Time For Change But Is The Minister For Consumer Affairs Listening?

Dear Jennie Willott MP 

I’ve been involved in the pub trade for almost 30 years. I have successfully operated a number of restaurant, bar and pub groups. I’m a founder member of the Fair Pint Campaign, a current group member of the Independent Pub Confederation (IPC) and a steering group member of the Fair Deal For Your Local Campaign.

Along with many others, I read with interest your recent comments in the House where you suggest that any Government intervention in the pub sector should be “proportionate and targeted”. Whilst I applaud your comments, I’m concerned that any well meaning Government solution to the damaging pubco tied supply problem, should it ever materialise, not fall under the ‘disproportionate’ influence of pubco lobbying or misleading propaganda brought about by the BBPA and the pubco sponsored beer group.

The pubco ‘tied’ model has severely damaged the pub sector of that there can be absolutely no doubt. The sector does not need a series of over-geared and very secondary property companies, aided by some very wealthy family brewers, controlling the supply of beer, fixing prices and manipulating valuations and rent reviews. Publicans and consumers who care very much about pubs are keen to see changes that will loosen the grip of cartel like influences that care very little indeed about the future of the cultural icon that is the British pub and more about how much they can squeeze from the sector whilst Government’s back is turned.

It is apparent that the pubcos are suggesting to anyone who will listen that somehow they have put their house in order and that self-regulation is working. Of course, viewed through the eyes of most tenants and consumers, this is wholly untrue. For every publican that manages to gain a ‘very public’, modest hand-out via PICAS and PIRRS, many thousands more fall by the wayside, go bust, never to be heard of again. It seems that the pubcos and the BBPA are running around Parliament - with acolytes in support - trying to make it look like self-regulation is working. As plausible as their PR sponsored argument may sound, beer is still being sold to their tenants at double the price, beer volumes continue to decline, rents are proportionally out of kilter with the free trade and pubs keep on closing.

Any code of practice, whether self-regulated or statutory, that doesn’t address tied tenant’s risk and reward is a meaningless distraction that allows pubco abuse to continue under the self-proclaimed banner of “we’ve changed our ways”. The truth of course is that they haven’t and self-regulation isn’t working. Foxes in chicken coops don’t regulate themselves. Pubcos charging up to twice as much for beer and abusing the archaic beer tie arrangement don’t change either.

We are of course seeing a craft beer resurgence in the sector with supermarkets, good quality innovative and exciting beers from small micro brewers - who have no chance of making pubco product lists - and changing tastes amongst young people creating much needed change and pubs and publicans have to respond to that. At present the pub industry, along with its true entrepreneurial flair, is strangled by pubco greed, which, in a competitive market would otherwise blossom. The beer tie is anachronistic and is in urgent need of reform. We need a free, fair and normal consumer driven market place where producers of goods will find consumers and where retailers can respond effectively to new challenges and demands.  

There has much been said recently about the serious issues in the pub sector and hopefully Ministers and officials have listened carefully to those concerns. The answer is the Market Rent Only option. This simple legal device, easily put in place via a statutory code, will instil competition and health into the market where for far too long it has been absent. It will put some power back in the hands of the tenants where it needs to be. There is nothing in the Market Rent Only option that puts pubcos out of business unless their business is based on overcharging which the pubcos claim it is not. Market Rent Only is not abolition of the beer tie, it simply uses open market forces to regulate and ensures all agreements are fair and reasonable.

In the pub sector, we’ve witnessed the devastating influence of the pubcos and the awful BBPA, lobbying for a watered down Government solution with ‘bought and paid for’ trade groups such as SIBA and the BII. All this effort is to stave off the risk that existing legislation - twisted carefully in favour of tenanted pub owning companies over many years - could be subject to change. The right change, if it could happen – a Market Rent Only option - would be all for the good as far as pubs and consumers are concerned but not perhaps for pubcos and the brewers that copy them.

The problem for tied tenants is that dealing with a pubco is like handing over your lunch money to the school bully every day. It’s a brutal cycle. The only supportable position is a Market Rent Only option and anything less than this allows the bullying to continue, forcing more pubs to close and many more lives destroyed in the process. I hope you will agree.

Very Best Regards

Steve Corbett  

Confused Brewers?

Martin Kellway

WharfeBank

Martin

You and I do not know one another but recently I was asked by a senior MP to contact you to discuss your company’s submission to the BIS pub consultation. You may have missed my message on your voicemail.

I’ve been involved successfully in the licensed trade for almost 30 years. I’m a founder member of the Fair Pint Campaign, a steering group member of the Independent Pub Confederation and I take an active role in debating and advising on pub related issues for a number of MP’s and ministers.

Along with many others, I have made detailed submissions to the recent BIS pub consultation and, in response to the publication of consultation evidence, will shortly be making final submissions to the same. I have spoken at length with others, including many brewers who are expressing similar concerns to my own at what appears to be a deeply entrenched and unhealthy collaboration between SIBA and the pubcos. Given the state of the pub sector and the unnecessary decline of UK pubs I think it is essential that the regulators find out the truth.

Whist I fully accept that your relationship with Punch Taverns has to date served you well, I must admit I was shocked to read your submission to the consultation as it didn’t explain how your trading terms differ from that of a normal tied agreement. You may be a happy pubco tenant – most aren’t. You must admit that the experience of many others, who don’t benefit from the relaxed tying agreement that you enjoy, falls way short of what would otherwise be considered acceptable in any other business to business relationship. 

The truth is of course that one swallow doesn’t make a summer. The fact that Punch enable one microbrewer to sell their own beer – and I must admit I don’t know the terms of your agreement – doesn’t at all change the fact that the range for other pubs is limited to those Punch allow into the market (foreclosure) and at excessive prices that punish the consumer, the publican and the brewer. Vicious dictators occasionally let one tortured prisoner go free in order to generate humanity when thousands of others stay in cells being beaten.

The pubco model borne out of a cleverly created legal loophole will not help tenants as you suggest in your submission. It has instead allowed accountants and property men to create a vast middleman that sucks the life out of the industry whilst investing nothing. Although large parts of the media are starting to wise up to this, the city and seemingly ‘brewers’ think that pubcos are operators and retailers in our sector without understanding that they are simply property companies that broke beer for far too much money.

These are truly dreadful companies and it may be that the regulators have eventually worked them out. This will of course be a good thing but the fact that it has taken so long, and thousands of lives have been ruined, is the fault of MP’s, brewers and all who have taken the pubco shilling.

I will be highlighting your evidence when I respond to BIS and it might be helpful if you would consider being party to my submission. Perhaps you might want to update BIS yourself? Clearly a truly open market is what a growing small brewer should want so I’d be surprised if this is something you can’t agree with.

I look forward to your thoughts – perhaps we could talk on the phone.

Best Regards

Steve

The Fair Pint Campaign

A letter to Mr Oliver Letwin MP - Minister for Government Policy

2 April 2014

Dear Mr Letwin

Thank you for responding to my recent tweet regarding pubs.

I’ve been involved the licensed trade for almost 30 years. I have successfully operated numerous restaurant, bar and pub groups. I’m a founder member of the Fair Pint Campaign and a current steering group member of the Independent Pub Confederation (IPC).

In recent years pub businesses have been failing in unprecedented numbers. Much of the damage being caused to publicans, and the cause of so many of these pub failures, is the abuse of the beer tie and rental valuation systems by companies such as Enterprise Inns, Punch Taverns and brewers that copy them such as Greene King, Marstons, Fullers and Shepherd Neame. Organisations like the British Beer & Pub Association (BBPA) may wish to promote ‘other issues’ such as duty and supermarket pricing as the reasons for pub failures but this simply isn’t true. Higher taxes may not help but they aren’t closing pubs.

I'm concerned that you may have been misled about the intentions of the BBPA and also their misplaced claims that the members they represent have changed their ways. The BBPA represents large property owning interests in the pub sector such as the companies mentioned above. It’s simply untrue to suggest that they have changed their ways – they haven’t at all. More money invested in PR and marketing may offer this illusion but the reality, as tied publicans will testify, is somewhat different. It is in fact the activities of members of the BBPA that has directly led to many of the serious issues of decline in the pub sector that we are now experiencing. Those serious issues, tied pub closures for example, have recently escalated and contrary to BBPA and pubco claims this is not at all what you would expect from an industry on the up.

The BBPA does not represent publicans. It is paid for by property companies and brewers. The so called Beer Group (APPBG), Chaired by Andrew Griffiths and up until recently, managed by Robert Humphries, is paid for by those same parties and does not represent publicans. For far too long both of these organisations have pretended to represent the interests of real publicans whilst in fact furthering the interests of a small number of larger benefactors such as Enterprise Inns and Marstons. In truth, the BBPA and the beer group are far too conflicted to present a true and complete picture of the problems faced by pubs and it does not help with the real issues, nor does it confer credit on Government, when they seem so ready to be part of the smoke screen being thrown up by the BBPA, the pubcos and the beer group.

The current BBPA self regulated code of practice administered through PICAS, PIRRS and the Pubs Governing Body (PGB) are largely an elaborate attempt by that organisation to bypass proposed Government intervention. This is about the exploitation of tied UK publicans through the over-charging of beer and the manipulation of pub valuation and rental guidance. Some well meaning politicians have been sucked in by codes that only offer the potential to resolve peripheral issues. The central issue and the main stumbling block to progress is the rebalancing of risk and reward and this remains absent, as it always will do, from the self-regulatory process.

The problem is now, and always has been, that there is no mechanism in place to restrain pub owning companies from abusing their dominant position and taking more than a fair share of a pubs profits.  Even now, with all of self-regulated bluster thrown up by the BBPA and its members, the basic requirement, the right of a tenant to be able to trade in a free and fair market place, remains a distant and illusive pipe dream.

Rental guidance and the starving of pubs of investment by depriving them of profit has led to many pubs closing their doors as they are unable to compete with their free of tie neighbours. CGA strategy recently confirmed that two thirds of UK pubs closing were tied. This of course does not take into account the business failure rate in the tied sector (bankruptcy, lease surrender, forfeiture, eviction etc) which, if published, would paint a true picture of the damage caused by the beer tie in the UK. This figure, for obvious reasons, remains the pubcos best kept secret.

It is clear that those against 'meaningful' reform will wish to continue to promote a self regulatory regime, in the hope of deluding you and other senior officials into influencing a dilution of the Government's statutory proposals. The purpose of the exercise is to maintain the status quo whilst denying the pub sector the changes it so desperately needs. A self-policing, self regulatory code, such as the one written by the pubcos and large brewers, simply can’t work and it’s crazy to watch so many people get distracted from the reality by ‘code obsession’. It’s kind of a corporate, close up card trick. Lots of distraction up front while the real trickery continues under the table.

The sector is at a crossroads and a statutory code that includes a free of tie option (MRO) and enshrines in law the principle that the tied tenant should be no worse off than if they were free of tie is the only supportable position and will undoubtedly put the industry back on the road to recovery. It will create necessary change and promote a way forward that offers greater protection for existing publicans and newcomers to the industry such that they do not suffer the extraordinary level of exploitation that has been seen is so many cases up and down the country. We have had four select committee inquiries and a pub consultation survey all screaming for change yet the abuse leveled at tied publicans, even with so much political scrutiny, still goes on today.

I would welcome the opportunity to meet you should you feel it would be helpful and very much look forward to hearing from you.

Very Best

Stephen Corbett

07946 721117