Friday, May 27, 2011

Same problems, no answers: Parliamentary beer group misses the point

Hardly headline news today is an interview with the new chairman of the All Party Parliamentary Beer Group (APPBG), Andrew Griffiths MP (Con, Burton) in the publican's trade press.

In the interview with the Morning Advertiser (#1), Griffiths promised to 'give the industry more clout', before trotting out the tired old 'red tape and supermarket pricing' panacea which has been wheeled out by politicians speaking about pubs for the last decade.

Griffiths also announced that he was 'beefing up' the APPBG. His version of beefing up is, perhaps, a reflection of his years spent working as a policy wonk for the Conservatives, both at Westminster and Brussels: he has increased the number of vice-chairmen to 8 from the current 3. Beyond that, the interview seemed remarkably free of content, and while he describes an increase in vice-chairmen as an attempt to make the group 'more heavyweight', he fails to describe how having almost half the 20 member group fighting over seats at the top table will do this.

A more interesting guide as to how he will represent the industry can be found in the register of interests for the APPBG. Under 'Benefits received by group from sources outside parliament' on the House of Commons website (*2), in the last year it lists £4800 from each of the following: Enterprise Inns Plc, Greene King Plc, Diageo Plc, Heineken UK, Molson Coors Ltd, Mitchells & Butlers plc, Marstons plc, Punch Taverns plc, InBev UK and Carlsberg UK, with a further £2860 from SABMiller and £1787 from Admiral Taverns. In other words, it has received £53,000 from the largest breweries and pubco's in the UK.

So, when he said in his interview "Everything we do has to be about improving the profitability of breweries and pubs”, one wonders who he meant? The long suffering tenants of pubco's, who are constantly nailed to the floor by their landlords while being forced to buy overpriced beer on tie? The small brewers, who are shut out of the pubco's pubs because they can't get a distributio deal with the large breweries? Or, more likely, the pubco's and large breweries whose business model relies on misleading and mistreating tenants and who, coincidentally, fund the APPBG?

Tough if hackneyed words from Griffiths on 'supermarket pricing' are all very well, but do not accurately reflect the situation on the ground. It is not just supermarkets which price 1pt tins of Stella Artois at about 50p each, most corner shops do the same. This is not what parliament, pubco's and breweries like to pretend are 'loss leaders', sold at below cost: this is a clear result of brewery pricing structures. But, with the UK's largest breweries funding the group which is supposed to oversee them in parliament, what is the betting that we'll go on pretending that 'supermarket pricing' is a supermarket problem?

Lets face it. When I had my pubs back in 2008, I could buy - on tie, from the pubco - a 10 gallon keg of Stella Artois for £167 + VAT. I could buy the same keg, off tie, from a local distributor for around £110 + VAT. These are 80 pint, aluminium kegs, fully re-useable, for the bulk wholesale of beer. At the same time, I could buy 80 pints of Stella Artois, retail packed, in tins, boxes and trays, for £92 including VAT from Tesco. I could buy the same for about £4 more from Mr Patel's shop down the road, so this is not the large supermarkets selling at a loss to attract customers - Mr Patel could hardly afford to do that, could he? - this is a major difference in wholesale pricing which puts the pub trade at a disadvantage.

I flatly refuse to believe that it is cheaper to produce retail packed, non-recyclable tins than it is to fill an 80 pint re-useable keg. Be honest, common sense tells you that, doesn't it?

But now we come on to the nub of the problem. One would have thought that the pubco's would have an interest in keeping down the wholesale cost of beer, but nobody knows what the pubco's - who are the largest purchasers of it - actually pay. That said, if I can buy Stella for £57 a keg cheaper from an independent wholesaler than I can from the brewery, and the wholesaler is making a profit on that, then it is not unreasonable to assume that for the quantity Enterprise Inns or Punch Taverns purchase, the cost per keg is probably rather less than Tesco (or Mr Patel) pay for their retail packed beer.

It is this skewing of the open market which is causing the huge price differentials between supermarkets and pubs. The question is to what extent can a parliamentary group funded by the same pubco's and breweries which are making considerable profits from this outrageous price rigging be expected to come up with an honest solution?

Of course, we do have the trade press to fall back on, don't we? They, surely, will back up the independent operators, tenants and other licensees who don't enjoy such cosy closed shop relationships with the breweries, won't they?

One only had to flick through the pages of the Publican and Morning Advertiser a few years ago to see why this isn't true, and won't be at any stage in the near future. Page after page of glossy, full colour advertising extolling the virtues of the latest products from the very breweries which fund the APPBG. Features on how wonderful it is to be a Punch, Enterprise, Mitchell & Butler or Admiral Taverns tenant, alongside advertising from these giants in the pubco game.

The trade press might claim to represent the industry, but in reality it can't afford to upset its advertisers, particularly since they became reliant on advertising: they are free publications to the trade.

So, our new chairman of the APPBG and its 8 vice-chairmen have their work cut out. They are funded by the very companies whose closed shop operations ensure pubs are priced out of the market, and informed by a trade press which is in the pocket of those same large corporates. Where, in all of this, is the voice of the small businessman, the publican who since the banning of smoking in pubs has seen their profits continuously squeezed by all of the above? If you spot the group which will speak up for them, by all means let me know.


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