Memorandum submitted by Martin and Alan
Hand
REVIEW OF
BEER TIE
As lessees of an Enterprise owned public house
operating to a Whitbread lease since 1995, I wish to submit the
following regarding the operation of tied leases which I believe
are inappropriate in today's market environment.
KEY ISSUES
1. The product cost per barrel charged by
Enterprise versus other sources of supply such as Cash & Carry
operators is excessive and results in managed pubs enjoying an
unfair and significant selling price advantage over beer tied
operators. The consumer ends up paying higher costs and the lessee
has margins squeezed too tightly.
2. The process for establishing a fair rent
currently favours Pubcos since where there is dispute the Lessee
finds arbitration too high a cost to mount a challenge.
3. Pubcos state that the high product cost
which they charge lessees provides for the cost of services which
they make available such as training etc and also helps to offset/subsidise
rent charges. This results in a total lack of clarity between
true rental costs and the cost of services which they offer. In
addition it results in lessees paying for the services on offer
which very many of them they do not require or use.
4. Concerns have been expressed that if
the beer tie is removed then brewers will assume the same powerful
negotiating position regarding product pricing as is currently
operated by Pubcos.
RECOMMENDATIONS
1. That the beer tie be removed which will
bring clarity to the opaque situation which exists between true
rental costs and cost of services provided by Pubcos.
2. A low cost effective method for arbitration
to settle rental disputes should be established.
3. If Pubcos believe that the services they
currently provide are important then they could continue to offer
them and lessees are free to pay for the particular services they
wish to use. Alternatively there are many independent companies
providing training across a whole range of activities who would
be willing to provide comparable training to those currently operated
by Pubcos.
4. The concerns expressed that removing
the beer tie would result in the brewers taking a similar position
on product costing to that currently operated by Pubcos misses
the point that Lessees currently have no option to purchase other
than from one source and no right of appeal on the charges levied.
The element of competition is reintroduced when Lessees are free
to purchase from a range of suppliers who will need to compete
or will see their product sales decline. Surely a better position
than a having a Pubco as the single supplier, with freedom to
charge whatever they wish without the purchaser, the lessee, having
the right to appeal.
5. The possibility of lessees establishing
a buying group should not be discounted nor should the opportunity
for Pubcos to provide that service on behalf of lessees since
they have the operating procedures and structures to meet that
need and since the Pubcos could be free to supply any lessee which
would provide competition between Pubcos to maximise their product
sales and grow that part of their business.
6. The alternative to a total removal of
the beer tie could be the introduction of an optional arrangement
which allows the lessee to contract in or out of the beer tie.
My belief is that if this option were implemented then in a very
short time the beer tie would cease to exist through lack of demand.
7. If the Pubcos believe that their business
model is such a good thing for the total industry and the consumer
as they claim then they should not need to oppose the lessee having
the option to contract out since if they are right then few lessees
would choose to contract out!!! We believe that the above reflects
a reasonably balanced view of the way forward to achieve what
is necessary to enable a thriving pub trade, fairly rewarded and
providing employment for thousands of people to survive and to
achieve a fair cost per pint to the consumer.
10 November 2009
| 
