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There are two companies in the pub industry I don’t like. *The first is Greene King, mainly for the fact that their beer across all brands in spectacularly average at best with very few exceptions, however some of their corporate traits as a pub owner, especially in the Scottish Belhaven subsidiary leave a lot to be desired also. *However the one I can’t stand is Enterprise Inns, the owner of over 5700 pubs across the UK. **Their treatment of tenants from a support perspective and the financial burdens its places on those same people with regard to rents and beer pricing is well known within the trade and is not an example to follow.
Their chief executive is Ted Tuppen, whom personally I think resembles Al Bundy out of the 80’s hit sitcom “Married with Children”. **Last week he came out against some elements of the Statutory Regulations of Pub Companies proposed by the Government to make the pub industry a more level playing field. **To quote, he stated that there could be “damaging unintended consequences” for the industry. *This kind of language is designed to scaremonger, something which I do not approve of at the personal, business or government level.
The system proposed by the Government would save each pub which is tied to one of the big six companies (Enterprise, Punch, Marston’s, Greene King, Star Pubs & Bars and Admiral Taverns) approximately £4000 each year by allowing them to trade on more level terms with free of tie pubs. **This is obviously not in Enterprise Inns interest. *Tuppen claims that the reduced income from each pub would “leave companies with no incentive to offer support”, following up later with “The training, the support, advice and assistance we give would be chocked off as we are forced to consider different ways of running our business”.
In effect he is saying if we get £4000 less from you, we will withdraw the same value of support from you to compensate. *This comes across as extortion akin to the loan shark threatening to hobble the debtor if he doesn’t get his money, in this case hobbling the business with lack of support. *The picture of business practices within the company is not building to be a pretty one. **This response to new regulation would of course look good on the short term balance sheet, but a long term growth strategy it is not, both financially and regarding its obligations to tenants who have sunk ten of thousands of pounds into deposits to take over an Enterprise Inns property.
Increased income for pub tenants, especially those which are struggling, would allow them to develop and market the pub to the local drinkers better, have the money to put on regular event nights and invest in updating the look of the premises. *This would hopefully drive more footfall, ensuring more beer is drank, hence Enterprise make more money in the long term from the lower purchase cost of drinks via increased bulk discounts from brewers. *In turn the pub landlords would still retain that extra £4000 per year to keep investing in the business to increase beer sales even further.
Of course even if he was not too short sighted to see the long term benefits of nurturing their pubs and tenants, I suspect he would advocate hammering them with rent increases which would all but negate the financial benefits of the increased business. *The Enterprise Inns empire was built on a pile of debt which still sits at £2.5 billion, down from £3.3 billion three year ago, and is under pressure to further reduce its outstanding liabilities. *That pressure is being put directly on the shoulders of pub tenants. *A drop in sales of 4.2% in their last set of half yearly results is only adding to that pressure.
Just like Belhaven, the Greene King owned pub company tried to use the courts to stop the competition opening outlets in Stirling where they hold a significant share of the towns drinking establishments, Tuppen and Enterprise are threatening legal action if they don’t get their way including judicial reviews and legals challenges within the European courts. *So from this we can conclude that the triumvirate of scaremongering, extortion of tenants and legal threats seem to be business ethics that Ted Tuppen embraces, a fact which does not inspire confidence in the company either as a tenant or investor, both of which the company is relying on.