Sunday, May 11, 2008

Let’s get this straight:

A wide range of products are available through most PubCos ties now but at prices set by the PubCo. Broad portfolios allow Pubcos to appear, to the authorities, to be market savvy and to be supporting independent brewers and a diversity of supply across the UK. Well, to a literal extent they are. But at what hidden cost? PubCos have steadily broadened their portfolios of available products mindful of outside accusations of restrictive supply. So they are much better in this respect than they were a decade ago but that is only to get themselves off the hook from OFT and others who occasionally cast a casual inspection across the market.

IN FACT highly restrictive price structures exist within these quite apparently wide product ranges. OFT and others completely miss the FACT that there is NO opportunity for negotiating volume discounts on these supplies whatsoever. There is NO opportunity to stock products outside those available through the product chain. No opportunity to tailor your individual product to the demands of the local consumer base. In addition ALL prices are FIXED by the PubCos with no reward for high volume sales; a situation completely unlike a free market.

This adds up to a complicated situation where, at a glance, it appears there are no restrictions but IN FACT there are and these restrictions also lead to an inevitable need for tied pubs to charge more for their beers than free of tied pubs. Both the lessee and the consumer therefore are being penalised as a result of the restrictive circumstances of the tie.

So although the market is not technically foreclosed it is, in PRACTICE highly restricted and behaves as a monopoly. All PubCos try to out compete each other for a wide portfolio of product – not essentially for the benefit of retailers, more realistically so they can assert that they are not restricting supply so they can get out of accusations of anti-competitive behaviour from external scrutineers... When you are tied you have to buy from your boss at a price he decides. You have NO opportunity to go elsewhere and negotiate a better deal. EVER, in perpetuity. This, in simple terms, is WRONG.

No matter how productive you are; if you are wildly successful and generate massive volume sales; you get no benefit for your endeavour. The greater YOUR volume the more THEY make out of YOU. There are NO discounts as there would be in ANY free of tie situation. THIS FACT on its own completely blows out of the water the notion asserted by PubCos that tied tenants are no worse off than free of tie tenants.

Talk to many brewers and independent wholesalers they will agree the tie does not work for them: these are people who either a) could sell their products to tied tenants direct for substantially less than they are available through the tie and still make a greater margin for themselves than they do by selling to the PubCo first and b) those who do not have access to the tied pub market at all because they do not have a head agreement with the PubCos perhaps because they are not able to reliably cope with high volume supply to an entire estate as they are small bespoke producers.

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