'Pubco model not working well'
The pubco model is not working well, especially in the current economic climate, and the beer tie should be phased out.
That was the message to MPs from Association of Licensed Multiple Retailers chief executive Nick Bish.
Speaking at the second session of the Business and Enterprise Committee inquiry into pubco power, Bish said the "lessee is being squeezed" in the current challenging trading environment because they can not afford the rent and beer sales are declining.
"It isn't working well because rents and agreements are fixed on a five year period and are not flexible enough to cope with a catastrophic decline in the economy," he said.
Bish said members were also "unhappy" with the level of discount being passed on by pubcos. "The squeeze on the business is tightening," he said.
He added: "We don't believe it (the beer tie) has a place. We don't see its value in modern circumstances."
The ALMR is also concerned about the AWP tie, which it perceives as "pretty unfair".
Bish said: "We don't like the FMT (fair maintainable trade) and we probably don't like the beer tie in long agreements."
But Bish warned that it must be "evolution" and not "revolution" and that any dumping of the tie overnight would be "cataclysmic". He suggested phasing out the tie on leased agreements over a period of time, thus giving the operator more choice.
TISC recommendations
British Beer and Pub Association chief executive Rob Hayward said that the freetrade had the highest rate of closures. However, when pressed on the failure rate of tenants, he said he did not know the answer. He blamed the smoking ban and the "insane" prices of the off-trade for a decline in beer sales.
Asked if the pubcos had only paid lip-service to the recommendations of the 2004 Trade and Industry Select Committee report, Hayward said changes had been made to the BBPA's code of practice.
"We do not regard theses as superficial," he said. "They are substantial and follow overwhelmingly the recommendations."
Hayward also pointed to the assistance being offered by pubcos to their tenants — with Marston's offering 13 different methods of help.
"The beer tie, they (the pubcos) would quite reasonably argue, means they are committed to the success of the business."
Arbitration
BII chief executive John McNamara said that half of calls to its legal assistance helpline involved questions over the landlord-tenant relationship.
He outlined plans for a BII-led independent expert determination scheme, which would provide a "short, sharp and clear" method for arbitration on rent reviews at a fixed cost.
Surprise
Enterprise boss Ted Tuppen said afterwards that he was "very surprised and disappointed" at the ALMR's views. His chief operating officer Simon Townsend said: "Nick Bish had indicated he would be broadly supportive and a benign witness."
Tuppen added wryly: "That's one subscription we won't be renewing."
Bish responded by saying the ALMR's submission was made available in advance.
