With reference to your article in the Daily Mail of Saturday 30th March ‘If Britain’s beer drinkers want to know who to thank for the surprise Budget cut in duty it’s Brigid Simmonds’
Whilst we appreciate that the BBPA have indeed lobbied for an ‘Axe the Tax’ for many years, some members feel that the headline is a little misleading. We believe that if had not of been for the invaluable help of the likes of Camra, the APPBG, the APPSTPG, the Tax Alliance etc then the campaign would have continued to flounder, as it had for years.
The article states that the BBPA represents most of Britain’s brewers and more than half of its’ 50,000 pubs, the reality is that the BBPA represents an undefined proportion of Britain’s brewers and a proportion of the pub companies which own more than half of Britain’s pubs, however it is clear from the evidence presented at four Select Committee hearings and articles reaching local and national newspapers, that the views of the pub companies and the views of the tenants, customers and communities are sometimes out of alignment. To suggest that you represent nearly half of Britain’s 50,000 pubs is somewhat ambiguous to say the least!
We are concerned at your apparent lack of understanding of the tied model. You have complained that politicians are lining up to blame brewers for pub closures, as we are sure you are aware, it is not just brewers but also the pub companies which do not brew beer and in reality are little more than property companies with an added benefitting of tying its’ licensees into purchase obligations, at a cost well in excess of those available on the open market. We believe that your Mac Donald’s and Burger King analogy just obfuscates the reality of the situation, many, many tied leases are not a franchise, they do not receive the benefits of franchises, such as extensive advertising with a worldwide branded image. The property companies do not brew beer, they are merely middle men, they are not being asked to allow other people’s beer in their pubs as they do not brew beer, neither do they manufacture spirits, wines or minerals! May we also take this opportunity to remind you that the reason the Beer Orders were brought in in the first place was due to lack of competition for the consumer, the restriction of choice of products in a large percentage of Britain’s pubs, would your argument not just set this trade back over 20 years? Surely you must ask yourself why politicians are taking the stance that they are, could it possibly be because they are seeing the reality of the situation in their own constituencies?
We remain extremely concerned at the peddling of the low cost entry, it is exactly because of this sort of short termism viewing that this sector of the trade is in the state that if finds itself, this should be viewed in its entirety and when that low cost entry becomes an extremely high cost exit then it is time to take a good, long, hard look at the reasons why, to bury heads in the sand, look the other way or pretend that it is not happening will only ensure the demise of an important part of our history, heritage and culture, the Great British Pub. We are aware of many, many licensees from both property and brewing pubcos who have fallen for the low cost entry spin and have ended up losing their homes and their businesses, who have lost their health and their wealth, who have suffered family break ups and very sadly sometimes even lost or took their own lives. This is not acceptable to JFL and neither should it be acceptable to the BBPA, very sadly it would appear that it is, right to the very top, if it were not then surely we would have seen the BBPA campaigning for reform?
Perhaps the most concerning of all is your following statement: ‘There is lots of innuendo about problems with tied houses, but I haven’t seen anything that bears this out. We are unsure whether this is just an exercise in plausible deniability or if there is indeed an inherent misunderstanding of the trade that you profess to represent? Below is a brief synopsis of why there are such problems, below that is a list of links to evidence and tenants stories, which bear out just some of the problems with tied houses. We have taken the time to do this for you in the hope that you will never have to make such a questionable statement to the national press and the British public again!
As we are sure you are aware, the rental system for the tied sector is dictated by VIP2 as set out by RICS, this paper was co-written by the National Rent Controller for one of the largest pub companies, Enterprise Inns. The Chief Operations Officer of Enterprise Inns also happens to be the BBPA’s Vice Chairman. One of the main areas of contention for licensees is the fact that their rents are not maintainable or sustainable and are out of kilter with what the market will allow for. As you should know, questions have been raised over the possibility of conflicts of interest within RICS and to date remain unanswered, the reality is that the current regulations and guidance, alongside the practices of the pub companies, fall short of producing fair and maintainable rents for many licensees, which results in the revolving door or ‘churn’ of tenants. We are seeing evidence of some tied rents being at an equal or in excess of open market rents for similar FOT. We have seen a very recent case where a rent review is 4 years out of date, it should have been concluded in June 2009, the pubco are refusing to supply any evidence whatsoever of their rental bid, other than a questionable P & L and the BDM has refused to discuss the outstanding rent review of 2009, declaring that he is concentrating on the 2014 rent review! This tied tenant is paying circa 30% of turnover in rent, he is using his pensions and benefits to pay his rent and beer order, pray tell Brigid, how any right minded thinking individual could ever possibly think this is right? If self-regulation was working then how could this possibly be happening right now?
The other main area of contention is the tie, or to be more precise, the abuse of the tie and the cost of the tie. The pubcos often refuse to supply tied products to tenants when the tenants face financial difficulties, removing credit facilities, demanding upfront payment, even when the reasons for the financial difficulties are intrinsically linked to the problem of the rent demanded being out of kilter with what the market can stand. Pubcos charging fees for delivery of beer which fall out of the allotted delivery schedule, you do not see this sort of sharp practice in the FOT sector, wholesalers and brewers are happy to deliver extra orders and appear pleased to be having the extra business, without charging exorbitant fees! As the tenants are tied they cannot source tied products from anywhere else, this is, in effect, preventing them from trading. Beer monitoring equipment which is not governed by weights and measures, whose accuracy has rightly been questioned and shown to be questionable, used to levy fines on licensees. Why don’t they just have the equipment governed by the Weights and Measures Act Brigid? Surely that would make for good common sense and business sense? It would prevent any unsavoury practices, it would ensure that the equipment was accurate and would put an end to all the arguments between pubco and licensee, job done and yet they don’t do it, why Brigid? What is your members’ reasoning? We could go on and on and on with tenants’ views of abuses of the tie….
It is easy enough to see the differentials between tied and FOT pricing structures, with the cost to tenants being up to and beyond double what they could achieve in the open market place for the same products. When this is taken in context with rents that are not fair or maintainable then it is not hard to see why there are real problems within the tied sector!
We have attached a price list, for your edification, this is a SIBA DDS price list from September 2012. We have noted your continual claims that beer duty risks jobs etc http://www.morningadvertiser.co.uk/content/search?SearchText=BBPA+and+beer+tax&SearchType=ntxt&SearchDate=all&sort=relevance&view=all and yet from the attached price list you will note that the pub companies take more than the Chancellor, so ergo aren’t the pubcos a bigger problem than the Chancellor? For example, Enterprise Inns pay £66.66 to the brewer for a 3.8% cask of ale, £30.33 of which is duty. Enterprise Inns sell this same cask onto their tenants, by virtue of the tie, for a sum of £104.90 this means that the EI earns £38.24 per cask. Punch pay £54.43 for the same cask and sell it onto their tenants at £96.44 which means that Punch earn £42.01. Both the brewer and the Chancellor take less than the pubcos ergo logic would dictate that if the Chancellor and his beer duty was actually causing so many problems and causing so much damage to the Great British pub, then using the same logic, the pubco must be creating more as they take more, surely Brigid? Here are the thoughts of a real licensee, they seem somewhat out of kilter with your thinking, any thoughts why that might be Brigid?
Below are the links to just a very small selection of evidence of problems in the tied sector, they are widely available on the internet, we remain disappointed but rather sadly not in the least surprised that you maintain that you have seen nothing which bears allegations of problems within the tied sector. May we respectfully suggest that you take time to read, digest and learn the reality of the situation, if you would like any further evidence of problems within the tied sector then we would be happy to oblige.
If you would like to learn more of the problems faced by tied licensees and the inherent problems within the model then we would happily arrange a meeting between yourself and those who could inform you of the other side of the story.
Justice for Licensees