Friday, January 23, 2009

fifi (bootpainter) has it exactly right.

The majority of pubs in the UK are owned by what are essentially property companies. They are called pub companies or pubcos. They let out (rent) their premises to people who then run a business out of the premises which traditionally is called a 'public house' i.e. a pub. Pubcos encourage, seek, advertise for entrepreneurial people who want a life change, people who want to be in charge of their lives, people who want to run a business, to take on their properties and operate them as businesses but oblige these people, as part of their contract, to buy beer from the pub company. This obligation is called a 'tie'. Tied pub companies generally are not brewers - but they have agreements with brewers to supply their estate of pubs with the brewer's beer.

Pubcos have enormous buying power. The two biggest pubcos, Punch Taverns and Enterprise Inns (above) own around 15,000 pubs between them. They are the biggest wholesalers of beer in Britain - even though they do not make the beer themselves. But their right to sell beer through the tie - or the contractual terms of their leases - allows them to charge whatever price they feel is right for the beer and they make ENORMOUS profits (HUNDREDS of £ millions every year) out of that process - on top of the rent that their thousands of tenants pay for the privilege of running 'their own' business out of the premises.

Here is an accurate example of the price differentials between tied and free of tie prices.

Becks Bier 275ml from my pubco wholesale price including value added tax is £28.50 for a case of 24 bottles. I have to sell this beer at a profit somehow. I could cross the street from my pub and buy the exact same beer from the corner shop for £1 a bottle and then put it in a frid

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