Out of Orders

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Last week the DTI announced that the Beer Orders, introduced in 1989, are to be revoked. Jackie Annett looks at how this will affect the tradeThe...

Last week the DTI announced that the Beer Orders, introduced in 1989, are to be revoked. Jackie Annett looks at how this will affect the trade​The trade was rocked by the biggest news of this century so far last month when the Department of Trade & Industry (DTI) revoked the Beer Orders that have shaped the industry into what it is today.It came as a huge surprise to many - and while some welcomed it others said it spelt disaster.The Beer Orders were introduced in 1989 to shake up an industry that ministers feared was being monopolised by a select few brewing giants.In an attempt to give the industry a more even playing field, the Beer Orders were brought in. They required brewers to:

  • reduce the size of their tied estate to their permitted maximum (2,000 plus half the highest number of pubs over 2,000 held by the brewer since July 10, 1989) by November 1, 1992
  • not tie their tenants and tied loan clients for any alcoholic drinks other than beer
  • permit their tenants and tied loan clients to buy one brand of cask conditioned beer and (as amended in 1997) one bottle-conditioned beer of their choice on the open market rather than through the brewer (the so-called "guest beer" provision)
  • to publish wholesale prices
  • not refuse to supply beer except in certain circumstances
  • not sell pubs with clauses preventing them being pubs in the future.

There is no doubt that this had a profound impact on the industry.The giant brewers had to act immediately to cut their estate size and huge packages of pubs were put on the market - a total of 11,000 outlets.This in itself marked a departure for an industry that mainly consisted of traditional pub estates that had been in the same hands for years.Entrepreneurs sprang up across the UK to buy and re-mould the pub packages and out of the ashes rose the new pubcos - Enterprise, Pubmaster and SFI to name but three.In time it was these retail businesses that would emerge as the major players, demanding discounts from the brewers for supplying their large estates. Now, 13 years later, competition minister Melanie Johnson has announced that the Beer Orders have served their purpose.But reaction to the move has been mixed.The removal of the Orders theoretically leaves giant pubcos free to buy breweries and tie their estates once more. But most of the pubcos are in part controlled by the interests of financiers like WestLB and Japanese bank Nomura. Would the City look kindly on moves to buy up breweries - traditionally viewed as less predictable in terms of profit building and a lot more expensive in terms of investment?On the other hand it also frees up the one remaining vertically integrated brewing giant - Scottish & Newcastle - and the up and coming super-regionals Greene King and Wolverhampton & Dudley Breweries to increase their estate size.But how likely is this?The brewing big boys no longer rely on the tie to ensure throughput of their beers - in fact most now offer a range of competitors' ales alongside their own in their pubs to ensure customer choice is paramount. And the Government will not be turning a blind eye by any means - the DTI has pledged to continue monitoring competition in the market and will no doubt intervene if it thinks the top players are getting too big.But there is concern - especially from the smaller players and licensees who saw the Beer Orders as a safety net that kept the giants in check.What they don't want to see is another situation in which the major players are squeezing them out.Whatever the outcome, it is likely to take a while to develop so, in the meantime, watch this space.

Super regional's view

Neil Gillis, managing director, Greene King Pub Company

How will this affect you?
It will allow us to make larger acquisitions in the future.

How will it affect the trade?
It's never good for the industry when the Government over-regulates. It doesn't do anyone any good and it doesn't protect small brewers.

How does the future of the industry look now?
Vertical integration won't be restricted.

Is this good or bad news for consumers?
It's probably good news because when there's competition you get better service and products.

How will competition in the industry be affected?
The industry will become more competitive.

Large brewer's view

Linda Bain, corporate affairs manager, S&N

How will this affect you?
It doesn't affect us at all. Going back 13 years, to 1989, it affected companies that had breweries and pubs, particularly those that had more than 2,000.

How will it affect the trade?
I don't think it will affect the trade either, because the industry has changed beyond recognition over the last 13 years.

How does the future of the industry look now?
It is likely to grow internationally.

Is this good or bad news for consumers?
There will be no impact on customers. Choice will not be limited.

How will competition in the industry be affected?
There is more competition now than there ever has been.

Small brewer's view

Nigel Atkinson, managing director, Gales brewery, Horndean, Hampshire

How will this affect you?
Because we're a small family brewer we're not enormously concerned.

How will it affect the trade?
It will affect the major brewers who own pubs, such as Scottish & Newcastle.

How does the future of the industry look now?
The industry is in turmoil and has been for 10 years. It is going through a process of segmentation.

Is this good or bad news for consumers?
For consumers the Beer Orders were virtually irrelevant. There won't be a huge difference at all.

How will competition in the industry be affected?
Competition is there anyway.

Licensee's view

Gary McClure, licensee of the Old Kings Head, Broughton-in-Furness, Cumbria.

How will this affect you?
It won't affect me in particular as I have a 20-year licence and am guaranteed my guest beer rights, but it will affect other licensees. The Government is playing into the big pub company's hands and this can't be good news for licensees or customers.

How will it affect the trade?
It will make it easier for the foreign banks to buy up pubs. The whole thing stinks of corruption.

How does the future of the industry look now?
I think we will see a lot of pub companies with leases that they can't sell. There are no benefits for licensees anymore. They will have no guest beer rights, rents are higher and the cost of insuring

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