After all, it wasn’t that long ago we were being assured that an average tied tenant could expect to earn around 45,000 per annum, factoring in the live-in benefit.
Now we’re being told how much support pubcos are offering tenants during these difficult times. It does beg the obvious question. If they’re earning an average of 45k per annum why do they require so much ‘support’?
And, up until very recently of course, we were being assured that blame for the continuing fall in volumes could be placed firmly at the feet of the duty escalator. Now that particular issue has been resolved, it seems ‘Pyongyang’ has been desperately looking for an alternative scapegoat. It would appear they’ve found one; the weather.
‘Another fall in volumes? Don’t worry. It’s just been a bit cloudy of late; things will pick up when the sun comes out.’
If this is indeed the case, then we can only conclude the UK has been suffering the effects of inclement weather since 1979. After all, that’s when we saw volumes begin their long, protracted journey southward.
In 2008, the then BBPA Chief Executive Rob Hayward stated “beer sales in pubs are now at their lowest level since the Great Depression of the 1930s – down seven million pints a day from the height of the market in 1979”.
No mention of the weather from Rob, just a forthright appraisal of how far volumes had fallen. Isn’t it a shame the current regime couldn’t be a little more balanced in their appraisal of the current crisis?
I say that because it’s clear they’re unwilling to acknowledge some pretty unpalatable facts. Indeed, if they’re to be believed, the tied model is delivering very real benefits to tenants.
Ah yes, the King really is looking resplendent in his suit of clothes, isn’t he?
The stark reality is that not a day goes by without stories breaking of tenants being evicted, bailiffs being summoned, pubs closing down, pubs being boarded up or sold off to property speculators and supermarket chains.
If that’s their idea of working well, one can only begin to imagine what would happen if things began, in the words of Del Boy, ‘to go a little pear shaped’!
More disconcertingly still, is the notion that the tied model is working well, and that offering tenants a viable free-of-tie option would be nothing short of an unmitigated disaster for the industry.
But would it?
I have to say, watching certain CEOs striding up to the pulpit to deliver this particular sermon does leave me feeling more than a little sceptical - a case of property companies hiding behind the skirts of brewers?
Several points are worthy of consideration:
The real cost of the tie
Much is made of the exorbitant prices charged for tied products. Rather less attention paid to the costs of the infrastructure required to maintain it. Consider for a moment how many people are employed to maintain this unwieldy modus operandi. The personnel required to man the phones for example, eager and ready to take those orders.
“Ohh…you’re a bit late with your order. It’s company policy to charge you a 30 administrative fee.”
“You want to add to your order? That’ll be another ten pounds please.”
Then there’s credit control, meticulously checking you’ve paid all your bills.
“Oh I see you’ve missed a payment. We can only accept cash I’m afraid.”
Add to that those staunch pillars of support, the BDMs. A countervailing benefit if pubcos are to be believed. The reality is they’re hired to milk as much out of each outlet as humanly possible - an attractive bi-annual bonus scheme ensures they’re heavily incentivised to carry out their duties diligently.
And let’s not forget Regional Managers; monitoring progress across the estate, ensuring subordinates are hitting their allotted targets.
Then there’s the beer monitoring equipment; in place for one reason and one reason only, to ensure you don’t buy out.
And if there are any discrepancies with the data, (inevitable many would argue given its track record on accuracy), you’ll receive a visit from those friendly ‘volume recovery personnel’. Invariably they’ll turn up unannounced, expecting access to your cellar whether you’re on site or not.
It’s a vast infrastructure, isn’t it? The question nobody ever seems to ask is how much it all costs? And more importantly, who’s paying for it?
Costs are prohibitively high, much of it of course financed by the tenant, through exorbitantly high wet and dry rent. The consumer also makes a sizeable contribution, via inflated prices at the pump.
Now think how much money could be saved if this ‘police state’ was dismantled? Allowing tenants an FOT option would do just that, resulting in huge savings which would inevitably filter down to the consumer.
Result of an FOT option - the cost of the pint at the pump will come down.
Promoting Choice
The amount of choice available to the consumer in supermarkets is mind blowing. Tied publicans can only look on in despair when they see what they’re up against. Of course there is no semblance of competition; supermarkets hold all the cards when it comes to both product range and price.
Customer choice is not foremost in their minds of pubcos when it comes to compiling product range. Decisions are invariably based on which beers/lagers secure the best margin. Given this, is it not somewhat galling that certain pubcos still openly promote the benefits of the so called ‘partnership’?
At a time when customers expect unlimited choice and are accustomed to getting it, tied pubs are penalised by ‘partners’ focused exclusively on securing short-term profit. What of course they should be doing is ensuring the long term viability of their businesses by allowing pubs to replicate the vast range of products found on the shelves of the off-trade.
Result of an FOT option – far greater consumer choice available to the consumer.
Reducing Costs
Property companies are more than happy to see beer prices rise – negotiating big discounts with brewers before passing on the balance to their tenants. (This fact alone has led to accusations of reciprocal ‘back scratching’ – i.e. collusion, leading to prices being artificially raised).
A free and open market will remove pubco self-interest and manipulation from the equation. Freed from the shackles of having to offer substantial discounts to the big boys, brewers will be able to price competitively in an open and vibrant market.
Tenants will be able to ensure they are able to deliver what customers want, at a price they’re prepared to pay. Isn’t this what a competitive market is all about?
Result of an FOT option - the cost of the pint at the pump will come down.
Promoting Innovation
Mainstream brewers maintain the tie is essential for innovation and investment. I would argue that the opposite is the case. After all, what incentive is there to innovate in a market devoid of competition? History has shown that protected markets do not encourage competition. In fact quite the reverse, they stifle it.
An open and transparent market can surely only help stimulate and encourage growth; incentivising aspiring new brewers by offering them unrestricted access to previously closed markets.
Limitless choice at competitive prices; these are the tools of empowerment tenants require in order to woo customers back to their former haunts.
Result of an FOT option – make pubs more attractive in the eyes of the consumer by offering greater choice and better value for money.
Conclusion
We have reached a pivotal moment - decisions made in the coming weeks will have a profound effect upon the future of pubs, as well as the communities they serve.
We have heard much from David Cameron about ‘Big Society’; one in which honesty, integrity and a sense of fairness supposedly prevail. It is time he began to deliver the vision. What better place to start than with pubs?
His government can begin by openly acknowledging that the interests of corporate UK can no longer be permitted to hold sway, running roughshod over the aspirations and dreams of honest hard-working publicans and their families.
Pubs are not mere chips on a giant corporate monopoly board, they’re assets serving local communities; fostering a sense of togetherness and well-being. In an age when society appears increasingly fragmented, their demise is a major cause for concern.
Government must finally take a stand; acknowledge that political cowardice, an obstacle to reform for so long, can no longer be tolerated.
It is time to cast aside the false smiles and handshakes; the hypocrisy of MPs posing for photographs behind the bar. Where are they when other pubs in their communities are being boarded up?
The fact of the matter is that, by feeding us a constant stream of platitudes, politicians have shown themselves more than content to pay mere lip service to well founded grievances. After all, FOUR Select Committees can’t all be wrong, can they?
I think it’s fair to say tied tenants deserve better than this.
MPs have failed tied tenants, of that there is no doubt, However, even now, at this late stage, the opportunity for redemption lies within their grasp.
All we ask is that they pluck up the courage to act in accordance with their convictions. By discarding inertia and hypocrisy, they can finally begin start to demonstrate the sort of resolute determination, steely resolve and inspired leadership that is so lacking at this point in time.
Quite simply, nothing less will suffice.
65 million years ago, a large meteorite hit the Yucatan Peninsula, leading to the eventual extinction of the dinosaurs. Thanks to evolution, this cataclysmic proved a godsend. Diverse forms of life developed and ultimately flourished, resulting in the eventual ascendancy of mankind.
I would suggest the time has finally come for David Cameron’s coalition government to deliver their own meteorite. If nothing else, it will merely confirm what all of us have long known.
The reign of the dinosaur is well and truly at an end.