Northern Beer Blog - Pubpaper 740 – The 10 headed PubCo hydra and other myths

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Christmas has come and gone and New Years is soon to be a passing memory. *We’ve had more beer than is good for us and eaten too much good food whilst the chocolate mountain still sits there taunting you. *The last dregs of the Christmas alcohol stockpile are sitting in the fridge looking lonely and your body is crying out for you to return to work to give it a break, even if your head fundamentally disagrees. **The adverts have gone from “drink me, eat me, buy me” to gym memberships, diets and all things healthy whilst thankfully I won’t have to stomach another perfume advert for another 10 months. *Hundreds of pounds and a couple of months of preparation, all over and done with in a few days.
So as we start 2014, where do we stand. *Pretty much where we left 2013 frankly. *The pub companies are still talking absolute rubbish trying to minimise the effects of the new legislation designed to create a more level playing field in the pub market. *I thought Ted Tuppen of Enterprise Inns was going to be hard to beat for hyping up false fears, but Jonathan Neame of the Shepherd Neame Brewery seems to have done that, warning “that the abolition of the AWP (fruit machine) tie would give to “widespread fraud, money laundering, tax evasion and criminal activity, with consequential loss of income to HMRC”. **So taking their logic, our landlords are suddenly going to start hiding the income, as well as the fruit machines which generate it and it is only the guiding hand of the pub companies which stops these landlords going rogue. *There is evidence that “pubcos not only took half the machine earnings but the machine income was often included within the pub’s net profit in the ‘dry rent’ calculation and so the lessee was being charged twice — effectively only receiving 25% of the machine profit”. *If that is not defrauding the landlord, then I don’t know what is!
Their stance on the “mandatory free of tie option” they would have to offer to all their tenants, to quote “The loss of operational support would result in declining loss of sales and viability of public houses. At best, this would result in lesser quality pubs less likely to achieve the licensing objectives and contributing less to the national economy”. *Again, what are these licensing objectives, and how would it invoke a loss of sales. *As far as I can see, some of our most successful landlords are owner occupiers or run free of tie pubs, they pay less for their beers, have more choice of what they can buy, and lets be honest they can’t cock up the British pub any more than the pub companies have already with their wet and dry rent demands. *They might make less money, but that would only be because the pub companies placed such a heavy cost on taking this “free of tie” option, something you can pretty much guarantee will happen.
Looking at another company, Heineken said the Government’s proposals “are simply an attempt to manage decline in the industry”. *Heineken who operate 1300 pubs via their Star Pubs arm are partly responsible for this decline. *The late great Bill Hicks said about America and the first Gulf War in 1990 “Iraq: incredible weapons – incredible weapons.” “How do you know that?” “Uh, well … we looked at the receipts. But as soon as that check clears, we’re goin’ in. What time’s the bank open? Eight? We’re going in at nine”. *The same is true of the pub companies, they have engineered the situation by giving landlords the chance to run a pub and then taking as much from them as they can when they start to make a success in the form beer costs and rent increases, while still wanting their pound of flesh if they don’t.
This whole issue is going to get very messy in the next few months and downright dirty at times. *The pub companies are going use every trick in the book to stop or minimise the reach of the legislation. *Every angle from a legal, public relations and business point of view will be explored by a teams of PR people, lawyers and the business management. *Expect to see some the big pub companies broken up into smaller units to get under the 500 pub level which the new law applies to. *One Enterprise is bad enough, imagine a hydra like creature with 10 heads all attached to the same body containing a single black heart. *Come 2015 there may be a whole sea of these monsters.


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