Wednesday, 14 May 2008

PubCo's on a Warning!

It is fair to say that I think the creation of large Pub Companies with their accompanying mountains of debt and avaricious habits has done far more to damage the UK pub industry than Tesco et al. I know it is open to considerable debate, but it is clear that moving from a position when the infamous Beer Orders came in to deal with the "monopoly" that was the Big Six Brewers, we went from a position where around 90% of the pubs in England and Wales were free of debt, to one where they were mortgaged to the hilt and beyond. Each time a pub company has bought another one, (and they are huge now, far bigger than the "problem" that was intended to be fixed) another few thousand pounds of debt has been heaped on the pubs and subsequently to the rent the tenant pays. At each stage of this spiralling game, money has been taken out and debt put in, to the point where pubs have become unviable. The tenants misery is added to by being tied - beer choice is dictated by the Pubcos by and large - and sold to tenants at inflated prices. Add changing lifestyles and habits, along with cheap supermarket beer and you have a losing formula. A desperate hope of survival against the odds for a lot of licensees.

The pub companies still don't get it though and continue on their anti competitive and losing ways. They are the true enemy of the pub lover, squeezing the assets until the pips squeak. And boy are they squeaking now. So much so that even our MPs have noticed something is amiss. Anti-pubco MP Tim Farron speaking at the official launch of the Fair Pint group, which wants the tie removed from all pubs, except those owned by brewers with fewer than 500 sites, said the Fair Pint campaign group is "pushing at an open door for another select committee hearing". Tory MP Sir Nicholas Winterton added: "There is a growing concern in Parliament about the power of the pubcos and how they are exploiting landlords."I believe an inquiry is long overdue."

Too bloody right it is Nick, but let's hope it isn't "too little, too late".


Paul Garrard said...

The cynic in me suggests that it will be too little and far too late.

brendan said...

Well, I don't know. If there is a market for pubs, and I am sure there is, something will come along to fill the void.

Andy Holmes said...

I'm getting a bit of a sinking feeling about the whole economy at the moment.

Inflation 3%, really? They must think we don't actually live here and spend money!

Matt said...

It does seem shocking that the pubcos have absolutely no interest in the function of a pub or its beers but rather the value of their portfolio. They really are real estate management groups.

Stonch said...

Peter, that's a well written summary of a very real problem.

Some people seem unaware of the distinction between brewery and pubco ties, thinking only of the former.

The biggest problem with ties isn't the restricted choice of products, it's the price you have to buy them at and the effect that has on your margins.

Boak said...

Indeed, it is a very good summary and one that anyone who wants to understand the beer scene in the UK should read. Question is, can you really legislate against it? Presumably the pubcos would all sell up, but who would buy the pubs and fill the vaccuum? (as indeed happened when brewery ties were legislated against, bring the pubco into existence in the first place)

Perhaps we need to think of ways to make getting a free house less complicated? And if pubcos are evil, should we be boycotting them in favour of free houses? Camra stays rather quiet on the issue, I can't help but feel.

Rednev said...

Tandleman has summarised the problem well, and while I hope the concerns expressed by some MPs lead to change, I feel their views are against the government's prevailing tendency to penalise drinkers on health and public order grounds. If you believe the propaganda of the new anti-alcohol puritans, every pub is full of uncontrollable binge drinkers who fight in the streets and end up in hospital or police cells. Unfortunately the puritans are winning the propaganda war: some of my acquaintances are amazed I go into Southport town centre at weekends and survive the mayhem.

A pub crawl around most town centres confirms that this view is nonsense, but it is a nonsense that is useful to justify raising money via a beer escalator modelled on the unpopular fuel escalator. I therefore feel it is unlikely that the government will do anything that might benefit pubs, and consequently the beer drinker.

Still, we can hope that some sense might prevail, if only because someone in government notices that an awful lot of jobs are generated by the drinks industry, and allowing the anti-competitive practices of the pub companies along with excessive tax hikes will ultimately be self-defeating.

Tandleman said...

The real issue now is that the debt on each pub wont just go away. The best we can hope for is that the straitjacket that the pubcos have on the pub tenants will be loosened enough to allow them to make a reasonable living. This needed intervention years ago. It may well be too late. Thanks for the comments all.