Ties that bind

When you ask people about how to improve the fortunes of the British pub, one issue that often comes up is the beer tie. Remove restrictions on supply, and allow pubs a free choice on which beers to stock, and they would be in a much stronger competitive position. On the fact of it, this sounds like a great idea, but in reality things are not that simple.

The “beer tie” refers to the ability of brewers to either own licensed premises directly, or control the supply of beer to them. In many countries, this kind of arrangement is prohibited, both because it is seen as anti-competitive, and because allowing alcohol producers to influence retailers is viewed as undesirable from a public health perspective. But this does not preclude large non-brewing companies owning multiple outlets.

One of the most extreme examples is in the United States, where after the repeal of Prohibition a three-tier system was introduced that compels brewers to sell through independent wholesalers rather than dealing with retailers directly. However, this did not stop the US beer market becoming one of the most concentrated in the world, with virtually all small and medium-sized independent breweries having disappeared by 1970. Indeed it could be argued that it encouraged this trend.

In Britain, in contrast, brewers have always been allowed to own pubs and sell their own beer exclusively through them. In the latter part of the 19th century, as the supply of licenses was restricted, brewers increasingly started buying up pubs to protect their own business and keep them out of the hands of competitors. Until the Second World War, the industry remained relatively fragmented, with no brewers having a national presence in pub ownership.

However, in the 1950s and 60s, there was a wave of mergers and takeovers that led to the creation of the infamous “Big Six” national brewers, who controlled around three-quarters of all the pubs in the country and often had local monopolies or duopolies. There did remain a substantial stratum of smaller independent brewers who in some areas, particularly the North-West, still had a significant presence in the market.

In the early days of CAMRA, many members criticised the tied house system on the grounds that it prevented pubs stocking the beers their customers wanted to buy. But without it it is likely that cask beer would have virtually or entirely disappeared. As much through inertia as a sense of commitment, most of the independent brewers continued to produce cask, as did many Big Six subsidiaries that served a distinct local market. Without this, pubs would have tended to go for whatever was most fashionable at the time, as they did in US, and that was nationally distributed and advertised keg beers.

In the early 70s, a “free house” often meant one that served Younger’s Tartan. Those who were around at the the time may remember the advertising slogan “worth passing a few pubs for”. Cask did virtually disappear in Scotland, where the tied house system was much weaker and there were only two small independent brewers. It is no exaggeration to say that the tied house system saved cask beer in Britain as anything more than an obscure niche product.

While considerable disquiet remained about the market power of the “Big Six”, little was done about it beyond some rather half-hearted pub swaps which resulted, for example, in Greenalls acquiring some former Wilson’s pubs in Stockport in return for some of their own in North Cheshire and South Lancs. However, the nettle was finally grasped in the form of the Beer Orders, which came into effect in 1989. These rules prevented any brewing company owning more than 2,000 tied houses, at a time when the biggest had around 7,000 each. Of any pubs above that figure, half would have to be freed from tie. All tenanted pubs belonging to the national brewers were allowed to stock a cask-conditioned guest beer.

At the time, this was widely welcomed, particularly by CAMRA, but ironically it happened at a time when the grip of the Big Six had already started to loosen. The rise of international lager brands was severing the connection between the brewer’s name above the door and the beers stocked, and splitting companies into brewing and retailing divisions put more focus on the actual performance of pubs. The big brewers started selling off large swathes of their “lower-end” pubs, either to independent brewers such as Belhaven and Vaux in this area, or to standalone non-brewing companies which rapidly became known as “pubcos”.

With hindsight, it is difficult to discern exactly what the proponents of the beer orders expected the outcome to be. It was never realistic that the big brewers would split themselves up into regional companies reflecting the pre-merger structure, and the growing dominance of national and international lager brands made regional beer identities less relevant. And the big brewers were never going to accept operating large estates of free-of-tie pubs, as it completely undermined their business model.

So the outcome was progressively selling the surplus pubs off to newly-formed stand-alone pub companies, often headed by former Big Six executives, who would be able to perpetuate the tied pub model because they didn’t brew themselves. Some of the biggest names were Pubmaster, Punch Taverns, Enterprise Inns and Admiral Taverns. To acquire these pub estates, the new pubcos had to load themselves up with large amounts of debt that eventually were to prove problematical. The erstwhile Big Six in general exited both brewing and pub retailing, and most of them no longer exist in a recognisable form. The one exception was Scottish & Newcastle, who barely scraped over the 2,000 pub threshold anyway. They eventually passed into the hands of Heineken and are still a major pub operator in the form of Star Pubs & Bars.

The major pubcos in their various guises remain the largest owners and operators of pubs in Britain, but have never won much, if any, affection, and have attracted criticism for restricting choice, selling off viable pubs, exploiting tenants and failing to invest in their estates. The issues with the relationship with tenants have led the government to create a Pubs Code overseen by a Pubs Adjudicator to oversee it. Given the precipitate decline in the pub trade in the past twenty-five years, which was not foreseen in the last century, the debt burden has proved an enduring millstone around their necks. In particular, they failed to predict the disastrous outcome of the 2007 smoking ban, with some executives even painting it as a business oppporunity.

It has even been questioned whether this is a legitimate business model at all. Why should a company be able to control the supply to lessees when they don’t make any of the products themselves? However, if you look at most of the remaining family brewers, most of the beer sold in their pubs is bought-in keg and lager brands. I remember listening to a presentation by the directors of Robinson’s where they said they had a target of 30% of sales being their own production. Hydes can’t be much more than 15%. This is surely a difference of degree, not principle. Only a handful of brewers such as Holt’s and Samuel Smith’s are honourable exceptions who seek to make all their draught sales their own products.

There are many parallels in other markets and industries where self-employed people or independent companies operate businesses where they are operating under the banner of a parent company and purchasing stock from them. Examples include convenience stores, restaurants, fuel retailing and domestic and industrial services. It’s by no means unique to pubs and can offer people a relatively low-cost and low-risk route into self-employment, as pubs have long done.

The charge is also laid that pubcos are primarily interested in property rather than actually running pubs. Yes, they do have a keen eye for property market considerations and are not going to hang on to pubs for sentimental reasons, but the same is true of Wetherspoon’s and family brewers. They do have area managers and business development officers, they offer training, marketing and financial advice, they invest in refurbishing pubs, they introduce new branding concepts. They may not do these things well, or sufficiently, but it cannot be argued that they do not do them at all and have no interest in pubs as ongoing businesses.

In response to this, various groups and social media accounts have grown up that purport to “champion” or “campaign for” pubs. But they are not doing so in a wider sense, but merely articulating a sense of grievance against pubcos. This may be justified to some extent, but they never seem to be able to get beyond moaning to put forward any positive alternative vision for the industry. As I said back in 2014,

So you have to wonder what is the motivation for these people? Are they basically living in a fantasy world, or are they spurred on by a visceral anti-capitalist agenda that completely ignores the real reasons pubs are closing – often combined with an animus towards the evil supermarkets who have the cheek to sell us a wide range of stuff at keen prices? It almost comes across as a deliberate distraction technique. The one thing that is certain is that they aren’t really interested in the long-term viability of pubs.

The idea that tied leases could be scrapped is entirely fanciful. The raison d'être of pubcos is operating pubs, so, as with the Big Six before them, they are not going to hold on to estates of free-of-tie properties. They would convert the best of them to direct management, or the franchise models that are becoming increasingly common, and sell the rest off. A few might go to sitting tenants, but most would be snapped by true property companies who would milk them for all they were worth and have no interest in maintaining them as pubs. And independent free houses are only guaranteed survival as long as their owner wants to stay in the business. Whenever they want to retire or move on, the pub is put “into play” and its future is at risk.

It is certainly not my intention here to defend pubcos. They are operating a fundamentally flawed business model that only exists because of historical factors. There is a rationale for operating an estate of managed pubs following specific trading formats, as Mitchells & Butlers do, but nobody would invent unbranded tied leased pubs if they didn’t exist already. The industry would be a lot stronger if many more pubs were owned by brewers. But we are where we are, and abolishing tied leases would make things a lot worse. Plus it isn’t going to happen anyway, so perhaps people would be better off devoting their efforts to campaigning against the anti-drink lobby and high alcohol duties.

Imagining that the pub landscape can be transformed into one of independent freeholders all able to choose beers from the whole breadth of the market is a “three acres and a cow” fantasy that simply isn’t going to happen. The reality is that most of the pubs in the country, particularly the bigger ones with higher volumes, will continue to be owned by large commercial companies who want to control what they sell and how they are run. Any attempt to improve the competitive environment in the industry has to recognise that.

Early to bed

Earlier this month, Keir Starmer announced that pubs would be allowed to stay open until 1 am on Thursday 8 May, to mark the 80th anniversary of VE Day. He said “Keeping our pubs open for longer will give people the opportunity to join in celebrations and raise a glass to all of the men and women who served their country, both overseas and at home.”

However, at a time when the pub trade had just been hit with a triple whammy of swingeing increases in National Insurance, the minimum wage and business rates, this was understandably seen by many licensees as a patronising sop that would be of little or no value to them. On a midweek night, it was doubtful whether many drinkers would want to take advantage of it anyway. All the reports were that the actual take-up was extremely low. As Adrian Chiles writes in this article in the Guardian, “I asked around the pubs near me and was met with shrugs and shakes of heads. I didn’t find one that opened late last week. In my local they didn’t even know it had been an option.”

Maybe the response would have been different had it been on a weekend night, but there is a more general feeling that there is much less appetite for late-night drinking than there used to be. One licensee he spoke to said that Covid lockdowns had been a major stimulus for this change, and there certainly was a period when a 10 pm curfew was imposed, where pubs were actually allowed to open at all. But I would say that the trend goes back well before that. Chiles goes on to say:

A while ago, an old friend was back in the area. We met at our teenage haunt – the Station Inn, West Hagley, since you ask. It was great to see him. But come 9.30pm there was a general feeling it was time to call it a night, and off we went. And I realised I couldn’t remember the last time I’d stayed out late enough to hear last orders called.

I took this to be a sad, if not unhealthy, sign of my advancing years. But I’m starting to wonder if it’s not just me. Once upon a time a pub wasn’t really a pub if it didn’t stay open until 11pm. These days, many a pub calls it a night an hour or two earlier if trade is quiet.

I have to say that it’s relatively rare that I’m in a pub at closing time, but one kind of occasion where I am is attending CAMRA meetings. There was a time when you would return to the main body of the pub after the formal proceedings had finished, and find it absolutely packed in the run-up to last orders. But, more and more, while the pub may have been ticking over nicely earlier in the evening, after 10 pm the customers are visibly melting away. Last year, on holiday in Sussex, there were two occasions when I was asked whether I wanted another drink before 9 pm, as they were about to close up.

There are various factors behind this. As well as the ongoing hangover of lockdowns, pubgoers are older on average and less willing or able to burn the candle at both ends, and there is a generally more circumspect attitude towards alcohol in society in general. It’s much less acceptable to turn up at work in the morning nursing a hangover. The liberalisation of licensing hours that allowed many pubs to stay open after 11 pm may perversely have encouraged this by making customers choose their own time to head home rather than having it imposed on them.

It’s not all a one-way street, though. There are times of the day when the trade is healthier than it was once. The popularity of many pubs in the late afternoon after tradesmen have knocked off has been widely observed, and in many cities and large towns pubs can be very busy in the early evening at weekends. But, overall, there has been a marked change in pubgoing habits, and the phrase “the night-time economy” is less accurate than it once was.

And, when we have days of national celebration or commemoration, wouldn’t it make sense to encourage pubs to stay open all day, rather than into the small hours?

Scarcity bites

A few weeks ago, I was browsing the Wetherspoon’s app and noticed that the chicken breast bites were “temporarily unavailable” I thought nothing of it, as branches can run out of food items and deliveries can be late. But, checking back a few days later, they were still absent, and the problem seemed to be general across their estate.

We are now into the fourth week of the shortage, and it has made the press. Being “in tears” over the absence of such a mundane item may seem an over-reaction, but if your favourite menu item is missing for a prolonged period you’re entitled to feel annoyed. They’re hardly the most scintillating item on Wetherspoon’s menu, and to my mind are inferior to McDonald’s chicken nuggets. But, as someone who is fussy about food and often divides it simplistically between items I won’t eat and those I will, they fall into the latter category. It’s also unfortunate timing given that Wetherspoon’s have recently been promoting a mix-and-match offer on “Wings, bites and strips”.

Apparently the shortage is due to issues with the supplier. But chicken bites are very much a commodity item, and surely by this time they could have found an alternative source, even just starting on a regional basis. Apparently they are still available in Ireland, including the North, indicating that they are using a different supplier there.The whole episode suggests an uncharacteristic failure of supply chain management.

Downfall

The Drinks Business reports on concerns that German beer is losing its lustre both at home and abroad.

Shocking new figures from the Statistisches Bundesamt office have revealed that global interest in German beer is rapidly diminishing alongside continued ambivalence for local beer in Germany itself. Assessing 2024 figures from the country’s Federal Statistical Office, EWN it was highlighted how Germany exported 1.45 billion litres of beer last year — marking a 6% decline compared to 2014. Notably, more than half of these exports (55.7%) were shipped to fellow EU member states, showing that domestic thirst had already started to wane.

Granted, alcohol consumption has dropped across many global markets, coinciding with growing public interest in health and wellness products. Added to this, non-alcoholic beer has been on the rise, seeing a boom in sales and offering a way for drinkers to adapt their drinking habits. But why has all of this had such a detrimental impact on German beer?

However, this needs to be taken in context, and I doubt whether it’s any worse than the decline in beer sales in other countries, prompted by increasing health concerns and anti-alcohol sentiment. Germany’s export figure is still well over three times the 411 million litres exported by the UK, and German drinkers consume half as much again as we do, at 94.4 litres per head against 64. A fall of 6% over ten yeards is hardly “rapidly dimishing”. German brewing is still a massive business, and enjoys a massive domestic market.

However, Germany is immensely proud of its brewing tradition as one of the key players in the development of lager, which is now the world’s dominant beer style. In contrast, while we tend to regard ourselves as a nation of beer-drinkers (perhaps somewhat unjustifiably) we are distinctly equivocal about our own brewing heritage. The average quality of beer consumed in Germany is considerably higher than that in this country, where the market is dominated by domestically-brewed international lagers.

I have to declare an interest here, as I am a big fan of German beer, and would regard it as my principal beer indulgence. I’m really not interested in drinking the likes of Stella and Madri, but am happy to fork out twice as much for the authentic German equivalent, while the modern premium craft beers entirely pass me by. I mostly buy these from the excellent Bottle Stop off-licence in Bramhall, but also from other sources such as Lidl’s Festbier pack. It only adds up to one or at most two bottles a week, but I’m happy to treat myself occasionally. If I had to name a favourite, it would probably be the distinctive, intensely hoppy Jever Pilsener from the north of the country, but I also very much enjoy the Bavarian Helles style.

While German beer has a high reputation internationally, it has never really taken off amongst the global beer brands in the same way that other European brewers such as Carlsberg and Heineken have done. German beers often appear as premium options, but they have never conquered the mainstream. AB InBev made some attempts to promote Löwenbräu as a global brand, and for a while Beck’s had a considerable reputation in the UK, before its owners decided to trash its image by reducing its strength from 5% to 4%. But there are no German brands amongst the world’s top twenty beers.

Despite the busy scenes in famous venues such as Hofbräuhaus in Munich, in fact Germany consumes a much higher proportion of beer at home than the UK. Statistics produced by Brewers of Europe show the relative proportions between on and off trade being, in 2015, 49/51 in the UK and 23/77 in Germany. The share of the on-trade will have further diminished since then in both countries. So it is a beer market with a very different structure.

German brewers have sometimes been criticised for a lack of innovation. However, while the country is generally known for pale lagers, it produces a huge variety of other styles such as Dunkel, Bock, Altbier, Kölsch, Weizenbier, Berliner Weisse, Rauchbier and Steinbier. The argument that it is all the same doesn’t hold water. And would it really be that desirable for German brewers to be trying to produce ersatz IPAs?

Germany also has the Reinheitsgebot beer purity law, which restricts ingredients to barley malt, hops, yeast and water, plus wheat malt for wheat beers. It does not apply to imports due to EU competition law. This originated in Bavaria in the 16th century with the noble intention of preventing the adulteration of beer with inferior adjuncts. However, it could be said to holding German brewing back, as most other major brewing nations, notably its neighbour Belgium, embrace other ingredients not so much for cheapness as to add different character to beer. I recently wrote about Thornbridge’s Union beers, which include expensive invert sugar to achieve a traditional English pale ale character.

The all-malt requirement does tend to give all German beers, even the so-so ones, a distinctive full-bodied character and a kind of austere purity. The variation between different brands of Pilsner or Helles is certain considerably less than that, say, between classic British bitters. This could be seen as a limiting factor. None of the leading British lager brands are German in origin, and all have a noticeably sweeter flavour than typical German beers.

While both these factors could be regarded as holding German beer back to some extent, on the other hand they demonstrate a reluctance to lower standards. It is certainly true that German brewing has shown a decline both domestically and in export markets, but it remains a powerhouse compared with its British equivalent. This is only a source of concern because Germany was so proud of its brewing traditions in the first place. And, in a sense, maybe German brewers deserve praise for sticking to what they do best rather than chasing every passing fad.

It’s a pity, though, that Wetherspoon’s, amongst their extensive array of bottled “world lagers” don’t have a single German offering. I occasionally used to enjoy a Krombacher when they stocked it.