31st October 2008
The Fair Pint campaign has written to the Office of Fair Trading, calling on them to investigate the growing disparity between the discount levels that pubcos are able to command from brewers, and those that the pubcos pass on to their tenants.
Over the last fifteen years, the gap between the price that the on- and off-trade sell their beer has widened significantly. This differential was in the region of a ratio of 2.5 to 1 ratio, but is now more like 4.5 to 1. Whilst it has always been recognised that pubs charge a higher price than charged by supermarkets, there is no logical reason for the vastly different rates of growth in on-trade and off-trade price, as supermarkets and pubcos are able to buy their beer at a similar discount price.
In the 2004 Trade and Industry Select Committee inquiry, the pubcos indicated that they were able to achieve discounts in the region of £140 per brewers barrel. Today, however, it is understood that pubcos benefit from discounts of between £190 and £215 per barrel, depending on the product. By contrast most tenants’ discount from their pubco has remained static at 0-£40.
In evidence to the 2004 Trade and Industry Select Committee inquiry, small brewers indicated that they were being forced to quote higher wholesale prices so that they could achieve higher discount prices to the pubcos, in order for their tenders to be accepted by the pubcos. In other words, the buying power of the pubcos has meant that brewers are under pressure to increase their wholesale prices so that pubcos can have their desired discount.
In this way, pubcos can increase their profit per barrel by not passing on their increased savings to their tenants, and driving up the price for the consumer.
Brian Jacobs, a member of the steering group of the Fair Pint campaign, said:
“The issue of beer discounts needs to be investigated by the proper authorities. These buy-to-let property companies are using their massive market dominance to manipulate the beer price, whilst pulling the wool over the eyes of their tenants. It goes to show the depths that pubcos will go to generate greater and greater profit margins at the expense of their tenants and the pub-goer.
“It is vital that the OFT investigate this issue and ensure that pubcos are forced to act in an open and transparent way. How can it be that the price of beer in pubs is dictated by organisations that neither brew the beer nor run the pubs that it is sold in.”
The Fair Pint campaign is a coalition of independent, tied landlords and industry experts that are seeking to highlight the plight of UK landlords and consumers who suffer as a result of ‘tied lease agreements’ to pub companies (pubcos).
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