Going Dutch

The news that Heineken is buying most of the tied pub estate of Punch Taverns has been written about on one hand as a great and confident nod to the future of the British pub and by by others as the return of the pre Beer Orders beer world.  Is either position really the case?

Ẁith the addition of 1900 pubs to its existing 1100 or so, soon Heineken will control over 3000 pubs and will apply, I assume, their rules to their new tenants. This will allow the tenants (in theory) access to a maximum of 176 cask beers, mainly chosen from big brewers.  On the contrary, one of the good things about Punch in their latter days was the ability of its tenants to buy from far and wide, mainly through SIBA, though of course, Punch did apply their mark-up to the end product invoice. This allowed access to hundreds of beers. Jeff Bell describes the process here for those interested in it.  As far as I know, Star Inns and Bars (Heineken's pub arm), allow no such flexibility. Indeed their tenants in my area tell me that far from being allowed access to the whole Heineken list, there is usually a much smaller list from which they must choose and requests for access to the bigger list, imperfect though it is,  are stonewalled by area managers.  One must assume that is done on grounds of profit, by Heineken purchasing and selling large volumes of a small amount of brands, led of course by their wholly owned offshoot, Caledonian Brewery.  It puts Star Inns and Bars tenants at a considerable disadvantage over rivals who are not so hidebound.

Now the Beer Orders have been long since revoked and funnily enough, Punch were in the process of really cleaning their act up - a process presumably approved of by Heineken, as they have stumped up £305 million to take control - but will this massive tie really be good for choice? Heineken are clearly aware of this concern and issued a statement to the London Evening Standard. Reading this rather bland and wishy washy set of "assurances" you may not exactly be reassured.  Lawson Mountstevens, head of Heineken’s Star Pubs & Bars UK estate, told the Standard: “Our plan is to keep great London pubs as high-quality venues."  He added: "Around 15% of the brands we sell in each of our existing pubs are not owned by us, so we use regional cask-ale brewers such as Fuller’s. I want to reassure sceptics that, subject to the deal for us buying the Punch pubs completing, we will aim to keep up this policy of selling a number of non-Heineken beers.”. 

Convinced? Me neither. A huge loss of choice will do nothing for the dog eat dog situation of over supply and may well see off quite a few brewers as markets close to them. In this respect we are indeed heading back to the closed markets pre Beer Orders. The Good Old Days?  For Heineken, maybe.

Heineken's boast of maintaining choice looks much less attractive of you look at it as Heineken selling 85% of brands they own in pubs.

To save you the arithmetic Heineken are paying an average of £160,000 a pub. Their partner,  Patron Capital will retain and run the 'Punch B' pubs of which there are 1,329 as well as TopCo. 

PubCo Pantomime

Pub Campaigner and LibDem MP Greg Mulholland, has got himself into hot water by going along to the Tenanted Pub Company Summit, a £600 a head do, and proceeding from his guest speaker's vantage point, to piss on all their chips.  He didn't as expected take the chance to say that with a victory in the House of Commons over Market Rent Option for PubCos, the slate has all been wiped clean now and all will be sweetness and light in the tenanted pub sector, as the audience apparently hoped.  Instead he tore into them as dedicated recidivists (my interpretation) who still wanted the lion's share of everything happening in the trade - in other words, they wished to carry on as before wherever they could.  The Morning Advertiser didn't like what he said one little bit and perhaps being a little less than even handed, lashed Mr M as "a self appointed Pubs Champion" and, in an opinion piece by the Deputy Editor Mike Berry, called him out for "overstepping the mark."

To the MA's credit though they have given Greg a right of reply, which our Pub Champion has put to good use, berating Mr Berry as "never overstepping the mark in his professional life" - translation - a bit of a wimp - and countering with Berry being more interested in having his back slapped - translation - being a bit of a toady.

Of course I'm no fan of the pub companies, so tend to side with Greg Mulholland. He adds in his right of reply, that at this £600 a head thrash that tenant profitability wasn't mentioned once by the panel that was discussing the various subjects and that it was doubtful if anyone that is a pub tenant was likely to be there given the cost. Both are telling points.  The whole background to why the PubCos failed the industry lies in overweening ambition, saddling pubs with immense debt, wiping out shareholder value and squeezing the tenants until their pips squeaked.  No wonder they want to say "Let's start again with a clean sheet."

They would wouldn't they?  Tell it like it is Greg.  More power to your elbow.

You can read both Morning Advertiser articles, here and here. They are brilliant knockabout pieces which makes you wonder how they read before they were (presumably) toned down.

Tough Ted Tuppen Tears into Government

I have mentioned Tough Ted before. He is the boss of Enterprise Inns, one of the giant PubCos which are to many, Public Enemy Number One. Ted alleges that evidence presented to the Government by anti pub group campaigners is no more than heresay and has labelled the Government’s consultation into the statutory code for pub companies “a disgrace” and accused MPs and ministers of “deliberate distortion of the meaning of evidence” over the issue. He asked the Pub Company Summit if "we are going to let a small number of campaigners and a handful of MPs bugger up our industry?"

 Disgruntled, he forecasts a few undesirable things that will happen if these pesky complainers are allowed to get their way.  Putting aside the fair possibility that things must surely be a bit buggered now, or there wouldn't be this kind of ongoing concern by HMG about what the PubCos are doing, you can read Tough Ted's list of doom and gloom in detail in the lovely old Morning Advertiser. The main points can be summed up as: closure of country pubs; blocking the trade to newcomers; a huge reduction in investment in pubs; brewery closures; treasury tax losses. Now correct me if I'm wrong, but didn't all of these already happen when the PubCos took over from brewers as the nation's biggest pub owners following the Beer Orders?

Now you might reasonably reach the conclusion that Ted is mixing up his buggerees with his buggerers.   To be fair, he'd have been on less thin ice if he'd pointed out the utter failure of Government intervention in the industry in the past and that the Government should therefore keep their beaks out. Of course, while true and where this mess started, the PubCos have made a bad situation worse.  Best keep quiet then as, to use his own analogy, he's buggered either way.

In the case of the PubCos, sadly, it seems like plus ça change, plus c'est la même chose!

Nearly all tenants (94%) would like to see a statutory code to regulate the pubco-tenant relationship, despite reporting improved levels of satisfaction with their pub companies accoding to an MA report. 

Where Did All the Money Go?

Statutory Instrument 1989 No. 2390

The Supply of Beer (Tied Estate) Order 1989

You will know if you read this blog that I'm not a fan of the big pub companies. I don't like the way they have morphed what was a debt free industry, into one that is mortgaged up to the hilt and that to pay for this they squeeze the life out of those daft enough to work for them. Of course the banks - it always comes back to them - aren't blameless here in allowing such debt to build up. And no. I'm not convinced by siren voices that say as long as you can service that debt, then what's the problem? I read then with no surprise that CAMRA, the Campaign for Real Ale has revealed that the majority of publicans tied to the big pub companies earn less than the minimum wage.

 " A representative sample of over 600 licensees were interviewed by research firm CGA Strategy, with the results showing that licensees tied to the big pub companies are substantially worse off than free of tie lessees. A shocking 60% of licensees tied to the big pub companies earn less than £10,000 a year. This compares to only 25% of free of tie lessees who earn less than £10,000 a year. The other end of the earnings scale also shows a stark difference in earnings, with just one in a hundred tied pub licensees earning over £45,000, as opposed to one in five who run free of tie pubs."

The government intends that the PubCos, having failed to put their own house in order, start to play fair with their tied tenants (by regulation), though of course they are resisting it as much as possible.  They talk about the the low start up costs, the support they give etc. etc. etc.  Just think how much support they could give to all their tenants as well as their own shareholders who have seen their asset value fall as debt soared,  if they didn't owe so much money in the first place.

At the time of the Beer Orders, there were very few pubcos as they would be recognised today. Pubcos were created from the disposal of the national brewers' public house operations following the implementation of the Orders. Concentration in public house ownership increased through merger and acquisition activity in the 1990s, until by 2000 the first of the 'large' pubcos, Enterprise, appeared with an estate of 1,500 public houses.[14] The rate of concentration has accelerated since 2003 with the acquisition by Punch of the Pubmaster estate (3,000 public houses) and the InnSpired estate (1,100 public houses), and the acquisition of the Unique estate (4,100 public houses) by Enterprise.  Source: Select Committee on Trade and Industry Second Report

Worse is that the money was taken out of the industry in the form of loan after loan to needlessly set up these miserable giants by a succession of takeovers as illustrated above.  The Beer Orders was an idea in theory that was good, but was too easily subverted by the then large breweries, all of which of course, have more or less disappeared up their own backsides long ago, taking even more money with them, while the government, having seen its own intent undermined sat back and did nothing.  It has been a sad  and sorry tale.

Going back to licensees, the Morning Advertiser reckons their wage equates to around £3.21 an hour given the hours that licensees work.

I suppose you can see why a lot of them are so surly.  While it doesn't help their case, they have much to be surly about.

The MA has their take on the story here. It ties in well with my comments on Monday about pubs. The CAMRA story is here.

How Much Is It Then?

Beer in the pub is becoming expensive. Anyone disagree? Of course some do. They'll tell you this simple drink should command a top dollar price, but most of us just like an ordinary decent pint at a price we feel is value. 

But what does a pint cost in these inflationary and recessionary times? Goodness knows. Even here in cheap old Manchester, it can be anything from a couple of quid, to double that.  My local, a Lees Tied House) now charges £2.60 for Lees Bitter and it was noticeable to me and to others on Saturday when we toured Saddleworth - an affluent part of my CAMRA empire - that it was the free houses that were cheapest, the PubCo houses the dearest and the Family Brewer's pubs somewhere in between.  I worry about that for Family Brewers - neither fish nor fowl.  No great ranges to attract customers in most cases and no financial advantage for them either.  A double whammy if ever there was one.

So while I'm in London for the next few days, I'm going to note down what I pay for each pint (if I can remember).  Let's see how the big metrollops compares.

And if you fancy joining in, why not record here what you pay for your pint wherever you drink it.  Let's see what we are paying. Pints only please and say what and where.

Also, if you are joining in, please tell us if there was any indication of price, clearly visible to you,  before your purchase.

A Point of View

I was out delivering our CAMRA Branch magazine (which I edit) today. As always I try and have a quick word with the licensee, just to see how things are. Maybe its different elsewhere or maybe we just have a better relationship with ours, but I always find them keen to talk to CAMRA. At one pub the licensee was bemoaning his limited cask guest beer list - a common complaint. He was also denied for reasons of which he was unsure, to a more wide ranging list which the PubCo also runs. I cooed sympathetically and asked "Is it Enterprise?" - as it usually is in such cases. "No" quoth he, I wish it was. It's Heineken. Bastards!".

The licensee also tells me things have got a lot worse since they took over from Scottish and Newcastle. So there. Enterprise aren't, in some eyes at least, as bad as Heineken. That should cheer old Tough Ted Tuppen up.

For all PubCos say about how things are much better for their tenants, I can tell you that's not what they tell me.

At least the pub was busy when I called at lunchtime, so that's something.

Trust and Distrust

I'm always interested in anything that affects the pub trade and its ability to work well within the financial constraints currently facing their businesses. PubCos are often a target of my scorn and in some ways this article is no different. For many tenants, already dealing with high rents and expensive beer, as well as restrictions on choice, there is the added burden of beer dispense measuring equipment, mostly supplied by a firm called Brulines.

The publicans' views are fairly straightforward; the equipment is inaccurate and additionally, fails to take into account liquid used to clean lines, as well as unsaleable cask beer and results in accusations of buying out, with resultant fines and general unpleasantness. Brulines say it is accurate, but have up till now refused to have it officially tested by the state owned National Measurement Office (NMO). Now they will, but under conditions that aren't being released. In a Morning Advertiser article, Simon Clarke who campaigns against the device says "One would think, if a company had confidence in the accuracy of its products, that it would engage the NMO and require a full and public testing of the equipment. Secret testing to be paid for by the very company seeking the endorsement in itself fuels the fire of suspicion that this is nothing more than an attempt to enable manipulation of the testing conclusions into a positive spin."

Now I have no real idea of the rights and wrongs of this, but it is important though, as we are talking, according Clarke, about big bucks. But what we do undoubtedly see is yet another example of how PubCos, either by intent or incompetence, make life difficult for their tenants, rub them up the wrong way and more importantly, clearly illustrate the sheer lack of trust that exists between the two parties. As pubs close and customers revert to home drinking in droves, you can't see how this can have a positive outcome for either side. It's all a bit, you know, undignified.

The trade is littered with such unwholesome and divisive stories and none of them make it look at all good.

The Morning Advertiser has the story in all its gory detail here.

Undone by Dark Star

I felt pretty good yesterday despite my mixed night of kipping on the sofa and a few hours in bed. Bacon butties were the order of the day and then a walk. Over Tower Bridge and along the South Bank, skirting Borough Market and its overpriced beery attractions, we crossed the Millennium Bridge and past St Paul's Cathedral and headed down Fleet St towards the Strand. Instinctively I knew where we were heading and duly, we appeared outside the Porterhouse Brewing Co. A pint of Wrassler's XXXX was procured while E had the Oyster Stout. Is it just me, or is this beer getting better and better? It was deliciously smooth and very bitter, with a strong Goldings finish. Great stuff, so another was needed.

We sensibly just had two, then E suggested we take a look at the goings on at the spare plinth in Trafalgar Square. Our route took us past, a for once not too busy, Harp in Chandos Place. I looked in. Dark Star American Pale Ale was on. This had to be sampled, so a couple of halves were purchased. It was hoppily delicious, well balanced, cool, in perfect condition and moreish. When the coveted chairs looking out of the open front became available, our fate was sealed. We had a few. What a great pub this is. A good selection of beers, some friendly regulars and the most coveted thing of all, great and cheerful service. Noting my repeated ordering of Dark Star, the barmaid mentioned that two more handpumps are on order. Dark Star Hophead will become permanent and there will usually be one other from that brewery. That's not bad news.

We left later than intended in a cab. Worth every penny.

Astonishingly the owner of this gem turns out to be the dreaded Punch Taverns, though no complaints from me on this occasion.

Restrictive Covenants

Heard of them? Possibly not. It's where a pub is put up for sale with a specific condition of sale excluding it being used by the future buyer as licensed premises ever again. This anti competitive practice which basically says "if we can't make money out of it, nobody else is allowed to try" should have been banned by law years ago. A lot of pub owning companies and breweries do it, including some which ought to know better. In almost every case, it's just plain wrong.

Now Enterprise Inns has followed Punch Taverns in removing restrictive covenants from pub sales. This may just give the opportunity to those with a keen eye to spot a business opportunity and snap up decent but failing pubs, dragged down the dead weight of the PubCos pressing down on them. Small brewers and pub chains will be watching this carefully and hopefully at least some pubs, abandoned by the big two, will see a new lease of life under more considerate ownership.

This is the latest in a line of concessions by the big two PubCos in an effort to persuade Peter Mandelson not to refer them to the Competition Commission. Enterprise and Punch are suddenly coming over all reasonable, but they they are beyond voluntary reform and should still be referred.This death bed conversion is too little and too late.

We're Dead Nice We Are

Remember how Parliament found that PubCos were screwing their licensees. Seems they have got it wrong. Enterprise Inns have surveyed all their licensees and found that only 5% have a bad relationship with them.

Tough looking Ted Tuppin, the main man for Enterprise said ""Clearly, an in house survey does not carry the same weight as an independent review, but we will provide the full set of responses, on a pub by pub basis, so that the Department for Business, Enterprise and Regulatory Reform (BERR) can validate the answers should they so wish."

There's the key. They know who said what. You wouldn't want Ted round at your door having a "quiet word" would you?

Full stories in the ever reliable MA and Publican

Guilty!

The Business and Enterprise Committee (Bec) report has found “alarming evidence” that there may be serious problems caused by the dominance of the large pub companies. Well we all knew that didn't we, but now it's official?

The Bec found among other things, that the evidence from Punch Taverns and Enterprise Inns gave only a 'partial picture' or was 'positively false'. Appallingly it reveals that 67% of PubCo licensees are earning less than £15,000 a year, despite in some cases having a turnover of over half a million pounds. The Chairman of the committee said “There must be a legal framework that takes account of the imbalance of bargaining power between licensees and pubcos.” The Bec doesn't recommend the scrapping of the beer tie, but says that more detailed analysis of the market is required and that there is a need to protect regional brewers.

So what next? The Committee recommends that the Government refer the matter to the Competition Commission for action, but this could take between two and three years. There is an alternative view, favoured by CAMRA, that the operation of the beer tie could be referred to the Office of Fair Trading to deal with the matter more quickly. However, such is the damning picture painted by the Bec, that a full referral to the Competition Commission seems inevitable.

Lees Buy Punch Pubs

I predicted way back in March that Lees would buy more pubs.To prove the point they have bought a parcel of ten from the debt laden Punch Group. All are in the North West and are as yet un-named.

They will have been bought for cash too I suspect.

Punch Drunk

Worried about your pub? Well if it is owned by Punch Taverns, maybe you ought to be. The Punch Group owes its bankers £4.6 billion pounds, secured against its estate of 8,300 pubs. Now when it gets to huge amounts of zeros, I get a bit confused, but it seems to me that is an average debt of £554,000 per pub. No wonder they are screwing their publicans and selling pubs as fast as they can. Not that it will do them any good. As the London Evening Standard remarked the other day "The group has bought back £318 million of debt for a bargain £200 million in the past six months. At 60p in the pound, that either shows investors think the company is doomed, or that they are so strapped for cash they are happy to take what they can get."

How did all this arise I hear you ask, when at the beer orders, most pubs were owned by brewers and more or less debt free? Well, when the pub companies were set up, each pub was mortgaged to pay the breweries for the pubs they had to divest. When pub companies subsequently merged or were taken over, a little bit more was added to the mortgage, with the surplus being trousered by those that sold them. Repeat quite a few times, until we get where we are today. A massive bloody debt that is being paid by the PubCos tenants - and, of course, by their customers. This couldn't go on for ever. Something would happen to stop it. Well a few things have. All at once. They are running out of mugs to take their leases, people aren't visiting pubs and the estate isn't worth what it used to be.

If Punch goes bust, there will be a fire sale of pubs at realistic prices. These pubs then, unburdened by huge debt, might just start to make money again.

The market says the group is worth £237 million. Latest figures indicate they "only" own 7371 pubs, so the debt per pub is actually worse.

BBPA Slams Fair Pint

The big brewer and PubCo dominated British Beer and Pub Association has laid into the Fair Pint Campaign over its assertion that it is high rents and the beer tie that is causing pub closures. It counters that it is increases in tax that is doing the dirty - a somewhat diametrically opposite view. Further it blames Fair Pint for letting the government off the hook on tax in yesterday's budget.

A number of bloggers have commented on the dastardly deeds of the PubCos. The knives are out for them and they know it, hence this water muddying exercise. In their present unequal format they are sucking the lifeblood out of pubs and have been doing so ever since the Beer Orders. Now they recognise they've been rumbled.

PubCos and their apologists can huff and puff, but they are on the retreat and not a moment too soon.