Chris Maclean: Why has the beer tie spiralled out of control?

It has been suggested I am a keen supporter of the tie. That somehow I might be in the pocket of pubcos and breweries whose interests are at stake. So maybe now is an opportune time to clarify the situation.

I believe the classic model of the tie is a good system.

Let me suggest a hypothetical model.

Thirty years ago if you wanted to drink Wodgers beer then the chances were that the only place you could get it was at a Wodgers pub. A tenant who ran a Wodgers pub had exclusive rights to Wodgers beer but paid a premium for it. But all those tenants were on a level playing field and paid the same amount. Simple.

But more recently "vertical integration" hit the scene. Not only could Wodgers tenants sell Wodgers beer but other licensees and pub outlets elsewhere could now get access to Wodgers beer.

Not only that but they could buy it cheaper. Indeed the Wodgers tenant now found themselves at a distinct disadvantage. Not only could their competitors get every Wodgers beer available but they could buy it cheaper. All of them. Nobody else paid more for the beer than a Wodgers tenant. Thats unfair.

The tie becomes less defensible when third party products, products sold elsewhere at considerably reduced prices, are part of the "tie".

So a Wodgers tenant is now operating at a market disadvantage.

No worry there though because a Wodgers tenant rented their pub at a "subsidised" rate. Really? Increasingly I am watching the tenancy/leasehold market looking at where value lies and rarely do I see pubs where rent is lower than 12.5 per cent of overall take - for me the magical cut-off point. Pressure from Wodgers shareholders to deliver profitability drove rents up years ago and there is no desire to see them fall.

So a Wodgers tenant, paying a premium price for their beer plus a rent that reflects pub achievements that are rarely met, might find things tough. Is that the end?

Around thirty years ago I remember breweries used to give away the gas necessary to dispense their own lager and keg ales. Now, for me, the cost of providing gas is around £50 a month. All sorts of extra charges have crept in. Counter rental. Fridges. Pool table space rental.

Some breweries/pubcos take a slice of the fruit machine income. None of this, for me, seems a fair intrusion into the income of a licensee.

So where does that leave me?

I believe that the idea of a local brewery owning a number of pubs where the tenant is compelled to buy, and sell, only the beer they produce is wholly acceptable. Indeed I would argue that it is an ideal model.

Outside of that I feel uncomfortable.

The model tenancy, explained to me many years ago, suggested that you paid two "rents". A "dry rent" which covered the basic costs of the building and a "wet rent" being an additional levy which suggested that, if a licensee were successful, the pub owner would share in the success. If you traded poorly all you had to find were the basic costs but, if you did well, the pubco wanted some of that success. It sounds nice and fair, doesn't it? But some feel it is as though the licensee is a cash cow designed to make money for others.

I believe the tied trade, for brewers, is the most logical, sensible and natural conclusion. It makes enormous sense for those pubs to only sell those beers and I believe it is good for the products.

After that I am at a loss.