Sibling rivalry at Marston's

How can tenanted pubs compete with managed pubs within the same estate, asks Morning Advertiser columnist Phil Dixon.

It was of those phone calls that I have always found difficult: "How can they justify the tie when the company's same pubs are charging far less for product?" It was always an issue Morland's tenants used to complain about — Greene King ones have organised petitions. A local Marston's tenant, lovely lady, made it perfectly clear where I should stick her purchasing agreement.

I have been associated with Marston's for more than three decades, removing Scottish & Newcastle beers (sorry about that) and putting Pedigree into Warwick University bars in 1978. Mind you, there were very good strategic and commercial reasons for this — I like Pedigree.

That relationship remains to this day; I am chairman of a 100% Marston's account village cricket club where only last week we were all quaffing Ringwood beers at our AGM.

On leaving university and becoming a national LVA officer, I was, in view of my established relationship, given responsibility for the Marston's Tenants' Association. There was a permanent queue for Marston's pubs in an estate that stretched from Cumbria to Chichester.

Licensees made good money despite being fully tied in their tenancies because rents were low and consumers loved their beers. In around 1990, at a meeting at the brewery, association chairman 'Jolly Jack' Grimsley, of the Junction, in Derby, tabled an item of concern for discussion — the number of vacancies in the estate.

He expressed his apprehension to the then Marston's director of tenancies, Neil Wilson. "Mr Wilson, we are most concerned that vacancies have reached an unprecedented level, one we, your long-serving licensees, have never seen before. Sir, it is now in double figures — it has reached 10. Is there something we should know," asked Grimsley.

So what's the situation today? I decided to do some role-playing. I enquired, as a prospective Marston's tenant, how many vacancies there were within a 20-mile drive of my house in the West Midlands.

Today there are only 67, but within 10 miles this dramatically drops to 44. Ah, but I am in the old Wolverhampton & Dudley (W&D) heartland so maybe that's untypical. So I searched as if I were at Grimsley's old 16 barrels a week (but now closed) Junction Tavern, and, true, there are far fewer vacancies in that imme-diate area — only 43!

Hindsight may be the first refuge of the historian, and some of this situation may be self-inflicted.

It was not that long ago (2006) that W&D paid £620,000 per pub for a 90% tenanted estate predominantly in South Wales (Celtic Inns). The sums for buying the Celtic pubs do add up — but only if you have a few magic mushrooms first.

So how have we come to a situation where almost every other pub seems to have a 'Pub to Let' sign on it? The issue is a simple one.

Can tenancies on the tied model produce enough remuneration to make them worthwhile? If gross profit margins are down in the low 40% and costs are rising near the 40% of turnover mark, does this render making a profit an impossibility?

In fairness to Marston's, it has at least tried to grasp this nettle with its new retail agreement, where licensees receive 20% to 28% of the net take and thus are guaranteed an income and a home.

Negatives​

Some competitors try to rubbish it, but I disagree. True, there are negatives — the lack of any security. And if the take is circa £2,000 to £3,000 a week, it's a lot of hours to work for far less than the minimum wage. But it is, in my opinion, a welcome innovation if it prevents business failure.

There does, though, appear to be two other distinctive factors that result in empty pubs. Now, call me old-fashioned, but I think competent, experienced licensees are worth their weight in beer mats. So why do companies allow or even force them to leave? My pocket calculator is certainly baffled.

You watch a Marston's fellow of the BII (British Institute of Innkeeping) with 20 years' service vacate, with bullish comments about how the proposed rent rise is easily achievable echoing in the background alongside the usual talk of lots of interest in the pub. But among the main competitors to Marston's tenants now are other Marston's pubs run by the managed estate.

My nearest town is Kidderminster, Worcestershire. Marston's has four superb managed houses in and around the town — the Viaduct Tavern, Three Crowns, Land Oak and the Watermill. The Land Oak and the delightful Watermill are food-led, 'no VAT increase' outlets and all the pubs offer easy-to-cook food.

So I posed the following questions to the guys in my cricket club:

1) Where is the cheapest pint of lager in a Marston's pub (in the town)?

Answer: the Viaduct — £1.99 for Carlsberg (on a Monday). £2.15 for Banks's.

2) Where's the cheapest bottle of wine in a Marston's pub?

Answer: the Viaduct — £4.99 all day every day.

3) Which is the cheapest Marston's pub to watch Sky football?

Answer: as above.

4) Where is the second cheapest Marston's pub for beer and wine?

Answer: the Three Crowns — £2.25 a pint and £6.99 a bottle.

A number of tenanted pubs I surveyed were all between 40p and £1 a pint more expensive on beer and typically 50%-100% more on wine.

So an understandable question to ask is: How do you compete in a Marston's tenancy with the company's own managed houses? I suspect the 44 local licensees who recently left their pubs would give you an obvious answer.