Complacency continues to hold sway

By Robert Sayles

- Last updated on GMT

Related tags Wholesale beer prices Great depression Mark hunter

Complacency continues to hold sway
So, British Beer & Pub Association (BBPA) chairman and Molson Coors chief executive Mark Hunter acknowledges that the rate of pub closures is “alarming” and the decline in beer volumes is a “wake up call of epic proportions”.

Well not before time. So, given this rather bleak assessment, the question we are all asking of course is what he and his colleagues intend to do about it?

What ground breaking initiatives have they devised to address the impending calamity?

The reason I ask is because we’ve heard it all before, haven’t we?

In 2008, the then BBPA Chief Executive Rob Hayward expressed similar sentiments, stating "beer sales in pubs are now at their lowest level since the Great Depression of the 1930s - down seven million pints a day from the height of the market in 1979”.

Now one could be forgiven for concluding that a proclamation as dire as this would get the alarm bells ringing. Well actually no; Rob Hayward duly departed to be replaced by Brigid ‘government taxation’ Simmonds.

Brigid made her modus operandi clear from the outset; lay all blame for the demise of the pub trade firmly at the feet of government.

It’s a strategy Mark Hunter appears keen to replicate, hence his appeal to Westminster for action. The message is clear; all this chaos afflicting the pub trade has nothing to do with us; government are to blame, they need to sort it out.

So that’s all right then, isn’t it? Let’s all just sit back and wait for them to do something about it, shall we?

Now whilst no-one would deny that the onerous duty escalator has undoubtedly contributed to the problem, I think most of us would accept that the industry must also take a great deal of the blame for the carnage we are currently witnessing.

Did Mark acknowledge that certain pubcos have contributed to their own downfall? Just as importantly, did he intimate that lessons have been learned?

No, the message was loud and clear. A scapegoat has been found so let’s carry on as usual, shall we?

Coors and Carlsberg were clearly very happy to do so. Both recently announced price hikes equivalent to 7 pence a pint. It’s the obvious answer to falling demand, isn’t it? Keep raising the price of the product.

Of course they would argue that such rises are “beyond their control” and necessary to cover additional costs. Cynics of course would suggest that brewers are offsetting depleted margin in the off trade by foisting annual increases upon the on trade; a policy sanctioned by a mutual beneficiary, namely the pubco.

This notion gains added credence once you dismiss the idea that rising wholesale beer prices are bad for pubcos.

Pubcos need escalating pre-discount wholesale beer prices to secure additional profits. Obtaining increased discounts from the supplying brewers enables them to secure greater margin.

It appears to be a nice little arrangement for both sides. Strange Mark neglected to mention this, isn’t it?

The result of course is that publicans are now in the business of selling a product that people feel less inclined to buy, at a price fewer can afford to pay. Hardly a recipe for long term success, is it?

I also find it odd that Mark didn’t lament the fact that for years large pubcos were fixated with growing their estates whilst showing little inclination to invest in their acquisitions.

The fact of the matter is that complacency ruled. Pubcos convinced themselves that people’s love for beer would always override any concerns they had about the quality of the establishments they drank in.

The culminative effect of such short sightedness is that these oversized estates now contain growing numbers of run down dilapidated outlets that have become surplus to requirements.

Perhaps Mark could also have acknowledged the lasting legacy of irresponsible borrowing, a debt mountain which now gives these pubcos little leeway to implement meaningful reforms.

The big boys have been caught with their trousers well and truly down. Unfortunately it is tenants who continue to suffer, paying the price for poor investment decisions made in the boardroom.

It is evident to all that things have to change. Pubcos have increasing numbers of empty outlets on their hands; too few tenants willing to take them on.

The question prospective tenants are asking themselves is ‘Can I make a decent living running a pub?’

In many cases the answer is no. Costs keep rising whilst volumes continue their journey southward. Pubcos however continue to delude themselves; striving to achieve returns synonymous with a bygone era.

Such unrealistic expectations will only result in increasing numbers of tenants deserting the trade and more and more pubs closing their doors for the final time.

The solution is simple; pubcos need to acknowledge the realities of the current market by giving more and contenting themselves with less. Unfortunately there is little evidence of a changing mindset.

From where I’m sitting the tied sector currently resembles a terminally ill patient; one surrounded by people frantically preoccupied with extracting the last drops of blood from the lifeless body before it exhales its last breath.

Odd Mark didn’t acknowledge that either. Perhaps he was too busy looking for a vein in which to insert his needle

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