Beer Tie

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It accused pub companies of seeking to scupper MRO applications by any means necessary, including spooking them with eviction notices. The group also cast doubt on the independence of assessments used to set rents.

As such, Marsden is delighted with the vote. “It’s basically fantastic,” he enthuses. “The industry has been dominated by these pub companies and over the past 20 years they have extracted a massive amount of profit, but have done very little of value.” The tie system also allows people to become pub tenants with smaller personal investments. This helps to make the sector more accessible widening the pool of potential applicants. The business model of a pub company combines wholesale with estate management. It uses its purchasing power to buy beer at low prices but then sells it at a high mark-up to the publican who also pays it rent. “The whole business model is wrong. A typical wholesaler might make 10-15%, these guys are making double or treble that,” says Marsden. Brewers been forced to sell-off some of their pubs as a condition of being allowed to merge, hence enabling new firms to enter the market. For example, in 2000 the UK’s Competition Commission forced Interbrew to dispose of some 75% of its pubs. The BPC chair, Greg Mulholland, who pushed the MRO option through parliament as a Liberal Democrat MP, said that in its current form “tenants do not have the rights they were promised by ministers”.

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I certainly don’t have any sympathy for them,” says Marsden. “I hope that many publicans are able to buy their premises, I’d certainly like to buy the Prince.” The vote to end the tie is supported by bodies such as CAMRA and the Federation of Small Businesses. They argue that removing the tie will save many pubs from closure and bring greater competition to the market. Fair Pint and the GMB had been lobbying the European Commission not to renew the opt out for the beer tie. Independent Family Brewers of Britain chairman Paul Wells said: "It's great news because it does validate the business model that the family brewers have been championing for a long time. Pubs in less affluent areas of Britain are in danger of becoming extinct. They have been priced out of the market by rapacious landlords and the supermarkets. If we don't look sharp we are in danger of losing them forever.

T he Competition and Markets Authority exists to promot e competition for the benefit of consumers – therefore it i s disappointing that they are seemingly disinterested in investigating something that will have potentially anti-competitive effects on the UK beer and pub market. The pub companies have borrowed heavily to expand their portfolios and since the credit crunch they’ve been forced by the banks into massive sell-offs. Some of these pubs have become free houses, but many others have been converted into other uses such as supermarkets. The new system would let tenants have their ties reviewed and where appropriate, move to a market rent with the freedom to buy their beer from other suppliers. Tenants can adjust their prices to better meet the needs of their customers and compete more effectively. The ‘tie’ system refers to the structure of businesses where pub companies buy a pub and then lease it to a tenant landlord who pays rent to the pub company. The agreement also ties the tenant into buying their beer from the same parent company. Proponents of the bill argue it ends an archaic system and will make pubs more profitable. Opponents including the government argue that it will result in pub closures and job losses. They say the tied option does not make financial sense for them and the pub would be more profitable – as well as offering cheaper and better beer – if they were free of the tie.Clarke says he helped draft the pubs code regulations but has still been unable to make them work. He and Law still do not know whether they will get their MRO or end up signing a new tied tenancy with “onerous” conditions. Even if they get their wish, they will have wasted three years of time and money. He and Clarke claim that when they applied for the MRO option, Enterprise tried to attach unreasonable conditions to their new lease that made it unworkable. They were left facing the prospect of spending huge sums on legal advice and hours of time on protracted negotiations. They also felt that the supposedly independent assessors who set the market rent were anything but. But she will already be in little doubt as to how many publicans view it. Pub tenants and MPs have been “duped and betrayed”, according to the British Pub Confederation, which said the MRO was little more than a myth. Challenges arising from supermarket pricing, pub regulation and punitive leases all have a cost. And that cost is a dire selection of the cheapest brands of beer, "ready" meals, poorly trained staff and management, delayed refurbishment, increasingly desperate price promotions and so on. In other words, a disheartening experience for the customer creating a spiral of decline, leading sooner or later to yet another closure statistic. What is it we stand to lose?