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Things Might Finally Be Looking Up for Britain’s Pub Landlords

Following a ten-year campaign by beer industry lobbyists, the UK government is reforming the pub tie system, an agreement that forced pub owners to buy markedup beer from large pub companies.

by Natalie Hardwick
May 19 2015, 2:14pm

Photo via Flickr user Anders Adermark

In the midst of rising property prices, city regeneration, and changing drinking attitudes causing pubs to close at an estimated rate of 29 per week, the British pub industry may finally have something to celebrate.

For years, a business practice known as the "tied pub system" has existed between pub owners and large pub companies or "pubcos." The practise sees pubcos subsidise landlords' rents and maintenance, something pubco Punch Taverns spokesperson described to MUNCHIES as "a low-cost, low-risk way for our partners to run their own pub business."

READ MORE: Who or What Is Killing the British Pub?

So far, so sensible but things start to smell a bit vinegary when it comes to the "wet lease," an unfortunately phrased part of the agreement that means tied pub owners are forced to buy beer through the profiteering pubco.

Consumer group Campaign for Real Ale (CAMRA) says that tied tenants can pay from 50 to 70 percent above the open market value for their drinks, with 2013 data showing that tied pubs paid up to 77 percent more for a keg of Foster's. That's a hell of a premium for bland bladder filler.

"Many [pub] licensees were unable to make a living and were forced out of business, often losing their homes as well," says CAMRA's Neil Walker of the pub tie system.

pubco-beer-tie-system

One of the 29 UK pubs estimated to close every week. Photo courtesy CAMRA.

At best, tied pub owners are thought to earn significantly less than their non-tied counterparts; at worst, they're estimated to earn under the minimum wage.

Aside from financial difficulties, the beer choice available to tied pub owners is woefully restricted, favouring beers bought in bulk from large multinational brewers.

"An example of how ridiculous the situation is, is that I can't actually sell the beer I brew in my own pub," explains Ed Mason, who is both a tied pub licensee and owner of independent craft brewery, Five Points Brewery. "The pub company has a defined, limited range of beers that I am allowed to buy and sell, sold to me at an inflated markup."

Some pubcos even go so far as to fit licensed pubs with line monitoring technology to check on exactly which pints are being pulled. Unsurprisingly, not everyone is a fan of this kind of overbearing surveillance and the limiting of options is at odds with the ever-increasing range of British craft beer.

"The UK is seeing an explosion in the number of pioneering and independent breweries opening yet it is incredibly hard for most of these breweries to have their beers sold in tied pubs," says Mason. "Tied pubs account for around 40 percent of all pubs in the UK and often own many of the more desirable sites. Broadly speaking, this means 40 percent of pubs in the UK are off limits to startup breweries who want to be able to approach pubs direct to sell them their beers at a fair market price."

An example of how ridiculous the situation is, is that I can't actually sell the beer I brew in my own pub. The pub company has a defined, limited range of beers that I am allowed to buy and sell, sold to me at an inflated markup.

But things are changing. Last November, following a ten-year campaign by CAMRA and other lobbyists, the UK government rang the bell on the pub tie system by voting for an introduction of a Market Rent Option (MRO), which will allow eligible tied pub owners to negotiate a non-subsidised, market-standard rent rate in exchange for being free to order beer with no restrictions.

"CAMRA is confident this freeing up of the market will deliver a fairer deal for licensees, more investment, lower prices, and a greater choice for consumers," says Walker. "And, ultimately, fewer pub closures."

And it's not just the notoriously trad CAMRA that's rejoicing. In the State of Craft Beer panel discussion's recent London episode, the pubco "mafia" were criticised for their long imposed beer restrictions in the face of a British drinking public that wants choice, not drinks you can buy for 75p from Tesco.

READ MORE: Glasgow's 'Hard Men' Have Nowhere Left to Drink

While the beer industry is celebrating the end of the beer tie—which came as the result of an amendment to the Small Business, Enterprise and Employment Bill—pubcos are less optimistic. A Punch spokesperson said: "The only thing certain about the Market Rent Only option is the uncertainty that surrounds it. We have long argued that there will be significant unintended consequences, as has been the case with previous interventions in the UK beer and pub industry."

In the end, the pub goer is the tastemaker, regardless of which models publicans trade under. Brooklyn Brewery CEO, Eric Ottaway, says the tied system both helped and hindered the growth of the brewery in the UK but sees the reform as a win for beer revolutionaries.

"The sheer number of [tied] outlets means the adoption of any new direction can accelerate pretty quickly," he says. "At the end of the day, this craft revolution is a consumer-driven movement and consumers have a way of driving change."

With the disconnect between the UK brewing renaissance and pub closure proving to be a gaping sore on the beer landscape, the MRO just might be the sticking plaster to protect the 870,000 UK jobs that rely on beer.

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