
BLAME IT ON THE MUSLIMS??
This really beggars belief!! – “In areas of Nottingham, Leicester, Manchester, Leeds & Birmingham THE INCREASE IN THE MUSLIM POPULATION, WHO DO NOT DRINK, LEADS TO MANY PUB CLOSURES“ per Lord Hodgson of Astley Abbotts in the UK House of Lords debate on the UK Small Business, Enterprise & Employment Bill.
This Lord (a former director of Marstons’ Brewery and the subservient trade association, BBPA) said the pub sector is under severe strain “for reasons quite unconnected with the brewers, the pubcos or the tenants“. What planet is this guy on?
How about the thousands of UK pub closures of past decades as a result of the exploitative asset-stripping pubcos and major brewers’ imposition of the pernicious, “bootlegging”, inflationary, anti-competitive restrictive practice known as “the beer tie” which most sections of the media are now blatantly misreporting in pandering to the scaremongering of the same all-powerful pubcos and major brewers following the recent long overdue successful vote in the UK Parliament for pub tenants to finally be able to opt out of this “bootlegging” arrangement and contract purely at a market rent for their pubs?
GOOD NEWS – FINALLY!
On 18th November 2014 a historic motion was passed in the UK Parliament effectively finally making the pernicious, anti-competitive, inflationary “boot-legging” restrictive practice known as “the beer tie” optional instead of compulsory by enabling leased pubs and their down-trodden tenants the option to hitherto contract with their exploitative pubco and national brewery landlords on a market rent only basis instead of also being forced to purchase stipulated supplies at extortionate prices from the same said landlords.
However the UK media have been far from balanced, and indeed noticeably biased towards the major pubcos and national brewers, in their reporting of this long-overdue material improvement in regulation of the UK pub industry, hence the two letters hereunder (which the UK media have disgracefully refused to publish):
Letter to the Evening Standard re their biased reporting on 19th November 2014:
I refer to your article in yesterday’s Evening Standard (19th November edition) on page 45 of the Business Section entitled “Vote to scrap beer tie will mean pub closures”.
I have seen some biased reporting in my time but this article by Nick Goodway is the worst. The article presents no counter argument to the obvious scaremongering statements by the very pubcos and major breweries who have closed up to 20,000 UK pubs, often using the “beer tie” to evict tenants in pubs that can be “asset-stripped” for lucrative development as supermarkets, estate agents and betting shops without the need for planning permission under a glaring loophole in current planning legislation.
It is hardly surprising that the pubcos, major breweries and their subservient trade associations, such as the BBPA, (that your article is clearly pandering to) are bleating about this long overdue and historical statutory amendment to their “boot-legging” compulsory restrictive practice known as the “beer tie” (outlawed in every other area of UK business).
These same avaricious companies have been milking hard working tenant publicans of their earnings for far too many decades (57% of licensees tied to the large pubcos earn less than £10k per annum!). It is no wonder therefore that the share prices of these companies, artificially boosted for many decades by their imposition of a pernicious, anti-competitive, inflationary and restrictive practice, are now being restored to their true value after this historic Parliamentary amendment. Furthermore this restrictive practice has unnecessarily inflated beer prices and reduced choice to the consumer for far too long.
Now tied tenants are finally unshackled and have an option to operate “free of tie” and purchase their beer in the open market at up to half the price charged by the pubcos and major brewers. Furthermore if as these same landlords state “the beer tie” is a fair commercial arrangement then they should have no fear in the operation of this option approved in Parliament on 18th November. This is NOT the abolition/”scrapping” of the “beer tie”, as consistently incorrectly reported including in your aforementioned biased article, but it is an OPTION for pub tenants to be able to contract with an open market rent only without the necessity to be tied to paying extortionate prices for stipulated supplies from their landlords.
This Parliamentary amendment will save the closure of a FURTHER 20,000 pubs in the next decade, preserve the UK’s unique pub culture within communities and dismiss Hilaire Belloc’s prophetic quote, which was sadly becoming true under the COMPULSORY pernicious “beer tie”, viz: “When you have lost your inns, drown your empty selves, for you will have lost the last of England”.
Letter to The Daily Telegraph re their biased and inaccurate reporting on 20th November 2014:
I refer to your uninformed Business Comment personalised by Allister Heath on page B2 of today’s Business Section of the Daily Telegraph entitled “The death of the beer tie will put thousands more pubs out of business” and your alarmist report on page B5 of today’s Business Section of the Daily Telegraph emblazoned “Pub Bosses issue warning over change to beer tie system”.
Firstly and foremost would you all please get it through your heads that it is NOT “The death of the beer tie…” nor is it the abolition of the “beer tie” and nor is it the scrapping of the “beer tie” as is being so inaccurately reported in the media. It is an OPTION for pub tenants to be able to contract with a market rent agreement only without the imposition of being tied to paying extortionate prices for stipulated supplies from their landlords, the large pubcos and national brewers. Your articles are pandering to the obvious scaremongering statements by the very pubcos and major breweries who have closed up to 20,000 UK pubs, often using the “beer tie” (in conjunction with their measurements’ enforcer – apparently founded by a convicted felon and whose equipment also apparently does not comply with Weights and Measures legislation or Trading Standards) to evict tenants in pubs that can be “asset-stripped” for lucrative development as supermarkets, estate agents and betting shops without the need for planning permission under a glaring loophole in current planning legislation. Having tackled the propensity for abuse of the “beer tie”, closing this planning loophole must now be the next step in reforming this business to prevent further ruthless “asset-stripping” of pubs.
It is hardly surprising that the pubcos, major breweries and their subservient trade associations, such as the BBPA, are bleating about this long overdue and historical statutory amendment to their “boot-legging” compulsory restrictive practice known as the “beer tie” (outlawed in every other area of UK business).
These same avaricious companies have been milking hard working tenant publicans of their earnings for far too many decades (57% of licensees tied to the large pubcos earn less than £10k per annum – based on a twelve hour opening day, seven days per week I calculate that this equates to an hourly rate of less than £2.30!). It is no wonder therefore that the share prices of these pubcos and national brewers, with profits artificially boosted for many decades by their imposition on their tenants of a pernicious, anti-competitive, inflationary and restrictive practice, are now being restored to their true value after this historic Parliamentary amendment. Furthermore this restrictive practice has unnecessarily inflated beer prices and reduced choice to the consumer for far too long. A long overdue equitable balance between pubco and tenant is now finally available.
Tied tenants are at last now unshackled and have an OPTION to operate “free of tie” and purchase their beer in the open market at up to half the price charged by the pubcos and major brewers. Furthermore if as these same landlords state “the beer tie” is a fair commercial arrangement then they should have no fear in the operation of this OPTION approved in Parliament on 18th November. The “beer tie” will still survive, as long as it is equitable. Tenanted publicans now finally have the CHOICE to remain as per the status quo or negotiate a fairer deal if the “beer tie” is being abused and is unfair, as has occurred so often on past occasions bringing it in to disrepute. CHOICE is now finally available to the pub tenant and arguably, more importantly, to the consumer and with a more affordable pint.
This Parliamentary amendment can now finally save the closure of a FURTHER 20,000 pubs in the next decade, preserve the UK’s unique pub culture within communities and dismiss Hilaire Belloc’s prophetic quote, which was sadly becoming true under the COMPULSORY pernicious “beer tie”, viz: “When you have lost your inns, drown your empty selves, for you will have lost the last of England”.
BEER TIE/PUB REFORM UPDATE
The Government has finally published its response to last year’s consultation on Pub Companies and Tenants and accordingly the Government’s recognition that self-regulation was not working and their confirmation that they will introduce a Statutory Code and an independent Adjudicator is most welcome. Indeed the first reading of the business bill incorporating the proposed aforementioned Statutory Code occurred on 24th June 2014. However, regrettably it would appear that the proposed Statutory Code to curtail ruthless pub company practices fails to deliver the promised fairness and a business environment whereby a tied tenant should be no worse off than if they were free of tie. The Government seem to have offered a diluted Code and an impotent Adjudicator which will in reality accelerate the closure of pubs and increase job losses in the industry. The apparent inherent weakness of the proposed Statutory Code will, it is feared, permit the exploitative pub companies to continue unabated their asset-stripping of the nation’s heritage.
Alarmingly the proposed Statutory Code does not include the essential equitable ingredient which is the right for tenants to choose whether they wish to continue in their tied relationships (which force them to pay excessive rents and artificially inflated beer prices) or opt for a normal commercial relationship where they pay an open market rent and can acquire all of their products in the free open market at almost half the price. It is mystifying why the pub industry is the only commercial area in the UK that tolerates a “restrictive practice” which is outlawed/illegal in every other business!
The fundamental question remains – how does the Public Consultation response and the proposed Statutory Code actually perform/satisfy the Government’s clear commitment to deliver fairness and circumstances where a tied tenant is no worse off than if they were free of tie?
What effective use is the proposed Adjudicator when he has no statutory powers to (i) render unenforceable any unfair or unreasonable lease provisions and (ii) determine a tied rent or offer any other remedy? The pub companies could quite easily declare that the Adjudicator was acting “ultra vires” should he even try to rule on the aforementioned issues.
In view of the aforementioned shortcomings the current bill as drafted is not fit for purpose and will do very little to rebalance risk and reward and offer a chance of a sustainable future for the Great British pub.
Accordingly please implore your local Member of Parliament to urgently press the Government for meaningful, material reforms and to support amendments for the following:
- a Market Rent Only option, offering a tenant a genuine remedy should a pub owning company act inappropriately,
- a material remedy should the parallel rent assessment demonstrate the tied tenant is worse off than if they were free of tie and:
- a clear and tangible power for the adjudicator to render unenforceable any unfair lease provisions.
The Market Rent Only option would then rightly place the future of the tied model into the hands of the market – the success or failure of the tied model then depending upon the fairness or otherwise of the terms of the tied agreements themselves. If, as the pub companies allege, their tied agreements are fair then they should have nothing to fear from a Market Rent Only option, but as most consumers and especially tenants know to their cost and all too often to their loss of their homes and their livelihood, the tied agreements are in reality pernicious, exploitative, anti-competitive, inflationary restrictive practices.
A FAIR DEAL FOR YOUR LOCAL – AND A FAIR PINT!
“When you have lost your inns, drown your empty selves, for you will have lost the last of England”……….Hilaire Belloc
There have been sweeping, unsubstantiated and scaremongering generalizations published by regional and national brewers and pub companies in their prejudiced opposition to the recent proposed regulation of the UK pub industry and in particular the long overdue reform of the pernicious, anti-competitive and inflationary practice known as the “beer tie”. The “beer tie” is not dissimilar to the activities perpetrated by the gangsters during the Prohibition era in the USA and is a ruthless practice whereby pub tenants are forced by the owner pub companies to purchase their stipulated beer supplies at inflated prices in addition to paying rents for the premises. Almost always the pub tenant could purchase the same beer supplies in the open market at a considerably lower price, but the pub tenant is prohibited from doing so by the owner pub companies.
The 1,150+ innovative and creative UK micro-breweries have been struggling to gain a foothold in this ” closed shop” and must welcome statutory regulation giving tenant publicans more freedom of choice. The “beer tie” is a restrictive practice, such arrangements being outlawed elsewhere in the commercial environment.
Real ale drinkers have been longing for a greater choice in their locals at more competitive prices instead of the limited choice dictated by pub companies and large brewers who overcharge for their stipulated supplies and thus force inflated retail prices on to consumers.
A significant effect of the evil “beer tie” has been the closure and sale for commercial development of far too many pubs in the UK, as highlighted in the media. We cannot afford to lose any more pubs to the asset-strippers in this climate of ever-increasing property values. The unique traditional pub culture in the UK is under threat or in the words of Hilaire Belloc “When you have lost your inns, drown your empty selves, for you will have lost the last of England”.
An about-turn from the Office of Fair Trading after its repeated endorsement and ill-considered support of the “beer tie” over many past years was never going to materialize. Likewise it has been unrealistic to expect the industry to self-regulate constructively or fairly. Government legislation is the only way to control this ruthless practice which has cost so many publicans their livelihood, their life savings and their homes and deprived whole communities of their local pubs. Competition must be restored to the UK pub industry so that the tied public house is no longer placed at a competitive disadvantage.
A “level playing field” dominated neither by exploitative pub companies nor by large brewers is long overdue in the UK.
WRITE TO SECRETARY OF STATE VINCE CABLE AND YOUR MP FOR STATUTORY REGULATORY REFORM OF THE UK PUB INDUSTRY AND DEFEND YOUR LOCAL PUB FROM “ASSET-STRIPPERS” BY GETTING IT LISTED AS AN ASSET OF COMMUNITY VALUE