Punch holds price rises to 1% for tenants

Punch Taverns has opted to help tenants' competitive position by holding price rises to 1% this year.

The move will mean that Punch has chosen to forgo as much as an extra 2.5% in price rises it could have pushed through to tenants.

The 1% price rise, which kicks in on Monday 5 April, applies as a blended average to all products except Carling, which is increasing by 2%.

Tenanted division boss Roger Whiteside said: "We are breaking tradition in hollding price increases to 1%.

"The market is still very difficult and we want to give tenants as much scope as possible to compete at a local level."

Referring to the 3.5% increase in wholesale prices announced by some brewers this year, Whiteside said: "I don't think the market can sustain that increase. This level of increase should be seen as a positive move. 

"We are still pushing in the same direction at Punch — to become the most trusted pub partner in the UK."

Punch has also scrapped its own wholesale price list and will instead only use brewers' wholesale price list.

The average barrelage discount within the Punch estate in the past year has been £45 a barrel on its own wholesale price list — the figure is £62 compared to brewers' wholesale lists.

The Punch decision on prices means that it is not growing its own beer margins this year when additional discounts to tenants are taken into account. 

The Punch move follows a decision by Marston's to hold prices until later in the year and by several regional brewers to freeze prices this year.

Morning Advertiser comment ​

Credit where credit is due. Last year Punch Taverns tenanted boss Roger Whiteside said publicly that Punch could not expect to keep improving its margins if the profit pie was not increasing at individual pubs.

The price rise move is Punch keeping its word on this. At last, it's using its scale and buying power to hold the line on prices for its tenants, giving them a chance to grow volumes by grabbing market share away from tenants of other companies, such as Enterprise, that are seeing 3.5% wholesale price increases.

What's happening here is that Punch is doing its bit on beer prices. Its long-term buying contracts mean it never pays the wholesale price increases that brewers push through — it will have contracts in place that cap the price increases that it pays by amounts negotiated at the start of the contract.

Ordinarily, pub companies simply pocket the difference as brewers announce rises above their own contracted price, creating extra absolute margin for themselves and growing their own profits offset by whatever drop in volumes occur for its licensees from having to increase price by more than, say, managed operators.

It will, of course, still be enjoying RPI rent increases across the estate this year — but at least it has exercised good faith on price rises in 2010.

This will have been a massive decision because of the loss of profit for Punch involved but the need to do the right things to create a sustainable future for its tenants creates a compelling imperative.