Last week the DTI announced that the Beer Orders, introduced in 1989, are to be revoked. Jackie Annett looks at how this will affect the tradeThe trade was rocked by the biggest news of this century so far last month when the Department of Trade & Industry (DTI) revoked the Beer Orders that have shaped the industry into what it is today.It came as a huge surprise to many - and while some welcomed it others said it spelt disaster.The Beer Orders were introduced in 1989 to shake up an industry that ministers feared was being monopolised by a select few brewing giants.In an attempt to give the industry a more even playing field, the Beer Orders were brought in. They required brewers to:
- reduce the size of their tied estate to their permitted maximum (2,000 plus half the highest number of pubs over 2,000 held by the brewer since July 10, 1989) by November 1, 1992
- not tie their tenants and tied loan clients for any alcoholic drinks other than beer
- permit their tenants and tied loan clients to buy one brand of cask conditioned beer and (as amended in 1997) one bottle-conditioned beer of their choice on the open market rather than through the brewer (the so-called "guest beer" provision)
- to publish wholesale prices
- not refuse to supply beer except in certain circumstances
- not sell pubs with clauses preventing them being pubs in the future.
There is no doubt that this had a profound impact on the industry.The giant brewers had to act immediately to cut their estate size and huge packages of pubs were put on the market - a total of 11,000 outlets.This in itself marked a departure for an industry that mainly consisted of traditional pub estates that had been in the same hands for years.Entrepreneurs sprang up across the UK to buy and re-mould the pub packages and out of the ashes rose the new pubcos - Enterprise, Pubmaster and SFI to name but three.In time it was these retail businesses that would emerge as the major players, demanding discounts from the brewers for supplying their large estates. Now, 13 years later, competition minister Melanie Johnson has announced that the Beer Orders have served their purpose.But reaction to the move has been mixed.The removal of the Orders theoretically leaves giant pubcos free to buy breweries and tie their estates once more. But most of the pubcos are in part controlled by the interests of financiers like WestLB and Japanese bank Nomura. Would the City look kindly on moves to buy up breweries - traditionally viewed as less predictable in terms of profit building and a lot more expensive in terms of investment?On the other hand it also frees up the one remaining vertically integrated brewing giant - Scottish & Newcastle - and the up and coming super-regionals Greene King and Wolverhampton & Dudley Breweries to increase their estate size.But how likely is this?The brewing big boys no longer rely on the tie to ensure throughput of their beers - in fact most now offer a range of competitors' ales alongside their own in their pubs to ensure customer choice is paramount. And the Government will not be turning a blind eye by any means - the DTI has pledged to continue monitoring competition in the market and will no doubt intervene if it thinks the top players are getting too big.But there is concern - especially from the smaller players and licensees who saw the Beer Orders as a safety net that kept the giants in check.What they don't want to see is another situation in which the major players are squeezing them out.Whatever the outcome, it is likely to take a while to develop so, in the meantime, watch this space.