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

The Great British Duty Con. The Day After the Budget!

The Great British Duty Con. The Day After

I think we should all be very concerned about this Governments stance on duty – this is the second budget in a row that they’ve reduced duty and in times of austerity it clearly doesn’t make sense at all. Let’s not kid ourselves, alcohol is nothing more than a luxury and I should think there are many more deserving causes in line for a state hand out.

Duty is a tax payable by the producer. It’s a cost to them of being effectively licensed to produce such a valuable commodity as alcohol. The assumption they have managed to create the feeling that it’s a consumer cost is simply ridiculous. It isn’t. It never has been and a well organised campaign, ran through the red tops by pubco bagmen such as Griffiths and Simmonds, has had the net result of making the rich brewers and pubcos even richer.

I fear that we’ve all been duped – this was never about duty, it was very about Osborne and a get out of jail card for the Government and the pubcos - giving them the cover they need to oppose pubco reform. “There you go boys I’ll remove the escalator and cut duty – that’s about 5billion over five years (probably a lot more) straight back into the industries coffers so there’s no need to do anything more.” “That’s ya lot, Bobs your uncle, over and out”. “Anyone for tennis?”

There is the old saying that you can fool some of the people some of the time but not all the people all of the time. The issue here is once again that people who pretend to know better, aided by people who ‘think’ they know better, have stuck their snouts in the middle of a process that won’t help publicans or their customers at all. Greg Mulholland’s Treasury FOI refusal tells you all you need to know about what’s really gone on here.

We are the people being fooled here and it’s a pity that no one is prepared to call it for what it is. Putting the whole thing into context, 1p duty is a round 500million directly into brewer and pubco pockets – they simply won’t pass it on. Disgraceful really when you consider that nurses were promised a £250 a year rise and they didn’t get it.

A worried and unhappy Steve

March 2014 (the day after the budget)

The OFT, the lies and their 'cosy' relationship with the pubcos

GOVERNMENT CONSULTATION ON PUB COMPANIES AND TENANTS RESPONSE TO OFT SUBMISSION DATED 14TH JUNE 2013

Fair Pint Campaign consider there are some fundamental flaws in the OFT's understanding of how the tied pub sector currently operates and the Government proposals to deliver fairness and circumstances where a tied tenant would be no worse off than if they were free of tie.

The OFT have said in the past that they do not consider the artificial market environment of a supply tie of beer to tied tenants raises any competition issues, they are now suggesting that the tenants choice to stay in the artificial environment or step outside it, in to an open market, would have competition issues.

COMPETITION

Despite the proposed intervention being on the grounds of the relationship between landlord and tenant, and not competition, the OFT do raise an important competition issue. Their previous conclusions in respect of the beer supply tie were established in 2010, since then legislation has changed requiring that Land Agreements (of which the supply tie would be one) need to be competitive and now fall under the Competition Act 1998. Anti competitive land agreements, or provisions within them, are now prohibited restrictions.

Fair Pint Campaign believe some supply ties would now be considered prohibited restrictions, and do not comply with the criteria for exemption, and the OFT should be reconsidering their previous findings in the light of these changes.

OFT CONCERNS TO THE PUBLIC CONSULTATION

The OFT stated in their submission they did not believe there would be a significant rental adjustment to rectify the perceived imbalance rendering the tied tenant no worse off than if they were free of tie. They then raise concern that the implementation of the "no worse off" principle may lead to significant rental adjustments. These two statements are contradictory and show a conflicting understanding of the 'no worse off' principle.

The OFT demonstrate a clear misunderstanding of the circumstances that prevail. To close a pub it must be vacated. Most tenants have a degree of protection from eviction by legislation. It is tied terms that circumvent that protection. The Government proposals would make it much harder to evict a tied tenant and offer them the similar protection to that enjoyed by practically all other commercial tenants in the UK.

The OFT also expressly indicate their understanding that price regulation is being proposed - IT IS NOT.

There are around 1,000 brewers in the UK and despite some large non brewing pub companies allowing sourcing from a small handful of them the vast majority are restrained from participating in around 40% of the UK's pubs. The OFT, even in their latest work, have failed to recognise this fact.

Contrary to the OFT understanding, the benefits of central purchasing by large pub companies are NOT passed on to the tenants and in turn the consumer does NOT benefit. If products and services were genuinely cheaper through the pub company, due to the benefits of central purchasing, then a tenant would choose to acquire them from the pub company not be forced to acquire them by mandatory lease provisions.

The original contractual nature of agreement between landlord and tenant is that the higher tied product prices would be fairly balanced by benefits (special commercial or financial advantages - SCORFA). The pub companies have altered the nature of the contract between the parties by undermining the balance taking too much in rent whilst over charging on tied product prices and offering little if any other countervailing benefits. The intention of Government intervention is to redress that balance and restore the 'fair' nature of the contract between the parties NOT to alter it as the OFT have concluded.

The OFT have demonstrated an incredibly naive perception of how the pub sector operates and the failings within it and seemingly relied almost entirely (again) on the information submitted to them by the pub companies and their representatives.

FAIR PINT CAMPAIGN

Simon Clarke
Steve Corbett

24 Hours to prove I’m not a troll!

24 Hours to prove I’m not a troll!

Nothing surprises me anymore when it comes to UK brewers and pubcos - I’ve been around too long to let their nonsense slip by unnoticed. Sadly, some still fall for their crap and Propel journo Martyn Cornell seems to be one of them.

Last Friday Martyn and I got into an argument on twitter after I called his pro pubco article on the recent London Economics report on pubs inaccurate and delusional. He didn’t like it of course and  gave me 24 to prove the report wrong or else become a zythopilliac troll.

Here is the tweet exchange and my email to Martyn below,

Steve Corbett ‏@SteveC271220 Dec

More inaccurate, delusional gumph from @zythophiliac who feels important as he continues to scrape of few crumbs of the pubco table.

                                                               

Martyn Cornell‏@zythophiliac

@SteveC2712 "inaccurate, delusional gumph" isn't feedback, without evidence to back that claim it's just you indulging in knee-jerk trolling

Steve Corbett ‏@SteveC271220 Dec

@zythophiliac claims of "Trolling" are usually the first line of defence for those who know their in the wrong.

Martyn Cornell ‏@zythophiliac20 Dec

@SteveC2712 Right, Steve - send me a list of my inaccuracies and delusions. I'll give you 24 hours. Otherwise you're just trolling.

Martin

Only 24 hours to supply you with rebuttal evidence or I become a troll? A little harsh don’t you think Martin? The Fair Pint team are beavering away on the LE rebuttal document as we speak – it’s a tad too long at the moment but it should be good to go shortly. Once complete I’ll send you a copy. BIS officials broke up for the hols a couple of days ago so there’s no point rushing it off.

I note that you’re a beer historian so I expect you have some experience of the sector. I think we can all lay some claim to experience of one sort or another. It’s not the experience of the people in it that enrich a particular sector but more how we choose to apply it and whether, despite the opinions we form as a result of our experience, we can continue to develop and learn from the experiences we continue to have and the new information that comes to hand. Part of that process is understanding and accepting criticism. I’ve always known that unpalatable views, delivered to us by people we might not like, can still be right.

So where are we now? The consultation has turned into a farce if I’m truthful, the BBPA had a game plan as they continue to play games with some inexperienced BIS officials. The LE reports a shocker, full of inaccuracies and guess work, all supplied and rubberstamped by the BBPA. Their plan in 3 parts was:

1                    Manipulate the consultation

2                    Avoid a statutory code

3                    Go skiing.

So how did they get on? Their plan was to get the RICS back on track – which was always going to happen because of the conflicts within the TRVG – squeeze the FLVA to say more fluffy nonsense - get the ALMR on the firm and cherry pick as many tenants and brewers to hand write glowing testimonials.  All of that would give them a chance of scoring some points with the usual damaging tosh about self-regulated codes of practice. Once achieved the game plan was to present the whole sham as a fait accompli and to marginalise other voices pushing for change. It’s embarrassing really.

And then there’s the real world. Pubs still failing at record rates for reasons denied by people causing it and then helped in doing so by people who should know better. The BBPA think it’s all jolly unfair that people with money and dinner parties should be outed as the bullies they really are. Like the idiot who fronts the PMA, I think you’re looking for goodwill where it doesn’t exist. It’s a plausible assumption to expect a high degree of honesty and integrity from those operating public limited companies. That degree of honesty and integrity is lacking in some of the larger pub companies and I would say that there are some in the media, you included, that are naive of these issues. I’ve seen some awful things over the years many include tenants that have been misled. Lies are told about trading histories and tenants are advised that they don’t need legal advice. Punch used to offer to pay for a lawyer to represent the tenant “no changes to the draft lease” were to be made. A great many people have been subjected to this sort of treatment which looks substantially like nothing more than a ‘timeshare’ type scam. Similar methodology seems to have been applied to dealing with investors. As you know, the pubco model was devised largely by people who are no longer connected with the sector and have long since departed with the cash leaving billions that will never be repaid to the bondholders and eye-watering interest bills that suck hundreds of millions out of the sector every year. The model leaves the tenants unable to maintain the building and the pubco cannot afford to either.

As for Fair Pint – we have been rightly critical of so called “leading figures”. In my own view the likes of Ted Tuppen etc are little more than overpaid frontmen for a scam that took place some time ago. The BBPA truly is a risible organisation that has sold its soul to serve the interests of large pubcos and the tie. Its annual rounds of pleading with the treasury, seen once more today, look more and more ludicrous, whilst saving pubs and jobs is given as a reason for the pleading little or nothing will be passed down to publicans. A duty cut and removal of the escalator hasn’t stopped pubs closing so I can’t expect the treasury will fall for that one again.  

All in all it’s a mess Martin. The men that set up the pubcos never had a long term interest in the sector but spotted legal loopholes, the greedy and less intelligent brewers, the naive trade bodies etc. Down at Fair Pint towers we are interested in the root of the industry. The publicans, the customers and the small creative brewers. We want them to succeed. The tie and the anti-competitive, monopolistic mess the pubcos have created make that very uncertain as we all unfortunately know.

Forgive my ramblings. I suspect nothing I say matches the news of Nigella Lawson.

Very best wishes.

S.

Andrew Griffiths MP and the Duty Scam

Andrew Griffiths Calls for an extensions of the beer duty freeze!

You can read his comments here:

http://www.thegrocer.co.uk/fmcg/mp-calls-for-extension-of-beer-duty-freeze/353091.article

My Response:

More delusional ‘gumph’ from Andrew Griffiths as he attempts to mislead hard working publicans and consumers into thinking a cut in duty will be passed down the line to pubs and beer drinkers. It won’t of course and Griffiths, acting in his role as M for Punch and Enterprise, knows this. Duty is paid at source by the producer. The producer decides whether to pass on a tax concession and of course they don’t. If they are forced into concessions by property owning pub companies – of the likes of zombies such as Enterprise Inns and Punch Taverns – then that company retains the benefit and pays it away in debt costs usually overseas to bondholders.  In short, whether it is the treasury or Griffiths’ friends down the BBPA then someone will have their hand in the consumer’s pocket.

Griffiths, MP for Burton,  is far too close to the pubco/brewer mouthpiece; the BBPA, and here once more we see him begging for a tax hand out for his wealthy mates. The BBPA truly is a risible organisation that has sold its soul to serve the interests of large pubcos and defend at all cost the disgraceful beer tie. Griffiths managed to convince the inept George Osborne that a duty cut was good for pubs last time round and not a single penny of it was passed down the line to pubs and consumers. This call for a duty cut extension is round two of the same old scam.

Caught Between A rock And A Hard Place!

Caught Between a Rock and a Hard Place

Is this more evidence that Cable & Co have absolutely no idea what to do with the pubcos and the beer tie?

http://www.morningadvertiser.co.uk/General-News/Statutory-code-BISC-chairman-Adrian-Bailey-urges-Government-to-act-now

Consider this:

Whether tenants like it or not it is clear that whatever government decide to do – even if that something is nothing – there will be some form of collateral damage, albeit inadvertently, on parts of the sector. If government legislate and give tenants a MRO or a ‘tied tenant no worse off’ then some pubcos may not survive it. Punch for example are teetering on the brink of extinction and it will only take a small shove to send them over the edge. Whilst I accept most tenants will be safeguarded by their lease agreement, it still leaves an uncertain long term future for pubs as there may not be an automatic right to renew especially if there is a mass pub jumble sale.

And then we have other companies that currently do business with the pubcos - brewers (family and micro) suppliers, maintenance contractors, builders, logistic companies – the list is endless and many companies/people will be affected by changes in legislation.

We would argue that pubs will still need the services of these companies and that is of course correct but we all must agree there will most definitely be fall out if government legislate and much of it will not be pretty.

So back to Government’s dilemma.

I expect they realise the above and find themselves firmly between a rock and hard place: help small businesses and there will be collateral damage, much of it ugly and backed up I expect with legal challenges, or do nothing and continue to see pubs close, tens of thousands of people lose their jobs with ex publicans and their families relying on state handouts. 

My point I suppose is they’v e left it too long to make change.  They had the perfect opportunity in 2004 but failed (just like the beer orders) to make adequate provision for the sector as a whole and whatever they do now, almost ten years later, will undoubtedly have serious consequences for parts of the sector.

Fair Pint were right; the beer tie doesn’t work – I would argue it never has – and Cable & Co, even if we were to imagine there are no dark forces in play, must be struggling with the situation they now find themselves in. It’s simple really, whatever they do they lose either way.

For my part I say burn the bastards. They’ve taken too much already!