Memorandum submitted by Marston's Pub
Marston's Pub Company (MPC) has taken very seriously
the conclusions and recommendations of the BESC investigation
into leased and tenanted pub companies. Not only has MPC launched
a range of initiatives designed to address the significant business
issues faced by our tenants and lessees, but also it has played
a full and active part in the British Beer and Pub Association's
efforts to develop accords with Lessee representative groups.
MPC is fully committed to the agreement between
the BBPA, BII and FLVA. MPC will revise its own code of conduct
in order to meet and exceed the new standards established by the
BBPA/BII/FLVA agreement. Our revised code will underpin our relationship
with our tenants and lessees and will be provided to them whether
existing or prospective. This code will be binding on MPC and
its customers where appropriate.
MPC, as a member of the BBPA, is also fully
committed to the Pub Independent Rent Review Scheme (PIRRS) which
has been launched recently.
MPC is passionate about the value of the tied
pub model and remains convinced that it offers real value to tenants
and lessees, the Company itself and consumers. MPC is committed
to trading responsibly and to the mutual benefit of all parties
involved in any agreement.
MPC believes that significant improvements have
and will continue to be made to the operation of tied agreements.
As a result it argues that further action or intervention in the
industry will be unnecessary or indeed counter-productive.
Marston's has been brewing beer and running
pubs for 175 years. It owns about 2,200 pubs and operates
five famous cask ale breweries. It also owns its distribution
fleet and employs an extensive team of Beer Quality technicians
which concentrates on raising the excellence of cask beer sold
in pubs. Marston's is a significant employer in the Midlands.
Marston's Pub Company operates 1,700 tenanted
and leased pubs in England and Wales. It has a very flat structure
there being only two layers of management between lessee
and Managing Director. Alistair Darby runs the division. In his
first 14 months in the role he has visited 400 pubs
and spoken extensively to tenants and lessees. He has also chaired
the BBPA working party tasked with addressing the findings of
the BESC report. MPC has also undertaken an in depth survey of
lessees' and tenants' attitudes through CGA, which interviewed
over 200 pubs.
3. BUSINESS INITIATIVES
Around 75% of MPC's tenants and lessees are
tied for wines, spirits and soft drinks. In the autumn of 2008 it
reduced the prices of these significantly using Booker Wholesale
as the competitor benchmark. This had the effect of moving £1 million
of margin into tenants' and lessees' businesses about
£1,000 on average per pub. As a result volume sales
have risen significantly.
In April 2009 MPC passed on lager price
increases £5 per barrel below those recommended by the
supplying brewers. In addition an extra £5 per barrel
of lager bought between April and September would be refunded
in October 2009, on condition that tenants and lessees agreed
to clean their beer lines weekly, to confirm that they had professional
stock takes and to stick to their contractual agreement. Over
£40,000 was refunded in October to 159 tenants
and lessees. It is sad to note that, despite considerable promotion
of this scheme, less than 20% of eligible customers chose to participate
when invited to do so.
MPC has continued to offer tactical price promotions
to pubs under specific competitive pressure. These offers have
had mixed results confirming that success is dependent on a committed
tenant or lessee and adequate space in the pub to cope with increased
MPC has provided £3 million of rent
and discount support to lessees and tenants over the last 12 months.
It has also trained all of its BDMs to conduct in depth business
reviews with tenants and lessees so that they can identify together
opportunities for sales growth, margin improvement and cost reduction.
MPC also has a dedicated team which provides
extensive business building advice through its regular Bar runner
magazine, its Full House manual and by supporting industry events
such as National Pub Week in cooperation with Justice for Licensees.
MPC uses the buying power of Marston's to offer
services such as refuse collection or pub consumables to its tenants
and lessees at better rates than can be achieved individually.
It also provides advisory services, for example for utilities
or business rates, to enable tenants and lessees to cut operating
costs. MPC earns no commission from any of these services.
iii) Licensee Skill Development
MPC has always had a strong track record of
offering high quality training both to existing tenants and lessees
and new ones. During 2009 MPC has added new programmes designed
to address the increased strain imposed by the consumer recession.
Two courses, The Profit Improvement Programme and The Rescue Package,
have proved very successful. They have been especially useful
when allied to extended repayment plans as a result of tenants
and lessees falling into arrears.
iv) Agreement innovation
MPC has recognised that more challenging market
conditions require greater choice in agreements available to tenants
and lessees. As a result MPC has launched four new agreements
The Tracker agreement converts a fixed fortnightly
rent payment into a variable charge levied on barrels of beer
purchased. This agreement charges rent by adding £75 to
each barrel purchased up to 200 barrels. At this point no
further charges are levied and all incremental barrelage is rent
free. The agreement therefore allows rent to flex with the ups
and downs of trading and rewards endeavour. In addition all machine
income after tax and rent is taken by the tenant to help increase
The Premium Tracker agreement builds on The
Tracker agreement by adding additional support through a weekly
reverse premium of up to £200 for the first six months
and a free first delivery of stock. This agreement is used to
give specific tenants a fast start in their pubs.
MPC now has about 100 Trackers in place.
MPC is trialling The Advance Agreement. This
gives tenants and lessees high discounts on all purchases (£120-£130 per
barrel on ales and £170 per barrel on lagers) in return
for an additional payment. This payment is calculated off a reduced
volume target resulting in a benefit of about £5,000 to
the average MPC pub. The agreement also includes a more rewarding
AWP income sharing mechanism. The Advance agreement sits alongside
the existing lease and can be taken up subject to a few basic
criteria being met. MPC believes that this agreement addresses
the key issue which affects landlordlessee relationships
by supplying beer at competitive market prices.
The Retail Agreement is now being rolled out
by MPC into 90 pubs. In these pubs the retailer earns 20%
of the net take from which income is earned and staff paid. MPC
takes responsibility for everything else from repairs and refurbishment
to tills and utility bills. The agreement provides a very low
risk entry into a pub businessthe retailer only requires
a refundable deposit of £5,000and all the expertise
of Marston's pub retailing skills. MPC expects this agreement
to expand significantly over the next two to three years.
Finally, MPC no longer incorporates lessee/tenant
AWP income into its FMT rent calculations.
MPC is fully committed to the BBPA/BII/FLVA
agreement and PIRRS.
MPC has evolved rapidly to improve the sustainability
of tenants' and lessees' businesses. MPC will continue to innovate
in the face of a challenging consumer environment.
MPC is passionate about working cooperatively
with its tenants and lessees to improve relationships and will
continue to support the BBPA's efforts to build agreements with
Lessee representative bodies.
MPC argues that significant progress has been
made in the aftermath of the BESC report and that it is now time
that the industry is allowed to implement the initiatives to which
it has committed without further distraction.
18 November, 2009