Is this the reshaping of the leased pub market?

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How will the emergence of Punch Taverns and Wellington Pub Company reshape the leased pub market? Everyone knew things would change in pub leasing...

How will the emergence of Punch Taverns and Wellington Pub Company reshape the leased pub market?

Everyone knew things would change in pub leasing when Hugh Osmond and Roger Myers announced two major purchases last year.

Last week, they announced details of how the pubs would be run.

The former PizzaExpress boss and the inventor of Cafe Rouge spent hundreds of millions of pounds on 845 Phoenix Inns and 1,428 Bass Lease pubs last year.

Both companies were effectively wiped out by the deals.

In their act of entering the pub market, the entrepreneurs immediately removed two of their competitors.

The Phoenix pubs have become the Wellington Pub Company while the Bass pubs are now Punch Taverns.

But just how much has the leased pub market really changed?

Everyone would agree that what was Phoenix and Bass Lease are now owned by the same people.

But those people are bound by the same commercial agreements the pub lessees enjoyed before.

So just how much scope have Myers and Osmond got to change things?

Phoenix lessees are entirely free-of-tie. The 845 lessees have been told that this will continue to be the case.

Punch Taverns lessees are tied, but as lessees they still have a great deal of say in how their pubs are run.

There was much talk before last week's announcement about themes and concepts. Myers and Osmond come from that background.

But there was nothing in the detail of their plans for Punch and Wellington about themes.

Instead, the message was that they will run community pubs better than their rivals.

Enterprise Inns has already shown that with belief and commitment, it is possible to create a strong non-managed pub company.

Myers and Osmond plan to follow in its footsteps.

Central to this will be support packages for lessees, refurbishment programmes, the range of products they can buy and the discounts available.

Wellington lessees will get discounts "in due course" on certain goods and services, possibly including insurance and food.

There are already plans for joint investment with lessees to ensure those free-of-tie pubs which need investment get it.

There is much more scope for change at Punch. Lessees there will be able to pick from a range of beers and other drinks from Bass and Whitbread.

"Buying outside the tie will not be tolerated," said Roger Myers.

There is a strong sense of keenness to get on with business, now that the company has worked out its strategy.

Peter Thomas has transferred from Bass Lease as managing director. He said: "We have wasted the last 18 months," in talks and negotiations.

Bass lessees were backed by the Premier Alliance scheme - "One of the most successful support packages in the industry," according to Hugh Osmond. It covers training, discounts and mystery customer programmes.

This will remain in force and will be significantly expanded, the company promises.

Details of this expansion and future discounts will emerge in June. Management plans to spend £40m on lessee-support.

Myers and Osmond know that Ted Tuppen has built his company's share price up from 221p to 361p over the last year and the company now has a P/E of 19.9 - on a par with Bass.

Punch Taverns will be floated one day and will attract serious investment. Before that happens, it may be merged with Wellington in some way.

Some may worry that Punch plans to take on 20 per cent more operational staff to handle the changes necessary to wipe out all vestiges of Bass methods and technological systems in order to establish the full independence of the new company.

This will mean substantial recruitment in the coming months. The new staff will form a dedicated investment division to manage the £40m support project.

Despite the lack of firm plans for themed concepts, the company wants one day to create a managed division.

There are pubs with potential for conversion and senior management has experience in this field.

But the move would involve painstaking negotiations with lessees, who enjoy considerable legal protection.

All of this means that the national leased companies have another serious competitor on their hands, which has replaced Bass and Phoenix.

Whitbread and Vanguard Pubs and Restaurants will want to monitor developments closely to make sure they offer their lessees similar levels of support.

It also means that Enterprise has a new rival, though at the moment its estate is obviously well ahead of the game.

Related topics: Other operators

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