Monday, March 22, 2010

Brookes attacks the tie in OFT submission

Brookes attacks the tie in OFT submission

The irony is that Heineken is not at fault here.

Heineken do beer not property.

Heineken bought a rather large brewer and got an almost medium size pubco along with the F&F.

Heineken makes no money out of selling its beer to its wholly owned subsidiary the almost medium sized pubco. So what is the point of owning all that property anyway? Oh, of course. It doesn't even own most of that property. No most is owned by other companies and its managed by the Heineken owned pubco.

And, like all other pubcos Heineken's wholly owned subsidiary, the almost medium sized pubco, is sitting on a whole load of toxic assets; either in the form of the lacklustre pubs it still owns having failed to sell them off at grossly inflated valuations to 'Punch drunk' banks like RBS, or in managing the estates of banks and others who are sitting on massive negative equity on the pubco's behalf. This while the pubco tries to squeeze every last drop of revenue out of an estate it 'manages' for the banks etc which, no doubt behind the scenes, is struggling just as much as the all other pubcos tied estates are. These estates are running dry, there's no juice left to squeeze.

To make things worse for the tie as a construct the brewers are turning against it. The writing is on the wall. Heineken, like Coors and the other brewers, is not happy with its margins in the UK generally - which are lower than in any of their other markets. Why? Because pubcos use their buying power to pare brewer's supply prices down to the bone, do not pass the discounts on; this wrongly forces the retail price of brewers' products upwards, which puts pressure on volume because people, customers, normal punters, buy less beer in pubs, which creates a declining market for the brewers' products. Which makes brewers unhappy. The supermarkets do come into this too but are a slightly separate point.

edited by: J Mark Dodds at: 22/03/2010 10:36:28

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J Mark Dodds 22/03/2010 10:36:39

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Brookes attacks the tie in OFT submission

This is a circle of commerce without virtue - where nothing works to the benefit of anyone except the pubcos in the middle.

The brewers are on to it. They have been on to it for a long time but now they are ready to turn the tables on the pubcos. Watch what unfolds.

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