Select Committee on Trade and Industry Second Report


1  INTRODUCTION

1. We decided to conduct an inquiry into the relationship between pub companies (pubcos) and their tenants following a request from the Federation of Small Businesses (FSB). During our inquiry it was difficult to find an agreed definition for pubcos. The Association of Licensed Multiple Retailers (ALMR) defined pubcos for us as "companies with no brewing dimension who own their own properties but issue leases to individuals or multiple companies to operate them".[1] This definition excludes the managed retail pub chains, such as the Spirit Group, as they are exclusively managed operations, and regional brewers, such as Wolverhampton & Dudley Breweries (W&DB), who have managed and tenanted estates and still combine brewing with public house ownership.

2. We chose to define pubcos as all multiple public house owners when looking at competition issues in the market for beer as we were interested in determining whether a single company, be they true pubco as defined by the ALMR, brewer or retail pub chain, held a dominant position in the market. Later, when we looked at the relationship between pubco and tenant, we excluded retail pub chains and the managed estates of brewers in our definition of pubcos, as these are managed and operated by employees or agents and not by tenants.

3. The FSB were concerned about the level of concentration in public house ownership and the consequences this was having for some of their members who were tenants of the pubcos. In particular, the FSB questioned whether the beer tie was still an appropriate business model for the 'pub trade', given the changing structure of the industry.

4. The specific issues we were interested in finding out about were: the exclusive purchasing obligations (beer tie) enforced by pubcos on their tenants; the link between the wholesale beer prices charged by pubcos and the rents they charged their tenants; pubcos' margins with regard to the prices paid by pubcos to breweries and those they charged to their tenants; the difference in the beer prices pubcos charged their tenants and the free market price; and the basis on which pubcos' tenants rents were set and increased, and their impact on struggling tenants.

5. In the course of our inquiry we took oral evidence from the Federation of Small Businesses (FSB), the Campaign for Real Ale (CAMRA), A.B Jacobs & Co, Ferdinand Kelly Solicitors, the Federation of Licensed Victuallers Associations (FLVA), the Association of Licensed Multiple Retailers (ALMR), the British Beer & Pub Association (BBPA), the Society for Independent Brewers (SIBA) and the Office of Fair Trading (OFT). We also wanted to hear directly from pubcos and so took oral evidence from Punch Taverns, Wolverhampton & Dudley Breweries (W&DB) and Enterprise Inns.

6. In addition, we received over 400 written submissions from individuals and their representatives. Most of the authors requested that their identity remained confidential. Those who did not are listed on pages 67 to 69. We express our gratitude to all those who contributed to this inquiry, but in particular to tenants who took time out from running their public houses to contribute.



1   Appendix 1, para 4 Back


 
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