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Wearing the old pub tie 2010-01-23 How the pub trade is run may be of little concern to most drinkers. However, a move to end the ‘tie’ could have a long lasting and potentially damaging affect on our pubs and the beers they serve. A little background is helpful to understand the subtleties. Basically, pubs fall into three categories; managed, tied or free. A managed pub is run like a retail shop and is under the direct control of the owner. A tied pub is owned by a brewery or pub company (pubco) and is run by a tenant who leases the pub from them. As part of the leasing agreement, the tenant agrees to buy his beer (and often all other drinks too) from the brewer or pubco. A ‘free of tie’ pub, or freehouse, is either independently owned or has a ‘free of tie’ lease agreement. This means a freehouse can buy all its drinks on the open market. The tied system has existed for decades and enables prospective publicans to acquire a pub at well below the cost of buying a pub outright on the open market. The publican buys a fixed term lease, pays an annual rent and is responsible for all the other overheads of running a pub, including staff costs. Recently though, this arrangement has caused resentment among many publicans. They say they are paying far more than a freehouse for their beers; a figure of up to 75p per pint has been quoted. The main focus of criticism has been the huge pubcos such as Punch Taverns and Enterprise Inns, who own some 16,000 pubs between them and larger regional brewers. A year ago a group of publicans launched a campaign called ‘Fair Pint,’ its aim is to end the tie; it thinks its best hope of doing so lies with the European Commission, claiming the tie breaches EU competition law. Fair Pint alleges many pubcos and some brewers have dramatically increased the price of beer to the pubs at a time when they are struggling to survive. In addition it says that rent reviews are unfairly skewed in favour of the landlord. Their campaign has gained some support from parliament and prompted a review of the trade’s practices. Similarly the Campaign for Real Ale (CAMRA) lodged a ‘super complaint’ in July 2009 with the Office of Fair Trading (OFT). This meant the OFT was obliged to investigate what CAMRA claims is ‘exploitation’ of the tie agreements and an unfair rent system which is ‘harming consumers and society as a whole’. CAMRA says the tie results in higher beer prices, restricts consumer choice and is adding to the rate of pub closures. However the OFT investigated CAMRA’s complaints and concluded they were unfounded and there was no evidence the tie was at fault. It reported that ‘in a competitive market, any strategy by a pub company which compromises the competitive position of its lessees would not be sustainable’ and did not agree that it prevented choice. CAMRA was incandescent at the OFT’s dismissal and vowed to continue its call for the tie to be overhauled. It’s interesting that CAMRA’s fervent misgivings about the tie are not absolute. They are fully aware of the disadvantages the tied pub has, but do not want to see it abolished altogether. Roger Protz, CAMRA veteran and respected beer writer, warned in an article last year for the Morning Advertiser that ‘scores of independent brewers….would consider the game was not worth the candle and get out of brewing.’ The smaller independent brewers, in particular, need an outlet for their beers and have a vested interest in keeping their pubs open. Any change to the tie should be carefully considered and its consequences thought through. The last time there was wholesale change in the pub industry was in the early 1990’s. Following the infamous Supply of Beer Report (Beer Orders), the Conservative government attempted to make the brewing industry fairer and more open to competition. It went spectacularly wrong. The Beer Orders resulted in thousands of pubs being disposed of by the national brewers and the formation of the massive pub companies, which many publicans have grown to hate. It did little to open the market to competition and merely shifted pubs into the hands of property speculators. Many believe the ill-thought-through legislation of the time is largely responsible for the mess we find ourselves in today, with pubs closing at an unprecedented rate. If you are a publican or have a view about the tie, you are welcome to add your comments to this page. |
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