Reality check at Sam Smith's

The Tadcaster-based Samuel Smith's business lives in its own bubble. Parts of its world are charming.

It eschews well-known brands and piped music. Modestly, its 200 or so pubs decline to carry company signage and televisions are banished from its trading areas. It refuses to embrace such modish modernities as a company website. At the weekend, a customer wrote to The Times in praise of one of the other aspects of the Smith trading philosophy — its pricing policy. "A pint of their superb Old Brewery Bitter will set you back an inconsiderable £1.40," the punter told Times readers looking for a bargain.

But the less charming face of the Sam Smith world was evident in an industrial tribunal that found last week in favour of a couple, Frank and Pam Marshall, who had worked for the brewery for 24 years. The company insists on running all 200 plus pubs within its estate as managed houses while steadfastly refusing to increase prices since 1990. It was clear last year that the company was in the grip of the inevitable crunch that's going to happen with a business model as inflexible as this one. Boss Humphrey Smith popped up at the tribunal to report that the company had been forced to order managers to make swingeing cuts in hours to ensure its bank renewed its overdraft and to stay with its banking covenants.

"We thought 45 hours was perfectly reasonable, but they (the managers) refused to compromise," Smith told the tribunal. For Frank and Pam Marshall this meant chopping their hours bill at the Holly Bush in Doncaster from 89 a week to 45 at a pub taking around £6,000 a week. The Marshalls were effectively being asked to increase their combined 110-hour working week by a whole lot more to cover the lost hours. This latest edict meant that the Marshalls had seen their hours allowance chipped away by almost 100 hours from the 140 hours they were allowed when they first arrived at this particular pub in 2002. When the Marshalls told their area manager that the new hours were unworkable they got short shrift. The Marshalls, along with a host of other managers facing unreasonable demands to cut hours, decided to quit the company — many other cases similar to the Marshalls are lined up against the brewery.

There are two straight-forward steps that the asset-rich Sam Smith's could take. It could increase its prices to create more margin for itself. Or it could convert large numbers of its pubs to tenancies, a logical step given that many of its pubs take far too little to be run sensibly as managed pubs. As it stands, it's Sam Smith's managers that are required to take the strain produced by the company's extraordinary attempts to defy economic gravity. Something will have to give.