Pub Companies - Business, Innovation and Skills Committee Contents

Written evidence submitted by Philip Liddell


—  (1)  Examining the IFFB's justification for the Tie and their perceived clean cut image.

—  (2)  Punch Tavern's desperation for tenants and their misleading profit projections.

—  (3)  Punch Tavern's What's Brewing advert promoting an imaginary Free of Tie option.

—  (4)  Countervailing Benefits that don't justify the Beer Tie.

—  (5)  Deeds of Variation—a simple means of addressing the legalities of change.

—  (6)  Codes of Practice—Documents of substance and change or a false dawn.

1.  The Independent Federation of Family Brewers has recently produced a brochure circulated amongst MPs to persuade you that "family brewers" are more trustworthy than the big Pub Cos, and that Breweries with less than 500 pubs should retain the right to the beer tie. This body is fairly insignificant in the sector, though it does contain some high volume cask brewers. There are only 29 brewer members, but investigation will reveal that all is not as it looks. Their website is rather misleading—Youngs and Charles Wells are listed as separate family brewers—they actually amalgamated in 2006, Youngs own 222 pubs, Wells 250, so only just under the 500 threshold. Brakspear beers are now brewed by Wychwood (Refresh), who are actually owned by Marstons along with Ringwood, Jennings, Bank's etc. Brakspear branded pubs exist as a separate company. So all is not transparent in the fold of the IFFB:

—  1.1  Will members of the IFFB, or BBPA or any other organization for that matter, split their estates and operate as separate companies to conform to a limit on tied houses? Will fudged legislation spawn another raft of independent Pub Cos and subsidiary companies, still tied to nominated suppliers or Breweries exactly as the Beer orders 1988 did—I would bet my life on it. There should be no "get out clause" when finally sorting out the draconian Beer tie.

—  1.2  If the members of the IFFB practice what they preach, they should allow their tenants to go free of tie. By their own statement, if their support is worth £8,040 in the first year, any of their tenants would be stupid to go elsewhere. If their figures are somewhat inflated, they are trying to pull the wool over the eyes of the Committee. Should the Committee allow free of tie, then the open market place will dictate whether IFFB members and any other Pub Co or Brewery offer value for money in their tenancy terms. Also quoted in the leaflet "57% of pub failures in 'recent months' have been free-of-tie sites"—were they sold as "free of tie" or did they operate as "free of tie", and what relevance does that bear on the IFFB case? The leaflet should be seen as a clumsy attempt to muddy the waters and cajole the Committee into a less radical shake up of the Tie, by playing on the "Family Brewers" tag. Not all members are family owned, not all are brewers. I won't disagree that some of the smaller Brewers operate the tie as it was originally intended, and that they do offer true support to their tenants, but beware of the wolves in sheep's clothing.

Q1.  I implore the Committee to challenge the IFFB to quantify their countervailing benefit figure and provide the source of their data and criteria for their FOT pub closure figures

2.  I recently received a glossy brochure advertising three pubs locally which Punch were desperate to install new lessees into. I knew of two out of three pubs, the Royal Oak and the Beeston Castle. Both had a checkered recent history with numerous lessees, tenants and management companies. What is striking in the brochures is the promise of a "potential earnings" of £31,000 for the Royal Oak, and £240,000 for the Beeston Castle. This forecast is totally misleading, indeed it is grossly miss-selling. Please examine Appendix 1 to substantiate these figures. Also note RV figures compared to proposed rent.[27]

Punch need to be asked,

Q2.  How is that figure generated—the projected P & L should be examined and trading hours / shift patterns / staff dispersal / duty hours of lessee and whether a spouse is included in the earnings potential. Is this figure realizable in the first year, or any year thereafter

3.   Further instances of Pub Companies cajoling and misleading their potential business partners into taking tenancies and leases manifests itself in the wording of adverts such as the one included in the CAMRA publication What's Brewing February 2011, see Appendix 2.[28] Punch's advert directly targets the Real Ale sector with its emphasis on Free of Tie agreements. Let us be clear, none of the major players have a true FOT option available in their leases or tenancies. Their claims are gravely misleading. They offer FOT "pricing" which reinforces the fact that tied prices are inflated well above FOT prices, but they do not allow the tenant to purchase freely from where he wishes to. The fact that many microbreweries refuse to join the SIBA DDS scheme, due to high fees and low returns, (see previous submissions), excludes many of the "local" breweries that the CAMRA member would wish to buy from.

Q3.  Directly question each Company as to whether they have a true FOT option available in their lease and tenancy agreements

4.  The whole "Beer tie" debate is based on the declarations by the Pub Cos that the high prices paid by tenants for tied products (please refer to previous submissions detailing price comparisons between tied and free of tie suppliers), is justified by the countervailing benefits granted by the Pub Co.

—  4.1  One of the so called benefits has been the "support" of a BDM. However, it has generally been admitted that training of BDM's is substandard. Although my business is doing well at present, partly due to a re-alignment of my customer offer and partly due to the closure of a local pub, I was looking to the future and consolidation of current success, and e-mailed my new BDM in April 2011. I am still waiting for a response. Indeed, in the time it takes for these monoliths of modern business to act, a pub can go out of business. Furthermore, a 20 year lease on a RPI rent arrangement cannot react effectively to a downturn in business and extraordinary set of circumstances that has affected business in general and pubs especially. A local award winning pub, The Bull at Shocklach, will close it's doors as the Committee sits, because the BDM and Admiral Taverns are too pig headed to listen to reason. The lessees are handing in their keys and this recently renovated, very successful gastro-pub is to be boarded up. There are many similar examples across the Country. The overriding advice from all the BDMs I have been involved with, is make sure you provide food and increase your prices (to compensate for depleted G.P. margins on tied products).

—  4.2  Other countervailing benefits touted by the Pub Cos include training, provision of a sales and office team. Training is generally paid for by the tenant, a sales team is available at any wholesaler or brewery at no charge. The office team are very good at providing phone numbers for the tenant to ring themselves, however if the problem occurs at the busiest trading times—weekends or evenings, there is no support what so ever as the office is closed. There is also a monthly magazine, AGENDA, with various deals and ideas for trade enhancement. Incidentally there are no discounts offered on tied beers, Ironically, Agenda highlights the deals that the Company could offer their "partners" permanently and underlines what a rip off their standard prices are.

—  4.3  Unhelpful trading terms and conditions such as cash paid two days before delivery, ullage replacement paid for before recompense, high insurance premiums, greatly inflated tied prices, do not compensate for the so-called benefits received. Marketing and promotional benefits to the Peal O'Bells would average out at about £50 per annum. This contrasts rather sharply with the £8,000 claims of the IFB.

—  4.4  However, the benefit of the tie to Admiral, in my case, calculating on average barrelage per annum and a very conservative mark up per brewers barrel of £100, would add up to £14,500. Realistically, with Admiral demanding substantial discounts from their suppliers, this figure would be double. Yet open market rent is realistically similar to the actual figure of £15,000 (current RV 1200) yet we are effectively paying wet plus dry rent of £30,000. Hardly a case of tied tenants should be no worse off then if free of tie!

Q4.  I request that the Committee explore the validity of these "benefits" and demand that the various Pub Cos put a value on each and every benefit on an individual basis

5.  Despite a recent thawing of relations with my Pub Company Admiral Taverns, I am still very dubious as to their long term intentions. I received a very welcome freezing of the RPI (Upward only rent review clause). This has been completed in a deed of variation to my Lease. I think it is worth noting that this amendment was completed with one brief paragraph, and added as a single page to the lease documents. I suggest that any amendments to leases as directed by this Committee, ie suspension of tied agreements, could be completed with a similar simple documentation amendment.

6.  The COPs are little more than a paper exercise, however, I shall leave the arguments as to the relevance of these documents to others, but suffice to say, they flatter to deceive. As I have found out to my detriment, even within a legal document such as my lease, there are many ways in which the Landlord can extort money from me, just by having the power to interpret the lease as it seems fit. What is said and what is done are two entirely different matters.


There has been a lot of activity from the Pub Cos and their various trade representatives, (BBPA etc), and much "spin" put about via brochures and documents—such as the COPs, but much of the contents of such documents are extremely vague and can be interpreted in many ways. I am sure the Committee will also discover that the crux of the recommendations listed last year have not been addressed fully or totally ignored in the COPs. Examples would be provision of a true free of tie option for leases, removal of the machine tie, and removal of upward only rents. I would like to add that I haven't found all negativity on the behalf of my Landlord, but fear any concessions given to me and others may be window dressing to placate your investigations. Most importantly, legislation must be instigated immediately. Whilst the Committee have been deliberating, thousands more pubs have been closed forever, and thousands more will continue to struggle and close in the time recommendations become legislation. Punch have committed themselves to their shareholders to ditch a third of their pubs—they don't care for the community pub, they don't care if it's the last pub in the village, it is now clear their true vocation was as property developers, but that lucrative market is now beyond their finances, so the properties have to be disposed of. The major Pub Cos and Breweries are beholden to the City, are in the pockets of the Banks, yet the British Taxpayer has bailed out these same banks. The British public needs to be informed that these Companies are not fit to run half of the Nations pubs—it is their pubs, their community hub which will be lost for ever. As a pub lover and a proud owner of a traditional British pub, I beg that the Committee make the following decisions:

—  (1)  The Beer tie must go. There should be no exemptions on size of Company. FOT options must be applied to existing leases and tenancies as well as new agreements.

—  (2)  The machine tie must go on all agreements.

—  (3)  There must be an open market rent review imposed with immediate effect, at minimal cost to the tenant, and with guidelines agreed with the various trade bodies and the RICS.

—  (4)  Provision for alternative Insurance policies should be allowed.

—  (5)  Immediate notice to be given to the Pub Cos and Breweries to instigate these measures and six months (max) to put these measures in place voluntarily by deed of variation, otherwise all tied agreements should be suspended until legislation is passed.

—  (6)  Fines instigated via unreliable flowmeter measurements used as evidence in "buying out" disagreements should be refunded.

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Prepared 6 October 2011