The 3.4% solution

It’s perhaps surprising that it’s as long ago as 2011 that the government halved the rate of duty for beers of 2.8% ABV or below. However, this proved to be a perfect demonstration of how changes in tax rates won’t carry the public with them if they don’t want to go. Although there was an initial rush of interest, as I wrote here, it rapidly became clear that it was difficult to brew palatable beers at such a low strength, and people didn’t want to drink them anyway, even if they were cheap. About the only remaining evidence on the beer market are Sam Smith’s keg Light and Dark Milds and Alpine Lager, which retail at a very low price (I think £2.40 a pint) and were only about 3.0% before anyway.

However, as part of the general restructuring of alcohol duties that comes into effect on 1 August this year, this threshold will be increased to 3.4%, which obviously creates a very different situation. It’s much easier to brew enjoyable, palable beers at that strength, and indeed many popular beers already qualify such as, in the North-West, Holts Mild at 3.2% and Thwaites Mild at 3.3%. The very tasty Brakspear Bitter (now ridiculously renamed as “Gravity”), which back in the days when it was brewed at Henley I would have classed as one of my Top Five beers, is only 3.4%. On the other hand, I do note that many of the beers perceived as “light” are actually 3.5%. There are a lot fewer low-strength milds and light bitters around than there once were.

The savings under the new regime are certainly not to be sneezed at. On looking at the detailed figures, the lower-strength duty is not half, but only 44% of the full-strength one. For draught beer, there is a saving of 24.7p on a 3.4% pint, which with typical pub mark-ups equates to 50p across the bar. It’s 21.1p for a 440 ml can, taxed at the slightly higher packaged rate, making 84p on a four-pack and £4.20 on a 20-can slab. No doubt these savings will be partly absorbed by brewers and pub operators, as indeed they should be, rather than being entirely passed on to the drinker, but they’re certainly pretty significant.

Price elasticity in the beer market does not work in an entirely linear way, though. It is broadly divided into standard and varying grades of premium, with no significant discount sector. Drinkers generally won’t go for beers just because they are cheap, and will be even more reluctant if they’re relatively weak too. People will generally look for cheaper places to buy their favourite brands rather than trading down.

In the on-trade, the impact of lower prices is reduced by the prevalence of round-buying. If people do feel the pinch, they will shift from the craft bar or brewery tied pub to Wetherspoon’s. In the off-trade, while there is cut-throat competition on major brands, supermarket own-brands have never gained much traction. They’re fine if you’re drinking alone, but if a friend comes round and you offer them an Aldi clone rather than a Punk IPA or Carling they’ll think you’re a right cheapskate.

It’s always difficult to make predictions on changes like this, and it should be remembered that measures such as the lower duty for 2.8% beers and permitting two-thirds measures have been damp squibs. However, the savings available are so great that it’s hard to imagine that the beer market will sail on little changed.

Surely it will be a no-brainer to reduce existing beers positioned at 3.5% by a single point. This would include Taylor’s Golden Best and Hook Norton Hooky Bitter, and locally Hydes Dark Ruby and 1863, and Lees Dark. The same would also probably happen to Bud Light, and very likely also the 3.6% smooth bitters such as John Smith’s and Worthington. Robinson’s have already introduced a new 3.4% beer called Citra Pale to compete in that category, although in my experience it’s a thin, lacklustre product and not a patch on the 3.7% balanced bitter Wizard which is being withdrawn.

I can’t really see established products around the 4.0% mark such as Carling or Holts Bitter having their strength reduced. But brewers of beers in the 3.6-3.8 range will be carefully considering their position. Of course if you do reduce the strength of a beer you need to take your customers with you, although a substantial price reduction might help persuade them. We may well end up in a position where there’s a yawning gap in the beer market between 3.4% and 4.0%. And who would introduce a new beer at 3.6% even if they think that’s the ideal strength for it? It will also be interesting to see if Sam Smith’s nudge up the strength of their 2.8% kegs by a few points.

Introducing new, weaker versions of existing products is something that doesn’t have a good track record, and it also serves to dilute the perception of the core brand. But it’s possible that brewers may consider launching entirely new beers that don’t identify themselves as “light” to take advantage. And it’s worth noting that in Scotland Greene King and Caledonian seem to have had success with Belhaven Best and Caledonia Best, relatively new keg and canned beers in the traditional sweet, malty Scottish style, both of which come in at a mere 3.2%. I have to say I have never even seen these beers on a bar or supermarket shelf, let alone tasted them, but they will certainly receive a big boost from the lower duty rate. And, under Scottish minimum pricing of 50p a unit, 4x440 ml cans of 3.4% beer at £2.99 is an attractive price point.

I have to say that in principle I don’t favour systems of tiered alcohol duties (or any similar taxes), as they inevitably produce perverse edge effects and distort the market. In my view there should be a single scale of beer duty proportionate to alcoholic strength. But brewers and drinkers can’t look a gift horse in the mouth, and any cut is better than none. It will be very interesting to see how this plays out in the beer market.

Is the outlook getting wetter?

There has been talk recently of a move away from dining pubs back towards wet-led ones. This is a theme taken up in this BBC report from February, and explored in further depth in this article by Glynn Davis. However, the two examples used are not perhaps the best illustrations of the point.

The first is the Ypres Castle Inn, situated in the shadow of the eponymous castle (actually more a glorified gatehouse) in the picturesque historic town of Rye in Sussex. It’s in a location where you’d probably expect a pub to serve food for visitors. However, it was taken over pre-Covid by high-profile licensee Jeff Bell who I suspect has turned it into more of a beer-focused pub and no longer sees the need for food.

The second is the Queen’s Head in Newton, Cambridgeshire, which is one of the “famous five” ever-present entries in the Good Beer Guide. It’s situated in an attractive village a few miles outside Cambridge. It serves a limited food menu including soup, sandwiches and meat and cheese platters, but as far as I know has never attempted to be a full-on dining pub, so it isn’t really illustrative of a trend, although it does underline the point that you don’t need to be a gastropub to thrive in that kind of location. As I wrote about it, “It’s odd how the South of England manages to draw middle-class customers to non-dining village and rural pubs in a way that is hard to imagine in Cheshire”.

So, case very much not proven. It has certainly been recognised in recent years, though, that the food-driven model isn’t necessarily appropriate for all pubs, and wet-led pubs need to be considered as an important category in their own right rather than just seen as second-class citizens of the pub world. North West-based Amber Taverns developed as a pubco dedicated to wet-led pubs, and divisions of major pubcos such as Stonegate’s Craft Union concentrate on this segment.

There has also, over a longer timeframe, been a substantial retrenchment of the availability of food in pubs, to a large extent associated with the general decline of the pub trade. In the past, many pubs would offer a simple menu of soup, sandwiches, toasties, burgers and the like with perhaps a hot dish of the day, which to a large extent was aimed at customers from nearby workplaces.

But lunchtime pub visits from work are increasingly frowned on, even if they don’t involve drinking any alcohol, and many of the workplaces themselves have closed or drastically slimmed down. Tougher hygiene regulations also require pubs to have a dedicated catering kitchen rather than preparing food in their domestic one. And town-centre footfall from shoppers is much reduced too. The classic freshly-prepared “four quarters” pub sandwich is a virtually extinct species.

I wrote about this trend fifteen years ago:

...many pubs in less prominent locations that once made an attempt to serve meals and appeal to outsiders have dropped the food, gone evenings-only and essentially cater only for locals and regulars.

In many cases these pubs are no longer there at all, and if they are they’re probably not open at lunchtimes. In smaller non-tourist towns it can be difficult to find any pub food outside of Wetherspoon’s, who have hoovered up what trade remains.

Of course many pubs do thrive by concentrating on food and turning themselves effectively into restaurants, but the “mixed economy” pub with a balance of dry and wet trade is becoming increasingly rare. With pub food, it seems to be either all or nothing. Plus, as I’ve mentioned before on the blog, there’s evidence of the much-vaunted family dining pub model not finding everything plain sailing.

Some of these trends are illustrated by the changing fortunes of one of my local pubs, the Griffin in Heaton Mersey. This is a four-square Holt’s pub with an unspoilt multi-roomed interior including an impressive sash-windowed bar. In the 1980s it was so busy, mostly with wet trade, that a large extension was built on one side, the bar of which effectively became the pub’s main bar.

There was a serving hatch in the extension from which a variety of straightforward food was dispensed at lunchtimes. I remember having some tasty bacon barms there. But the general decline of pubgoing meant that it became nowhere near as busy as it once was, and Holts carried out a thorough cosmetic refurbishment, fortunately leaving the historic parts untouched, but removing the serving hatch. I’m not sure whether this was pre- or post-smoking ban.

They introduced a much more ambitious and expensive pub food menu, but it never seemed to find many takers, and the general impression that the pub still gave of being a traditional boozer probably put diners off. In hindsight, it might have made more sense to make the extension a dedicated dining area with a brighter colour scheme and return the main bar service to the old side.

So the food has now been dropped, and according to WhatPub it now only offers “pies and barmcakes”, which presumably need no kitchen preparation. It majors on TV sports, but apart from when United or City are on gives the impression of a few people rattling around in a large building, whereas thirty years ago it was often standing room only. As I mentioned in an earlier blogpost, the contrast in the level of trade between it and the Wetherspoon’s half a mile down the road is very striking.

Yes, there may well be examples of more marginal food-serving pubs giving it up entirely, but I really don’t see much evidence of pubs with a major food offer dialling it back and putting the emphasis more on wet trade. It might be nice if they did, though.

As an aside, the term “wet-led” often seems to be used to mean pubs that serve no food at all, whereas surely it should also encompass pubs where food is only a relatively small part of their sales.

Widening the gap

Last year, the government announced that, as part of the general restructuring of alcohol duties to come into effect from 1 August this year, they would introduce a 5% duty discount for draught beer. In his budget last week, Chancellor Jeremy Hunt sprung something of a surprise by almost doubling this discount. However, the way he achieved this was to freeze the duty on draught beer (and cider) but to increase it on all other alcoholic drinks by the full amount of RPI inflation, resulting in a differential of 9.2%. The full details of the new duty rates are set out on this page.

In practice, this won’t make a huge difference to prices. The duty isn’t actually being cut, just frozen, so no prices will fall, they will simply rise more slowly. For a pint at 4% ABV, it’s worth about 5p when the VAT is added on, equating to 10p over the bar once a typical markup has been added on. That’s not enough to change people’s behaviour, but that isn’t the point. Essentially it is giving financial support to pubs by reducing the tax burden on a product that is only sold in pubs and other on-trade outlets.

Likewise, some have complained that most of the benefit will accrue to the brewers and drinkers of mass-market lagers, but of course most of the draught beer sold in pubs *is* mass-market lagers. I was amused, though, to see it labelled as the “Brexit pubs guarantee”, as it’s a change that could not have been made if we were still members of the EU, something that will no doubt stick in a few craws.

It wouldn’t really make much sense if it was intended to change behaviour. Fiddling about with tax rates rarely makes much difference to purchasing patterns, especially if it’s going against the grain of what people want to do. Halving the duty on beers of 2.8% or below didn’t lead to any kind of boom in sales. And, as I wrote here, would shaving a few pence off the purchase price of beer really prompt most people to drink more in pubs? I also tend to take the view that reducing the burden on things I happen to like, however tempting it may seem, isn’t usually a sound basis for taxation policy.

All the talk about the reduction in draught beer duty has to some extent obscured the fact that Jeremy Hunt has imposed the largest increase this century in the duty on all other forms of alcoholic drinks. This must account for 85% of all alcohol sold in this country, and includes all the production of small distilleries and a growing proportion of the sales of small independent breweries.

After several years of either duty freezes or minimal increases, this will be a real kick in the teeth for consumers, especially at a time when the price of pretty much everything else they buy in the shops is rocketing too. Tom Utley certainly wasn’t impressed. And, as usual, smokers, who typically are less well-off than the average person, have been clobbered by an above-inflation increase.

The wine lobby are understandably aggrieved that the changes will lead to the duty on a typical bottle increasing by as much as 45p, although in fact, while one might quibble about the ahsolute level of duty, a move to taxing wine by alcoholic strength rather than at a flat rate is long overdue.

All human life is there

My pub visits this year so far have reinforced my view that Wetherspoon’s must attract a wider cross-section of society than any other pub operator. People often look back at the past through rose-tinted spectacles imagining an idyllic world where the lord of the manor rubbed shoulders with the farm labourer. But in fact pubs back then could often be very exclusive at both ends of the spectrum, and the vast majority applied social segmentation through having separate public and saloon bars. You quickly knew if you had ventured in to the wrong pub, or the “wrong side”.

Now in Wetherspoon’s you are likely to encounter a very wide mix of customers of different ages, social classes and sexes, and also who are visiting for different purposes, whereas the dining pub and sports boozer can be very monocultural. This is perhaps even more the case for those in suburban locations, where there will be more families, and also categories of customer like sports teams after their Sunday morning match.

Wetherspoon’s have always tended to avoid this type of location, as their business model is very much based on sites with a lot of existing footfall, rather than being pubs people would make a special trip to visit. But the Gateway in East Didsbury, opposite the Parrswood leisure complex, with its cinema and bowling alley, is an exception to this rule, and seems to do very good business. It’s always noticeable how busy it is, when the Griffin just up the road, a classic multi-roomed Holt’s boozer, is virtually empty. There are a handful of other Spoons in similar spots around the country.

Recently there have been several reports that the gloss had come off the family dining sector, which not too long ago was hailed as a major growth area in the pub trade. To some extent, in these locations , Wetherspoon’s are competing against family dining pubs. But they are pubs that serve food, as opposed to food pubs, and so have a wider appeal. Although they sell a lot of food, there’s no pressure to eat in Spoons, and nobody is going to judge you if you just order random items from the menu. While the food in Spoons may not be particularly brilliant, neither is that in most family dining pubs.

Another factor is that Wetherspoon’s don’t show football. I recognise that there is a place, and a demand, for TV football in pubs, even though it isn’t something I particularly care for. But the mere fact of putting it on creates a somewhat more laddish atmosphere and makes the pub less inclusive. Its absence is a key factor in maintaining their broad appeal.

Do not imagine, though, that I am some kind of Wetherspoon’s fanboy. While I recognise them as a successful and savvy company, they’re far from my favourite places to drink. They are, I believe deliberately, laid out to prevent people feeling too cosy and comfortable, to reduce customer dwell time. Their cask beer quality is very hit and miss, and even at its best always seems to be lacking a little condition. They also have a strange knack of being able to put on eight beers, none of which I particularly fancy drinking. And their food offer varies from reasonably appetising to pretty poor.

But that isn’t the point. They’re not aiming for excellence, they’re setting out to be an adequate, consistent, good-value pub that deters as few customers as possible*, and in that they undoubtedly succeed.

* Apart from some diehard opponents of Brexit, of course. Although the people who performatively boycott Wetherspoon’s are generally those who hardly ever visited anyway.

An inspector calls

Alex Polizzi has presented The Hotel Inspector on Channel 5 since 2008. In the show, she looks at a variety of struggling hotels and guest houses and comes up with suggestions as to how they could improve their business. As the granddaughter of famous hotelier Lord Charles Forte it’s a reasonable assumption she knows what she’s talking about. I’ve watched the occasional episode and found it mildly interesting but not really essential viewing.

However, the thought has often occurred to me, and others, that there could be room for a similar show specifically looking at pubs. Many pubs do seriously ill-considered or neglectful things that surely deserve to be pointed out to them. To some extent this brief was covered by Tom Kerridge’s Saving the Great British Pub which aired in 2020, but sadly that became overtaken by Covid and ended up with a distinctly different theme.

However, Ms Polizzi is now branching out with a new programme covering a wider range of hospitality operations, including restaurants, wedding venues, tourist attractions – and pubs – and is asking for businesses to put themselves forward. It’s easy to imagine that she’ll just tell them all to go down the gastropub route, but she’s more savvy than that, and I would imagine most of those that volunteer will already be food-led pubs rather than back-street boozers.

I have to say in my experience pubs of all kinds commit a myriad of sins that are likely to be offputting to customers. Setting aside my own personal prejudices, some of the most obvious ones are:

• Failing to publicise your opening hours and changing them on a whim
• Not displaying menus on your website or, in urban locations, outside the door. It also baffles me why pubs don’t put menus out on tables and expect you to ask for one at the bar
• Ill-mannered, inattentive staff. Yes, I know recruitment is hard at present, but a lot of this comes from the management approach
• Poor hygiene standards, especially unpleasant toilets

More than other types of venues, pubs are dependent on repeat business, and so it’s important not to give customers any reason not to want to return. On the other hand, I sometimes come across pubs that seem to be ticking a lot of the right boxes but still aren’t attracting customers, and so obviously are missing out on some magic ingredient. In these days of multiple online guides and social media channels, it can be difficult to know how best to promote your pub, but one thing that is certain that, if you do create a website or Facebook page, you need to keep it updated.

It has to be said that independent pub businesses are often some of the worst offenders. At their best, they include some of the highest-quality pubs around, but in the absence of an area manager to give them a prod they can all too easily lose interest and let standards slip. They also have much more scope to apply idiosyncratic and offputting policies. And I would expect in general that most of those who apply will be independent businesses

I’m pretty sure it will be a certain type of pub that predominantly features, but even so no doubt it will make interesting viewing and I’ll definitely make a point of tuning in.