Fears grow over tenanted & managed price gap
The widening drinks price gap between tenanted and managed pubs grew further this week as the real effect of the Budget duty hike became clear.
The decision by major managed operators Mitchells & Butlers and JD Wetherspoon to absorb the 2% rise contrasted sharply to reports from licensees in leased pub estates, who say they will be forced to slap between 5p and 10p on a pint.
Most of the big leased companies, including Punch and Enterprise, have confirmed the duty hike will be passed on to their lessees and tenants. Marston's, after holding prices in January, is passing on the rise to its tenants, but absorbing the cost at its managed pubs.
Graham Page, consultant at market analyst Nielsen, said price differentials between managed and leased pubs will widen.
"Tenant licensees look upon gross margin as mandatory and have always to judge whether they have covered their cost base when setting prices.
"The big managed chains are increasingly using their muscle and buying power to extract the best deals from suppliers and are following the lead of the big high-street retailers in marketing their offer," he said.
Federation of Licensed Victuallers Associations chief executive Tony Payne warned licensees to calculate their price rises with care.
"I would urge them to look at their costs and margins closely and weigh up the competition in their area when deciding where to pitch their prices.
"Costs are rising, including statutory increases on holiday pay, which came into effect in April, but in the current climate licensees have to be very careful," he said.
Payne said talk of a 10p-a-pint rise "worried him", while the Campaign for Real Ale said the latest increase could put many pubs "over the edge".
The British Beer & Pub Association has predicted a 5p-a-pint rise for drinkers across the bar.
A survey in last week's MA showed two out of three hosts expect to add either 5p or 10p to a pint after the duty rise.
City analyst Geof Collyer, of Deutsche Bank, said it would be several weeks before a clear picture of the duty impact and possible price differential issues became clear.
"Individual licensees have never been able to match the huge buying power of the managed companies and have always suffered from this economy of scale factor," he said.
"Cost pressures are currently leaping about all over the place and it could be some licensees will now claw back some margin and conveniently blame the Government."
