CAMRA’s Pub and Club Campaigns Committee feels that many members would find it helpful to have more information about the companies that control many of our pubs. This is the first in a series of articles that will provide the facts on pub company practices and operations, explaining in particular how their business models work and what this means for both licensees and, ultimately, us as customers. The aim is to let the facts speak for themselves so that members can make up their own minds about the positive or negative effects of these practices on our pubs and the folk who run them.
EPISODE ONE – A POTTED HISTORY OF THE PUBCO
Fifty years ago, when CAMRA was formed, the pub landscape looked very different. For a start, there were many more of them – some 75,000 against around 47,500 now. The majority of pubs (52,000 or so) were owned by breweries. The 89 small and regional breweries had 13,800 of them and the rest were in the hands of the ‘Big Six’: Bass Charrington, Allied, Whitbread, Scottish & Newcastle, Watney (Grand Metropolitan) and Courage (Imperial Group). Most of the other 23,000 pubs were free houses (in name anyway; many tied their beer supplies to a big brewer in return for loans and discounts). Companies that just owned pubs were few and far between; the likes of the Sir John Fitzgerald group in the north-east and Heavitree in the southwest (although they tied themselves to Bass).
Just about every pub-owning brewery rigorously imposed a supply tie on its own products. As late as the mid-1980s, I remember a Greene King director recoiling in horror at my suggestion that they allow a few guest beers in their pubs. As a result, new breweries found outlets hard to come by and we customers were hardly spoilt for choice, as a glance at a Good Beer Guide of that era will reveal.
Then, in 1989, along came the Beer Orders. The story of this epochal legislation (for better or worse) is superbly told in Laura Hadland’s recent book Fifty Years of CAMRA but, in essence, the government acknowledged the stranglehold on the industry exercised by the Big Six and, among other things, capped their pub ownership at 2,000. By now, because of closures and sell-offs, the Big Six owned fewer pubs between them but the Orders still led to around 11,000 pubs coming onto the market. We, of course, dreamed of a new golden age of multi-handpumped free houses galore, but the reality was sadly different. Companies were quickly established, usually with close links to the Big Six, to hoover up these pubs in big batches then negotiate supply deals, invariably with the company who previously owned the place. Enterprise Inns, for instance, started off with the purchase of 368 pubs from Bass, and that’s where they bought the beer from.
In the years that followed, wheeling and dealing saw companies variously grow, collapse, merge, acquire, dispose etc; it was very difficult to keep up with who owned what. Some companies concentrated on managed pubs, some on tenancies, a few on a mixed model. Behemoths emerged: by 2004, Punch Taverns and Enterprise each owned more than 8,000 pubs, although both had accumulated so much debt that they ran into trouble come the financial crash and subsequently retrenched. We’ll have a closer look at the current pub company scene in the next article.
A brief history of Punch Taverns illustrates the volatility surrounding pubcos from the 1990s onwards. Punch formed in 1997, purchasing a tranche of pubs from Bass. Two years later, they bought Inn Business (mostly former Whitbread pubs) and then the rump of the Allied estate. Managed pubs were spun off into a separate division called Spirit. In 2003, they acquired their 3,100-strong rival Pubmaster, plus a couple of smaller companies. Next, Scottish & Newcastle’s managed pubs were snapped up and added to the Spirit portfolio. By 2011 the impact of the crash was being felt, calling for a ‘strategic review’. Spirit was demerged and, in 2015, sold to Greene King. Come 2016, a takeover bid totalling £403 million (plus the taking on of debt of £1 billion) was accepted; 1,900 pubs went to Heineken with the remaining 1,300 residing with Patron Capital, though the Punch brand has been retained.
What, then, of the breweries that still owned pubs? The Beer Orders were actually revoked in 2003 so brewers are no longer prevented from having over 2,000 pubs. However, brewers have tended to move in different directions. In some cases (e.g. Greene King and Marstons) this extends only so far as having separate management structures for their brewing and pub operations. Others though (Fullers, Young’s, Charles Wells), have sold their breweries to become just pub companies. Thwaites sold their main brands and downscaled to a mini-brewery.
In the meantime, the treatment of their tenants by many of the Pubcos had become a major issue and, after years of campaigning, in 2014 the Government was persuaded to announce a statutory Pubs Code aimed at regulating their practices and ensuring fair treatment for tenants. We’ll return to the Code in a future article. In this context, though, it needs mentioning that the currently accepted definition of a pub company embraces breweries that own pubs and, nowadays, most such companies have separate management structures for their pub and brewing operations.
Final comments: pub companies are here to stay. There is nothing wrong with the basic model and, indeed, there are some excellent companies (mostly smaller ones) who treat their licensees well and clearly see their pubs as more than just property assets. It would, though, be difficult to argue that the ways in which some companies operate raise many issues around their custodianship of what aren’t just piles of bricks-and-mortar but, in most cases, precious and valued community assets. We’ll examine those issues in due course.
Future articles will cover topics such as:
- the pub company business model (i.e. how they make their money)
- their operating models (tenancies, managed houses, retail agreements)
- the tie and how it operates
- the Pubs Code
- areas of reported concern
Paul Ainsworth