Letter to Enterprise Inns from Brulines
dated 3 March 2009
Re: David Law Submission to BEC
As requested I am writing to provide Brulines
response to parts of the David Law submission to the BEC enquiry.
It is worth underlining that Brulines' core
purpose is to provide operational transparency to draught beer
operations in pubs.
Our core service consists of:
— Monitoring of dispensed draught beer
volume trends utilising the highly reliable Titan Pelton Wheel
flow meter, and remote harvesting of the data.
— Report production including weekly
comparison of draught beer dispensed against draught beer officially
delivered by the pub company supply chain to the pub.
— Customer Data Analysis on a weekly
basis which includes identification and removal of line cleaning,
rectification of data anomalies, and analysis of variances between
delivery and dispense trends including potential buying out.
— Customer Account Manager and Data
Advisor support to directly address potential buying out and reconcile
discrepancies with licensees and customer representatives.
Brulines provide reports and identify trends
which allow Pub Companies and licensees to run more efficient
businesses.
Good honest licensees who uphold their legally
binding contracts with the pub companies use the system to help
improve their business whereas others attempt to discredit and
bypass the system for greed and or need driven reasons:
— Access free market discounts that
free hold pubs can access ie they won't take a mortgage out to
buy a free of tie pub but they want the discounts that it attracts
despite having knowingly entered into a contractual agreement
to be tied to purchase supplies through the pub company. A case
of wanting the cake and eating it.
— Avoid paying taxes by buying beer
for cash on the grey market. In doing so they can avoid VAT and
business tax, and also avoid national insurance by paying bar
staff in cash earned from undeclared retail sales.
— In some cases unscrupulous licensees
take unofficial supply from nearby free trade pubs which have
volume over rider targets with the brewers.
The Brulines system is effectively the industry
standard management information system for draught beer operations.
It allows the key stakeholders to look at one set of factual information,
forming a basis on which investment, fair rent, and business support
decisions can be made.
The submission from Mr David Law consists of
inaccurate and misleading assertions which I address below.
Mr Law—This system is known as Brulines
and was founded by Derrick Collin who in 1986 was convicted of
conspiracy and blackmail.
This point is irrelevant as the integrity
of the system is not directly related to the personal history
of Derrick Collin.
In the article evidenced by Law, the journalist
Edmond Jackson of the Telegraph questions whether or not Derrick
Collin's conviction was disclosed to investors, not the integrity
of the system or indeed Brulines as a company. He goes on to suggest
investors should hang on to their investment. "I am not implying
that CBS shares are a write-off. Its Brulines subsidiary is the
market leader in its specialist area and investors should hang
on".
For the record Brulines has since March 2003
been managed by chief executive James Dickson during which time
he has overseen a management buyout from Derrick Collin in May
2005 followed by a successful flotation in October 2006. Becoming
a listed public company entailed satisfying significant commercial
and legal due diligence.
Dickson, BSc Civil Engineering, MBA (IMD,
Lausanne) Chartered Director (Institute of Directors) had previously
held senior positions in Scottish & Newcastle and Whitbread.
Mr Law—The system is based around a very
simple flow meter commonly used in plumbing and can be bought
over the counter in any plumbers merchant for approx 24p
There is no truth in this statement which seems
to be based on ignorance and a lack of understanding of our market
leading system.
The Titan flow meters used in dispense monitoring
installations are not commonly used in plumbing and are not commonly
available over the counter in plumbing merchants.
The price quoted by Law is understated by a
factor of c.70 times and is therefore spuriously inaccurate.
Mr Law—The problem lies in the fact that
the analysts of the data at the Brulines HQ have to guestimate
the quantities of water that the Lessee pulls through the dispense
system to clean the beer pipes
Brulines Customer Data Advisors are trained
to identify and highlight as water any volumes within trading
hours that may be attributable to the process of flushing the
lines with clean water when changing from empty to full real ale
cask containers.
Whilst the practice of flushing between casks
is common place it should not be confused with the correct cleaning
methods widely recognised within the industry, and therefore should
not be regarded as a weekly clean. Mr Law clearly confuses the
two practices in his comment "with regard to real ale
we clean our lines at the end of every barrel".
Where practiced the water pull between casks
is usually in the range of 2-4 pints per flush; relative to total
cask volume this would not be evidential of buying out. It is
standard practice for Brulines data advisors to overestimate line
cleaning volumes in the favour of the licensee.
Mr Law also claims that there is a law on frequency
of line cleaning. He is clearly confused as there is no law relating
to frequency of line cleaning, however brewers and retailers have
over the years established best practice for line cleaning regimes,
including the recommended frequency.
Sadly too many licensees fail to clean their
beer lines either frequently enough or to a robust enough regime
which results in too many unsatisfactory pints being sold to the
consumer. These licensees then wonder why their businesses are
not performing.
Mr Law—My first experience of this was when
my BDM reported a 54 x 11 gallon, barrels discrepancy to my previous
employers at the Eagle
This example from July 2005 is a case of incorrect
interpretation of the data by our Customer Data Advisor rather
than system accuracy; it relates to missing delivery information
for guest cask ales and the manual flushing between casks as covered
above.
The tenanted pub companies provide a very wide
portfolio of guest ales for their tenants. Historically this was
occasionally problematic as direct supply by some cask providers
took time to reconcile with deliveries from the various pub company
supply chains however logistics systems are increasingly integrated
enabling robust weekly delivery information.
Where the comparison data provided by Brulines
is disputed the pub company and Brulines are careful to ensure
that any area of dispute is investigated thoroughly to ensure
the facts are correct (apart from our desire to be fair and transparent,
if a dispute cannot be settled satisfactorily the data must be
capable of standing up in court). In the dispute referred to by
Mr Law the investigation was carried out and resulted in the appropriate
corrective action being taken by Brulines and Enterprise, thereby
demonstrating the fairness of the system. This is covered in the
email dated 28 July 2005 as provided by Mr Law.
To minimise the risk of human error Brulines
have implemented several quality assurance checks and processes
over the past three years.
Mr Law—Unfortunately I personally know four
Lessees that have been charged with the same accusation and sadly
paid fines of £1.5k, £3k, £4K, £8K and another
with an attempt at £18k
It is unreasonable to comment on this statement
without further specific information being provided by Mr Law.
Overall the incidence of Brulines systems identifying
licensees buying beer outside the tie and tampering with the system
(bypassing and interfering) has continued rise over the past five
years.
Mr Law—Nick Light Operations Director, Enterprise
Inns told us that Brulines had gone to court 160 times and had
a 100% track record.
Mr Law is largely correct. In an email from
Brulines to Nick Light timed 22.27 on 01 April 2008 the actual
numbers for the period April 2005 to February 2008 were confirmed
as:
— Licensees admissions of buying
out 10,949
— Licensees written undertaking
not to buy out again 7,233
Since Brulines systems were first installed
in the mid nineties we have never lost in court when the data
has been challenged.
The bottom line is that Brulines provide
reliable operational transparency to draught beer operations in
pubs. This transparency allows the pub companies to ensure that
licensees are honouring agreements and also allows a factual basis
for business development conversations and rent negotiations.
The historical information is particularly helpful for new lessees
ensuring that they have transparency on actual performance of
the pub before entering into an agreement.
Brulines system is a management information
system which allows pub companies to manage their assets, and
provides proactive licensees with valuable trading information
for business improvement. This is why dispense monitoring is installed
in 22,500 pubs.
Mr Law—Inclusion of the Publican article
http://www.thepublican.com/storv.asp?storyCode=53272
Data integrity and transparency are sacrosanct
for Brulines and to help ensure this we make significant investment
in our systems, organisation and people.
For example, our back office systems and Customer
Data Analysts review the data on a weekly basis and on finding
data anomalies will first check its integrity against historic
trends, and where appropriate will commission line verifications
and/or calibration checks, and possibly a field engineer visit
to check for evidence of the licensee either tampering or bypassing
flow meters. Malicious damage, tampering and bypassing of flow
meters are common place due to many unscrupulous licensees who
seek to defraud the pub companies and avoid taxes.
In this particular case Phil Turner-Wright's
issue was not escalated by one of our Customer Data Analysts resulting
in him escalating it direct through the Publican. Once the issue
had been raised the appropriate action was taken to investigate
and remedy the situation.
In my statement at the time in October 2006,
I said: "My investigations have highlighted a very basic
internal communication failure which resulted in this situation
being handled unsuccessfully by an employee. Had Mr. Turner-Wright's
issue been escalated through the proper channels more promptly
this scenario would not have transpired".
Enterprise Inns provide their retailers with
full time Customer Account Managers to investigate dispense irregularities
in all of their outlets.
The process allows licensees to challenge the
data and seek clarification and corrective action where appropriate.
Mr Law—Recently we had new meters installed
and the variance started to drop dramatically
I am unable to comment on the installation of
new flow meters as Mr Law does not make direct reference as to
which outlet. "I am a Partner in two pubs leased from Enterprise
Inns".
Mr Law—The meters aren't government stamped,
are not recognised by Weights and Measures or Trading Standards
This statement is a red herring.
Flow meters used in the installation of Brulines
dispense monitoring systems undergo an in-situ calibration process
traceable to national standards.
For any flow meter that is calibrated in-situ
(as with all Brulines flow meters) the repeatability is the over-riding
factor and the repeatability of Titan meters at constant flow
is +0.25% (or better where a full pint is being measured).
Already mentioned, Brulines have systems and
processes which regularly review the integrity of calibrations,
which is particularly necessary given the proliferation of licensees
attempting to get round the dispense monitoring system.
Unlike spirits optics and grocers scales the
Brulines flow meters are not installed to determine a unit for
retailing where money exchanges hands between vendor and consumer.
Our flow meters are used to reliably gather management data which
is used for analysis and to identify trends. The trends are then
investigated and may lead to issues being addressed with licensees
including gaining admissions of buying out, fines being levied,
and potential forfeiture of lease.
Mr Law's point relating to Weights and Measures
has no validity as Weights and Measures legislation does not apply
to the provision of data by Brulines because the services it provides
arise out of a business to business transaction and do not impact
on the product sold to the end user. In addition, Brulines has
always believed that its equipment does not require to be stamped
by Trading Standards.
I hope this addresses the key elements of Mr
Law's submission, but should you require any further clarification
please give me a call.
EAGLE, BATTERSEA
(MIKE ROBERTS—ETI
FLOWMETERING MANAGER)
Firstly, the flowmeters used are neither of
the type available across the counter or that used in the oil
industry, are not notoriously inaccurate and do not tend to need
recalibration on a frequent basis. A paper on the technical nature
of the meters is available if required. The meters do measure
the flow of liquid as described, and the model used by Enterprise
cannot distinguish between water and beer, which we have never
claimed it can do.
The dispense data is sent to Brulines for analysis
and part of that analysis is indeed to attempt to remove dispense
volume which might be water used during line cleaning. For keg
products, which form the vast majority of dispense, this process
is relatively straightforward because a meter is placed on the
water ring main and volumes dispensed when water is being flushed
through are removed. The set of circumstances referred to by Mr
Law is restricted to cask products when cleaning is achieved by
pulling water and/or line cleaning solution through the system
directly from a container, generally a bucket. The removal of
this volume is a more subjective process and is normally manifested
by significantly large volumes being dispensed in short periods
of time often outside of trading hours. It would be difficult
to accurately identify what was line cleaning if lines were cleaned
after each cask within trading hours as described by Mr Law.
Because of this potential inaccuracy, Brulines
would not normally conclude that purchasing outside the tie had
taken place on cask products without the Brulines CAM (who is
trained in the interpretation of data) attending the site and
discussing the reportage with the retailer. This discussion should
encompass the line cleaning regime in that particular outlet and
the reportage will be reviewed in the light of that.
A major discrepancy was identified at the Eagle
in the first half of 2005 and this was subsequently withdrawn
on the basis that the cask line cleaning regime had not been taken
into account and that deliveries by a former variant of the SIBA
DDS scheme had not been accounted for. Since then there has been
no reason to suspect anything untoward occurring at the Eagle
because these factors have now been addressed.
Brulines do supply data to retailers, either
directly or via the web, and recently Simon Clarke at the Eagle
complained that cask line-cleaning had not been removed correctly.
As mentioned before this is a subjective process and a closer
look at the data suggested that this might be right and the volumes
were removed. It should be re-iterated that no accusation had
been made on the strength of the data alone. Data continues to
be sent to the Eagle and whilst no further issues have been raised,
it has been suggested that some erratic line cleaning procedures
are continually being introduced in order to deliberately complicate
the interpretation process.
20 March 2009
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