Pub Companies - Business and Enterprise Committee Contents

Memorandum submitted by the National Parliamentary Committee of the Guild of Master Victuallers

1.  BEER

Costs to Pubcos

  Pubcos are able to negotiate substantial discounts from their suppliers because of the influence in the market due to their size. For instance Enterprise Inns and Punch Taverns own in excess of 15,000 licensed premises which represents more than 25% of the UK pub market. These pubs are in the main operated by individual tenants and lessees.

  This situation is compounded by the managed house estates also owned by the Pubcos and their buying power with a distinct advantage over the individual tenants and lessees all operating in the same high street.

Costs to tenants and lessees

  Due to Pubcos strict enforcement of their supply agreements with both tenants and lessees which prohibits them from obtaining their products on the open market or from suppliers of their choice they are bound by the price list imposed by the pub owning companies. This price list does not reflect the large discounts obtained by the pubcos from the Brewers. Where large volume sales result in a more beneficial discount to the tenant or lessee it is offset by a higher level of rent which negates any advantage gained.

Guest Ales

  The Guest Ale provision in the Beer Orders, enabling tenant and lessees by right to stock these products, have in most cases been eroded by the Pubcos by arrangements forced on licensees in exchange for discounts. These arrangements are reflected in any subsequent rent review.

2.  RENT

  On review rents should be subject to any environmental changes in and around the licensed premises which adversely affect the profitability of the business. The unfairness of the upward only rent reviews do not take in consideration these changing circumstances which in most cases are outside of the control of the licensee. In commercial trading practises there is no place for upward only rent reviews and therefore they should be abolished. Pubcos should be open with their tenants about the way in which rents are calculated.


  In the case of AWPs (Amusement with Prizes Machines), Juke boxes, Video machines and Quiz machines, the licensee is again restricted from a choice of supplier by having to adhere to the Pubcos list of preferred suppliers of these machines. The preferred suppliers rental arrangements with licensees are in excess of those that can be obtained in the open market.

  The reason for this is because the Pubcos receive commission on the inflated rental charges levied by the suppliers. This general practice is further compounded by their taking of a high proportion of the total machine income. In the case of pool tables and snooker tables that are not rented from the preferred supplier, the Pubcos levy a ground rent to offset their loss of commission. Where the tie exists it should be removed.


  Licensees have no choice in the selection of building insurance providers but are restricted to the company's nominated insurer. The restriction results in higher premiums than can be otherwise obtained due to the company's commission arrangements with the nominated insurers.


  There has been no substantial review of the Tie since the 1990's when the spotlight was on Inntrepreneur Pub Company. At that time the focus of attention was on whether the Tied Lease complied with the "Block Exemption" requirements under European Competition Law. In particular, attention focused on whether the Tied Lease provided the tenant with any "special commercial or financial advantage" (SCOFA).

  The basis of the Tie in early 1900s meant that all beer products supplied by the tenant had to be purchased from the landlord or from the landlords nominated supplier and at the landlords standard price. This was subject to one proviso ie. that the tenant could, at any given time, stock one "guest" ale of the tenants choice and purchased from a supplier of the tenant's choosing.

  The nature and scope of the tie has changed dramatically since the late 1990's, either through changes introduced in the terms of new leases granted by Pubco landlords or through financial incentives. The guest ale concessions have been removed from leases granted in the late 1990s and onwards. In addition many existing tenants were offered financial incentives to give up the guest ale. The tie provisions in leases have been extended from beer only to "beer, ciders and alcopops". Some Pubco landloads have introduced a "full tie" in new leases.

  AWPS and other gaming amusement machines have been brought into the scope of the tie provisions. Tenants must now use the landlords nominated supplier for such machines. In addition, the net takings, (which formerly belonged to the tenant absolutely) must now be shared between the landlord and the tenant.

  Increasing public concern over alcopops and increased consumption of soft drinks in public houses has resulted in the tie provisions being changed yet again. Alcopops are now going out of the tie provisions and are being replaced by soft drinks.

Other issues

  The National Parliamentary Committee of the Guild of Master Victuallers has restricted its submission to the issues that the Business & Enterprise Committee intend looking into but it is aware that there are other issues that are of concern to licensees. It would like the Committee to consider other important issues such as:

    An agreed accredited National Code of Practice to apply to all Pubcos.

    Transparancy in all dealings between Pubcos and licensees.

    Independent fully binding complaints procedure panel.

    Affordable arbitration.

29 September 2008

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