Punch Taverns and the pubco tie - my experience

27-Oct-2014 - Last updated on 27-Oct-2014 at 13:18 GMT

Jeffrey Bell: "The beer tie is still a huge hit to a publican's margins and creates an active disincentive to sell beer in favour of everything else"

One of the things I was always cagey about when writing about the Gunmakers back in 2009 (the year I became licensee) was the pub's 'tie' to Punch Taverns, writes Jeffrey Bell.

They owned the freehold (they still do - I sold my leasehold interest and my business, but the bricks and mortar belong to the pubco) and as well as paying them rent I had to buy all my beer and cider, draught or packaged, through them at above market prices.

When I first started that meant I could only buy what their nominated suppliers - Carlsberg - were selling.

I glossed over that in my writing and in conversations over the bar with inquisitive (nosey) customers because I didn't want to encourage any perception that our beer choice was severely restricted. And as the years went by things improved so much that many thought the Gunmakers had become a free house.

Credit has to go to Punch for that. Slowly and reluctantly, they did wake up to the changes in the beer market and offered more flexibility to selected pubs.

Credible

In 2009 Carlsberg's beer list for Punch lessees was almost all very mainstream. It did include a rotating range of guest ales called Finest Cask. Sometimes that allowed me to buy some really decent beers from across the UK, although a lot of the beers were ropey seasonals or one-offs from national brewers. In the early days we built our reputation as a good ale house by making the most of Finest Cask.

As the years went on Carlsberg started to offer mainstream but credible bottled product - the likes of Goose Island IPA or Brooklyn Lager, for example - and in late 2013 they even introduced a very limited "craft keg" range. I steered clear of that because the beers didn't really appeal and our tiny bar was already chocka with handpumps.

The biggest change for the Gunmakers came at the end of 2011, when Punch finally allowed us to use the Direct Delivery Scheme operated by the Society of Independent Brewers (SIBA). This gave access to beers from participating local brewers within about a 30 mile radius. The Gunmakers was able to participate in the boom in London microbrewing that was just around the corner. Credit goes to Punch again.

Mark-up

Of course, the pubco had to protect its own margin - the 'wet rent'. The system worked like this: we would call SIBA and order the beer, they'd then call the individual brewers, the delivery would come, and the brewers would register the delivery with SIBA. Then came payment: SIBA would present the bill to Punch for the beer, Punch would pay the rock bottom prices you'd expect from a pubco with huge buying power, and then they'd add their own huge mark-up and present me with the bill.

There is no doubt that Punch would have made a greater mark-up by selling me beer from bigger breweries, purchased in bulk and delivered by Carlsberg. Microbrewers can't compete on volume so will only go so low on price, even to pubcos. That's why the SIBA scheme is only available to a few licensees in Punch's estate who make a big fuss about beer choice. I even had to get a Cask Marque - a waste of time and money in my opinion - to show I was serious.

A word on pricing under the tie generally. The anti-pubco campaigners frequently state that tied publicans pay double the market price for their beer. I suspect what they mean is that the purchasing power of pubcos sometimes allows them to charge pubs double what they paid themselves, their buying price being far lower than a individual publican or multiple operator would be able to achieve.

I never paid more than about half again the amount I would have paid otherwise on the open market, usually less. That still isn't pretty but the record needs to be set straight after some of the wild claims I've seen bandied around.

Disincentive

Of course the beer tie is still a huge hit to a publican's margins and creates an active disincentive to sell beer in favour of everything else. In my first three years I tried all sorts of schemes to sell more wine and food, and had a degree of success, before deciding it was too much work and I wanted the Gunmakers to be an alehouse first and foremost.

Although that meant lower margins, it also lowered staff cost in the kitchen and revenue increased so the business actually became a touch more profitable and easier to run.

So much for the pubco tie. In an upcoming post I'll cover what it's like to be free of tie at my new pub, the Finborough Arms.

Jeffrey Bell is licensee at the Finborough Arms in London and has his own blog.