Wet-Led Woes

The decision of Marstons to sell some 200 of its wet-led pubs has met with a degree of concern that is hardly surprising, but should that really be so?  The giant PubCos are a mess and have little coherent branding, but Marstons and Greene King, huge in themselves, but disconcertingly under the radar in most circumstances, are quietly changing their wet focus into food-led with drink as an add on.  They are building large new pubs to emphasise this point, so there is surely little shock that bottom end pubs with little prospect of fitting into a different mainstream future are being disposed of? It is not simply the move to food that has motivated Marstons however, as the company needs to reduce its £1 billion debt and the £90 million deal will come in handy for this purpose.  But it will also be used to build more new pubs, or should that be pub/restaurants? 

What is more worrying is the buyer. In this case NewRiver Retail, which plans to convert most of them into shops or supermarkets.  The pubs it seems, have been sold for that very purpose. This already happens a lot, sometimes openly, but often by stealth and in ones and twos.  CAMRA, the Campaign for Real Ale feels that to allow such change of use without the planners being able to intervene or the public to object, is a loophole which is too easily exploited.  Maybe, but in some cases at least the alternative will never and never could be retaining them as pubs, so poor is the business.  In some cases though, it is not so clear cut.  CAMRA has announced it will oppose the changes of use. Mike Benner, the Chief Executive said "The fact that this sale has happened is a result of a dysfunctional planning system which means pubs are regarded as easy pickings by developers.  CAMRA will be using this development to press home the case for tougher planning protection for pubs and for greater consumer consultation when they are threatened with alternative use."

All well and good and I agree that it is right that planning law should include changes of use in such cases, especially since so many shops are empty (though often, unlike pubs, in the wrong places) but the underlying trend of big brewers and small getting out of many marginal wet led pubs will continue.  As Curmudgeon pointed out, even here in Manchester, Lees and Robinsons are doing just that, though not in their cases to alleviate debt.  It may well be the case that the wet led pub has a limited future under certain kinds of ownership and that is likely to be under the control of individual owners and small chains, where they see that the market exists if the right beers are sold and the right offer is made.

At least this time we will know in advance which pubs are affected.  That's useful, but one thing is for sure, they won't all be viable as pubs.

I'll of course be interested as a local CAMRA Chairman to see if any of our pubs are affected. That'll put more meat on the bones.

Up to Their Neck in Debt

I've written before about the Pub Companies. The big ones at least, are not ones that most would reckon to be the landlord's friend. Nor indeed the drinker's friend. I know they give all that guff out about how their interests and those of their licensees are identical, but what they never mention is that they are up to their eyes in debt. That makes the relationship more akin to a starving man to a man with a large pie. The starving man needs to get that pie to live and he will do so at all costs.

Back in 1989, when the Beer Orders came in, the existing large breweries were to be limited to a couple of thousand pubs.* It wasn't anticipated that rather than go along with this, sell off the excess and compete for business, that they'd side step the arrangements by setting up Pub Companies and thus defeat the whole point of the new legislation. What isn't always appreciated is that to raise the money, the new Pub Companies took out loans or mortgages on the pubs, most of which were debt free, having been acquired by the big breweries long since and the loans paid off likewise. Every time a merger took place of  Pub Companies it was paid for by borrowing to pay off those that had borrowed to set it all up in the first place. It explains why the Pub Companies are, not to put too fine a point on it, sinking under a sea of debt.

The Sunday Times had an excellent article on this last Sunday, in which they explain that the sharks are circling around one of the biggest, Punch Taverns. This is a company with a share base worth £41 million and owes a staggering £2.3 billion - 56 times its worth. It owns around 5000 pubs, which in turn are mortgaged to an average of £460,000 each. Any wonder then that they squeeze their landlords until the pips squeak? These pubs are mostly tenanted (some leased) and in an effort to reduce the debt further, the aim is to sell off another 2000 pubs. Isn't it ironic that these estates are being brought down to a sensible level now after creating giants that have devastated the industry? Rather like the Beer Orders intended - the numbers that is - not the devastation.

So good news? Yes and no. There is already a lot of pubs available at a time when the market is weak, the economy flat lining and demand for pubs sluggish at best. The pick of the crop is either in the floated off Spirit Group (the managed house arm which has become a separate company - again!), being held back against a rainy day (it is pissing down at the moment and everything is effectively for sale), or have been sold off already. Don't look for good news soon I'd say.

Oh and what of the circling sharks. When blood is scented they appear in numbers. Vulture funds have hoovered up around half of the companies shares to be in a position to strike when it all goes tits up.Who knows what will happen then? It could go either way, but will it be good for pubs and drinkers or bad?

Time will tell, but it looks like we might find out about Punch sooner rather than later.

I've written previously about Pub Companies - none of it particularly positively I'm sorry to say. Click here for details.  

* See John Clarke's very important comment too, as areminder it could have all been very different.