Monday, February 25, 2008

Letter to Watchdog

Why do publicans in the UK spend £1.19 wholesale on a bottle of Beck’s bought from their landlord when they could get it at a supermarket for 49p?

PubCo leases oblige tenants to buy beer and other products through the PubCo at prices set by the PubCo. The ostensible reason for the PubCo charging a premium price for beer is that the rent on the pubs is cheap. This is not so. PubCos have been extremely aggressive at rent reviews and have consistently put up beer prices faster than inflation for over a decade. They have systematically removed profit from the tenant’s (lessee) P&L and transferred it to the PubCo’s.

Radio 4's You and Yours had a slot on Friday 8 February called 'is there a future in running a pub?' I listened and was disappointed that the programme swayed heavily in favour of suggesting that, in spite of a dreadful 2007 summer and the impact of the smoking ban, this noble industry has a lot of mileage in it yet for the entrepreneurial, hard working, bright publican who has a business head and relishes being self employed doing a pub their own way. 

The reality is very different. Please look at this thread on the Morning Advertiser website for a flavour of what is wrong with the PubCos. The main protagonists are Punch and Enterprise but all the others follow their lead.

I own The Sun and Doves an award winning pub in Camberwell SE5. When I signed the lease it was a dead quiet, sticky floored boozer with leaded lights, an eternally empty pool room, a pink disco lounge bar and a threadbare garden. They served deep fried sausages and packet potato mash for lunch. I spent £150K of my own money turning it into one of Britain’s first ‘Gastro Pubs’ and have spent the last thirteen years learning about the scandalous behaviour of Britain's Pub Companies the hard way - by becoming one of their unwittingly bonded slaves.

In PubCo’s literature people like me are ‘budding entrepreneurs’ who want to ‘build their own business’ working with the PubCo who ‘have been running great pubs for years and are looking for great people to carry on the tradition’. I have not met one licensee who describes it as anything like this. Their usual response is “they’ve got me by the short and curlies” or “over a barrel”. Please give me a chance to explain more. 

You will be amazed. Thanks. Mark Dodds.

The radio 4 programme was a desperately inadequate assessment of an industry that is in tatters – because of the iniquitous practices of the solicitors and accountants who run PubCos and masterfully massage figures and markets purely to the advantage of themselves and their shareholders... Their business model is more in line with the practices of plantation owners at the height of the slave trade than with contemporary expectations of corporate behaviour. Try finding a meaningful CSR statement published by any of the PubCo’s. You won’t find one. Because they can’t write about real social responsibility without lying (honest). The PubCos get away with it through wielding sheer corporate power, sleight of hand when it comes to official investigations, and because about 20,000 pubs in the UK are not in their estates. They are Free Of Tie, better looked after, better managed and operated because there is a profit incentive and the people who run them don’t work 80 hours a week, and customers don’t know the difference between one type of pub and another. Tied? Free of Tie? Freehouse? I didn’t know fifteen years ago, I can spot them a mile off now – if they are tatty in any way they are tied – if well looked after – they are free of tie. 

What You and Yours failed to touch on ENTIRELY is how skewed the entire industry is by the actions of the PubCo's and how they make their FTSE 100 record returns largely by squeezing every ounce of profit from their estates to the extent that thousands of publicans across the country are being forced out of business without leaving a trace of their history, largely to be replaced by people new to the trade who invest their life savings - or even the proceeds of selling their own home to get into a dream vocation - only to quickly become part of the invisible statistics of tragic misery and failure that are the collateral damage of the PubCo's wild success story.

The Morning Advertiser posted a news piece about the programme on its website : "Beer Tie Attacked On Radio 4" 

I posted a response to this which was an honest summation of the position I felt the programme had taken. This post stimulated a big response from readers of the Morning Advertiser forum over the weekend (this was only the third or fourth post I've made on this forum) and by Monday morning had seventy or so responses. At around 9am this whole thread was removed from the forum and I was barred from posting for a couple of hours.

This statement is taken from the Scottish & Newcastle Pub Enterprises website:

“Once you are in your pub, you will have the opportunity to take further courses on Cellar Management (Essential and Advanced levels) and Cask Ale Handling, all of which are designed and run by our in-house experts; our courses are devised and run by licensed retailers for licensed retailers and our focus is always on your business and your customers”. This is my freeholder. Referring to statements like this in their literature, I have asked coutless times – and in writing – for training for me or my staff. I have never been offered it. This is typical behaviour.

A few CSR statements:


S&N Pub Enterprises, my freeholder, say that CSR is my responsibility not theirs... – in 2003 I tried persuading them that through their area managers they could encourage a 2,000 strong estate of publicans to change to energy saving light bulbs which would save each pub around £400 a year in electricity bills. They were not in the slightest bit interested.

I have documentation, letters and a network of other publicans who are prepared to help expose the gross inequities of this PubCo system.

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