Thursday, October 25, 2012

Free of Tie Paradise?

If there were no market distortion we wouldn't be having the conversation and there wouldn't be thousands of pubs rotting and falling apart from dilapidation all over the UK and that failed building stock wouldn't have to be substantially invested in from scratch because the properties would be in fair maintainable order, having been responsibly managed by the people responsible for them over the last thirty years.

The ancient rule of thumb for a GP% in restaurants is 65%. When I arrived on the pub scene in 1994 the pub sector target GP% for draught beer, for some reason I've never understood, was 55%. I can't remember the retail prices now, I've probably got one somewhere from 1995, but when I began trading I could get 56% on tied draught beer without making my customers squeak - and I was 20p more than any other pub in the area. Roll on fifteen years and I was the same price as most other pubs around (they'd ALL been long 'done up' by then) except the local M&B who were 10p a pint more and I was getting 49% GP overall while charging £3.60.

So when tied I got 49% GP overall on the prices that S&NPC charged. Their wholesale prices were pretty much DOUBLE what I could pay for the same beer to be delivered and paid for from an 'independent' wholesaler with a yard down the road. If I'd been free of tie I'd NEVER have charged the prices i needed to charge just to get a disastrous GP% that inevitably led to my losing money and my business failing.

If there were no tie interfering and we had a fair and free market we'd be paying the brewers more than they sell beer to the pubco's and it's reasonable to assume we'd be able to achieve a sensible GP% like 55% - 60% for our beer, make a sensible profit AND make sensible decisions about reinvestment in the business and for having a decent standard of living as well.

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