Beer tie winners and losers

TO SAY that the current scrutiny of the beer tie has the potential to make dramatic differences to the way brewers supply pubs is something of an understatement.

In the unlikely event that the beer tie is abolished, the ensuing changes would send shockwaves throughout the traditional tied-pub estate model. Its effect would, at this stage, be inestimable.

There is tremendous reluctance among the family brewers to discuss this obviously sensitive issue, largely for that reason. What¹s the point of commenting on what is only conjecture, many ask?

It proved more straightforward to elicit comments in the case of smaller operators.

Picture a scenario where the Fair Pint group wins its campaign. Previously tied licensees would be free of their obligation to buy from certain sources and micro-brewers would have a greater freetrade to sell into.

Alan Morgan, managing director of Bath-based Abbey Ales, for example, claims the number of pubs which he supplies would leap up around 50 per cent if the tie were to be abolished.

"There are lots of pubs locally that would like to sell my beer," he says.

"They say 'we would love to have it but can¹t because we¹re a tied house'.

"I've asked their business development managers about it, and many of them agree that it would be better for those pubs' businesses if they had their pick of beers."

More complex​

For bigger brewers, those with large estates of their own pubs with licensees tied to them, the consequences would be altogether more complex.

For Greene King (1,690 tenanted and leased pubs) and Marston¹s (1,722), the large swathes of licensees who currently bring such good business to their breweries would be free to go elsewhere ­ attracted by greater choice and more competitive prices.

However, the licensees who would be affected would not be onto a sure-fire winner because their rents would undoubtedly go up to compensate.

As one source within a pubco and brewer said: "Higher rents may be forced upon us.

"The tenanted model works on the basis of variable rent. There needs to be an income stream to make the business model sustainable." The source added that licensees aggrieved at the relatively high beer prices involved with the beer tie, should know what to expect when they sign contracts. They should not cry foul when accepting the subsidised rents.

The exception to Fair Pint's demands, that pubs owned by brewers with fewer than 500 pubs would be exempt from having the tie removed, would make it slightly more straightforward for the likes of Shepherd Neame (326 tenancies) and Brains (152 tenancies). The pubs would still be tied to buying beer from them.

For them, the tie being abolished may only be good news in that the increased freetrade would give them a bigger potential market.

The only thing absolutely clear is that there are more questions than answers at this stage.

Who would be exempt?

With the proviso that breweries with 500 or less pubs could keep a tie deal in the event of a campaign victory it becomes clear who Fair Pint is targeting.

It is clearly going after the big boys in the pubco world, notably Punch Taverns (7,560 pubs last count), Enterprise Inns (7,700), Admiral Taverns (2,300) and Scottish & Newcastle Pub Enterprises (2,200).

There would, of course, be major implications for the two super-regional brewers, Marston¹s and Greene King. So far all of these have declined the opportunity to meet with Fair Pint to discuss its plans, as has Wellington Pub Company, which has the largest free-of-tie estate in the country with 850 pubs.

It is also the company that would be least affected by the removal of the tie and indeed could become the model that other pubcos follow in the event of the tie being removed.

But there are also others who would fall foul of the 500 marker. At the time of the last Publican Industry Report County Estate Management had 900 tenanted and leased pubs and Trust Inns had 578 ­ just on the wrong side of the Fair Pint cut-off.

On the flip side, Frederic Robinson, Daniel Thwaites, Caledonian Heritable, Charles Wells, London Town and Wadworth all have less than 500 but more than 200 pubs and would be free to carry on with a tie deal in their tenanted and leased businesses.