Comment: UK pub sector
Pressure is rising on the UK's largest pub companies to accept that reform of the so-called 'beer tie' needs to happen, as pub closures continue apace.
Pub companies such as Enterprise Inns and Punch Taverns have been fighting a rearguard action ever since the House of Commons Business and Enterprise Committee of MPs said in May that the Competition Commission should examine the relationship between pubs and tenants.
That relationship, enshrined in law and known as the "tie", may be "exacerbating" financial pressure on pubs by forcing them to buy beer from their pub companies at set prices, the Committee said.
The issue is fast coming to a head, amid figures that show more than 50 pubs are closing down every week. That is around 2,750 annually, from a total UK pub network of around 56,000. Around 24,000 are covered by the "tie".
The Campaign for Real Ale has confirmed to just-drinks that it intends to use its power as a registered consumer body to lodge a "super complaint" with the Office of Fair Trading, forcing it to open an inquiry.
One pub landlord, Giles Webster, who runs the Coach & Horses gastropub in central London, told just-drinks that he believes reform needs to happen.
Webster, who is tied to a major pub company, said: "At one point, it was cheaper for me to go up the road and buy the same beer at retail price than it was to get it from my own pub company."
Webster said he "does not mind being tied" and that he doesn't blame pub companies for trying to make a profit.
But, he said "trading is extremely tough" and he criticised pub companies' policy on rent. He accused them of "negotiating the rent up way beyond what is fair and reasonable".
This week produced more stark figures on the UK pub trade, from Enterprise Inns, which owns more than 7,500 outlets. Enterprise said that pub closures are up 50% on last year and that closures are losing it GBP2m per month.
The group said it is also paying GBP1.7m per month to keep around 800 struggling pubs afloat, largely via temporary rent reductions.
Both Enterprise and rival Punch Taverns have been forced to offload pubs this year in order to pay down mounting debts.
Given the financial state of the sector, some might conclude that a review of the "tie" could, in the end, be in everybody's interest.
However, pub companies, who fear losing income - and there is less and less to lose - remain staunchly in favour of the status quo. Naturally, large companies in a sector will be fearful of anything that might rock the boat, and are therefore loathe to have competition officials rustling through the corporate drawers.
Punch said, following the Business and Enterprise Committee report: "We strongly believe that the tied pub model provides a fair and equitable approach to sharing risk between ourselves and our licensees, represents a low cost opportunity for entrepreneurs, and has a rightful place in the market."
Reports this week suggest Peter Mandelson, the UK government's defacto vice-prime minister as first secretary of state, will make a decision on whether to hold an inquiry on the beer tie in October.
Enterprise said this week that it and other pub companies are committed to ensuring the relationship between pubs and licensees "continues to evolve in a way which ensures vibrant competition, wide choice and fair prices for consumers".
That may be so, but, looking at the figures, surely something has got to give?
Sectors: Beer & cider
- Comment - The Appeal and Perils of Craft
- Review of the Year 2014 - Part IV: Spirits
- Cuba-US Normalisation: Bacardi, Pernod Winners?
- Sustainability in Wine - Part I
- Time is Right for Refresco Gerber Exit
- Belvédère to sell assets, streamline portfolio
- Belvedere vodka tie-up over new James Bond film
- Diageo ups focus on China with Mortlach roll-out
- Diageo rolls out Beckham's Haig Club to US
- Brown-Forman eyeing Scotch, Irish whisk(e)y entry?
- Global vodka insights - market forecasts, product innovation and consumer trends research
- Global Scotch whisky insights - market forecasts, product innovation and consumer trends research
- The IWSR Forecast Report - 2014-2019 Global Review
- Global Tequila Market 2014-2018
- just-drinks on-trend: Craft beer - fortunes and future