Following articles in last week’s Publican’s Morning Advertiser calling for pub companies to ensure their lessees’ margins are not eroded by above-inflationary annual beer price rises, Enterprise chief executive Ted Tuppen wrote a letter to editor Rob Willock saying: “I read with interest your article on the ‘beer-price escalator’. You identify a problem that may be regarded by some as a bit hypothetical, but which is rightly a concern of current and potential tied publicans and therefore officials at the Government’s Department for Business Innovation & Skills.”
Beer prices not in lease contracts
He conceded that, as beer prices are not currently specified in lease contracts, they could “in theory” escalate between rent reviews or lease renewals.
Tuppen revealed: “Enterprise is now considering the introduction of an additional contractual obligation whereby a publican will be protected against unjustified increases in the net price
that they have agreed to pay for their tied drinks supplies, perhaps by limiting such rises to supplier wholesale price increases, RPI [inflation] or some combination of the two.”
He added that the final version of an industry framework or industry standard code “would do well to include protection for publicans from unjustified increases in net beer prices”.
Penalised for loyalty
Meanwhile, a multiple operator of Enterprise leased pubs also contacted the PMA to complain about another aspect of tied beer pricing.
He said: “Above-inflationary price increases squeeze the tied tenant, but it’s not the only way we are squeezed. We are penalised for loyalty in one dramatic other way too.
“In the past 10 years my volume-related discount has fallen from £35,000 to zero! New products hitting the market — the very products our customers are demanding in the modern pub — are often left off the list of brands qualifying for volume discount.”
Enterprise promises a review
Enterprise responded by saying that there are products on which the company does not itself get a discount from the brewer sufficient to pass on to its lessees, but promised it would review how those products can be included in discount schemes, such as volume-related discounts.
Fair Pint campaigner Simon Clarke commented on the PMA’s forum on the subject of beer price controls, saying: “I fail to see any argument or proposal that has yet been put up that comes close to the ‘market rent-only’ option, a market solution to a market problem.
“If tied prices are not fairly reflected in tied rents, then the model does not survive.”
His co-campaigner Karl Harrison suggested that pubco discounts obscure the pricing differential between tied and free-of-tie pubs.
He said: “The wholesale price of beer is an artificial mechanism for promoting tied estate profits.
“In my free-of-tie businesses I couldn’t care less about the ‘discount’ — I just want to know the price per tub.”
To download the letter click here.