The solid virtues of the tie

It's not just the giant pubcos that are waiting nervously for the Parliamentary review of pub company power to report.

The country's 27 family brewers, which between them own more than 4,200 pubs and brew more than 280 beers, are also concerned their centuries-old way of doing business may be under threat.

It's true the members of the Business and Enterprise Committee have been tasked solely with a look at progress by Punch, Enterprise and other national pubcos since the original 2004 review. But the political storm whipped up by the Fair Pint campaigners threatens to open a Pandora's Box, which may cast pub ownership rules to the wind and lead to a rethink of the tie.

For the Independent Family Brewers of Britain (IFBB), that would be a disaster. Their business model is based on the security that so-called "vertical integration" delivers. By owning pubs that are tied to sell just that brewer's beers, the family brewer can plan for the future and make investment decisions with more confidence than if he had no pubs guaranteed to take his beer.

In a world where few businessmen enjoy any security, that enviable position might look a little cosy to some politicians and regulators. It is, undeniably, a restraint of trade and therefore anti-competitive. But defenders of the tie have been able to see off opponents before, and their position is enshrined in European Commission law. In 1983/4, Article 85 (1) of the Treaty of Rome gave the family brewers' tie block exemption from competition law, and this was renewed in 1997. That renewal was a triumph of the family brewers' lobbying power. Fearful that the Brewers Society, the British Beer & Pub Association as was, might not pursue their interests with total vigour, they created the Independent Family Brewers of Britain in 1993 and pressed their suit successfully with Brussels.

Current chairman Paul Wells is confident that the IFBB will pass any future round of European scrutiny, on the de minimis basis that it constitutes less than 5% market share. But the anti-tie sentiments expressed by disaffected lessees, including leading Association of Licensed Multiple Retailers members, and endorsed by a growing band of politicians do worry him.

"Cask ale has only survived because of the tie," says Wells. "Consumers only have choice of beer and regional diversity thanks to it. It's only because of the tie we have been able to resist the lager tide that Edward Taylor created with Carling Black Label through the '50s and '60s onwards, and the subsequent rise of the property pubcos."

Wells derives no comfort from the Fair Pint lobbyists providing their own block exemption for any company owning 500 or fewer pubs — the entire IFBB membership. It's only the giant pubcos Fair Pint has in its sights.

"With politicians in situations like this, as we all know, there's a danger of the law of unintended consequences taking effect. I think this is a real Joni Mitchell moment — her line 'You don't know what you've got till it's gone' is so true."

Wells lists the reasons why the tie is essential if the family brewers are to survive — and the industry to avoid consolidation into just a few national brewers. "The decline of cask beer coincided with the rise of the property pubcos after 1989. To continue to combat this, family brewers need to know their future sales so they can plan investment in their breweries. With the degree of certainty that the tie gives, IFBB members can think longer term than listed companies and write off capital expenditure over a longer term.

"And it's not just about beer. The tie also means IFBB members can reinvest in their pubs, which keeps them in good condition and lets the licensee concentrate on selling local beers to his customers."

Best deal in trade​

Wells and his members believe their licensees get the best deal in the trade. "My father used to say to me 'Look after the roof and the windows, and nothing else can go wrong' — and we certainly do everything we can to look after our tenants. We take care of the fabric of the pub. And we help them with their utilities, training needs and food.

"It's not in our interests to over-complicate things: if the licensee isn't doing well, neither is the brewery. So our licensees are paying lower rents than many other licensees, and we do give them financial help when they need it."

All this, Wells argues, "overwhelms" any argument that by being tied, the licensee is reducing drinks choice to his customers.

The IFBB case for tie retention is supported by many, with the Campaign for Real Ale unsurprisingly in the vanguard. But until the politicians show they have no intention of paving over this particular part of paradise, to quote Ms Mitchell again, it remains an uneasy time for ale

lovers everywhere.