I tuned into a rather interesting broadcast on YO1 Radio with Paul Crossman of the Campaign for Pubs and local York MP Rachel Maskell reflecting on the Beer Orders established in 1989 and their impact on the pubs of today.
As Paul quite rightly points out, what was initially a decent idea to promote competitiveness and a way to break down barriers for more people to have their own pub business, became something rather sinister as a result of Pubcos. exploitation and abuse of power.
The fundamental issue is what is known as ‘The Beer Tie’. This means Tied Pub Tenants are obliged, or contractually ‘Tied’, to purchase alcoholic drinks and soft drinks from their landlord. These agreements can differ and Tenants may opt to purchase their wines or spirits for example from the open market but only if they pay a Annual Premium or ‘Buy out fee’ to their landlord to do so. However, as nearly all pubs rely on draught products as their main source of alcoholic beverage income, I have yet to see any Tied agreements which allow for all draught products to be purchased on the open market for an Annual Premium whilst remaining Tied on other less demanded products.
This causes the Tied Tenants unnecessary hardship. Pubco. landlords rely on 2 streams of income: Rent & Beer. As a result of the Tenant therefore becoming contractually bound to purchase their beers through the landlord; the landlord realised they can essentially charge whatever they want for it. The idea of a Tied Pub Tenant is that the rent is lower than the open market value, and purchasing beer through them would essentially top it up giving the Tenant a head start and a cash flow advantage. This concept couldn’t be farther from the truth as both rental value is generally inflated in comparison to the open market rental value and the beer pricing is usually extortionately inflated (in some cases it has been reported up to 140% per 11 gallon of beer in comparison to accessible open market prices).
In cash terms, the average difference in Beer Prices I would suggest is approximately increased by £80 per 11 gallon of beer for Tied Pub Tenants in comparison to Free of Tie Tenants who buy from the open market. That’s nearly £1 a pint more than if bought from the open market for the same product. One has to bear in mind that a pint of lager is on average sold at around £5.08 (according to the Morning Advertiser) so to purchase beer at a £1 a pint more to sell at this price is simply in any other trade, economically ridiculous.
To give balance, the Beer Tie isn’t exactly new. Prior to 1989, the 6 main UK breweries (Bass/Scottish & Newcastle/ Whitbread etc) owned the huge numbers of the UK pub estate and they quite reasonably demanded that the beer that they brewed was sold over the bar. Tenants had a reasonably good relationship with these breweries. The breweries had the money to invest and upkeep their properties to a decent standard to keep business turning over. Breweries had a ‘direct to market’ operation reducing third party distribution costs. Breweries had their own technical services to upkeep the dispense and cellar equipments effectively. Breweries were also at a competitive war with each other and so it made sense to keep their prices lower to keep people drinking their beer.
But in 1989 Government made a decision to ‘break’ this monopoly to encourage a fairer real estate and brewing market. The majority of these pubs were purchased by the Pubcos or better known as ‘real estate moguls’. Currently only 2 of the 6 main UK Pubcos. actually brew beer and even then, the beer pricing to Tenants of their own pubs is still grossly inflated. All 6 Pubcos. demand that the products they list (irrespective of whether they are brewed by themselves) are to be the only products available to Tenants to sell in their pubs by simply acting as a third party between supplier and tenant; a glorified supermarket if you like. This is detrimental to smaller independent breweries and Tenants and does not promote the fairer market principle of the Beer Orders act.
As a result of the Pubco. takeover, beer prices have been consistently driven higher and higher at wholesale and customer level; even when external economic factors were more stable than today. Pubs close as a result. Pubs fall into disrepair as publicans cannot afford to maintain the property on minimal GP and cash margins (Pubcos. now expect most Tenants and leaseholders to essentially upkeep the property in a similar manner to a freehold owner). Consequentially this has caused pubs what were and should be thriving to fail. We have lost 1/3rd of Great British Pubs since the millennium yet Pubcos. have thrived and offshore stakeholders have become even richer at our expense.
The Beer Orders have encouraged nothing more than big profit gains at the expense of our hard working publicans and communities which rely on upon them. Shame on the Government. Shame on the Pubcos.
On a side note, being a York publican, we are extremely lucky to have Rachel Maskell as our local MP in backing this cause to pressure for Parliamentary change alongside Paul Crossman who is a hard working publican in his own right whilst also being a passionate and dedicated campaigner for change in the Pub industry. But as highlighted in the interview, more MPS need to be made aware of this problem. I would suggest this will only happen to happen is members of the public directly pressure their local MP’s to save their locals by campaigning for legislative change to save us from the clutches of greed.
LornaSpeaks 
Leave a comment