Tuesday, August 19, 2014

Great British Pubco Scam

Tied lease pubco's are by FAR the worst offenders at profiteering in the pub sector and the family brewers pretty much all slavishly follow their big bad wolf lead. They all get involved in kick backs on supply deals via third party introductions to their tenants but their own wholesale to tenant prices all work out to within pennies difference, pubco to pubco - while they all say their tenants benefit from the buying power they have with suppliers, which gives them competitive purchasing they then pass onto their tenants. It is a downright lie and is undoubtedly cartel like behaviour.
Currently, as of 19 August 2014:

Punch tenants buy Carlsberg wholesale through tied supply chain at £143.70
(11gal 88 pints without wastage) + VAT = £1.96 pint

Similar profiteering wholesale prices are evident in all tied agreements with all pubco's / family brewers.  Wadworth's for example, right now, are charging more than Punch for Carlsberg and an 11 of the same beer can be bought for £68+vat from wholesalers.

CASH&CARRY the same Carlsberg 11gall keg is £84.49
(11gal 88 pints) + VAT = £ 1.15 pint (+ free 6 bots of wine with order of 3 kegs)

Without any negotiation for volume discounts. Independent wholesaler prices are less than Cash&Carry.

Compare contrast with:

J D Wetherspoon's SELLING the same Carlsberg for £1.80-£1.99 a pint inc Vat

Punch, Enterprise et al buying power is undoubtedly as strong as Wetherspoon's - their estates are considerably larger and annual volumes greater. They OBLIGE their tenants to BUY beer at the same price, or more, than JDW charge customers over the bar. JDW consistently outperforms much of the rest of the pub sector in profitability.

Punch and Enterprise et all profiteer and still cannot keep up with their gargantuan interest payments on debt 

It is a scam


  1. At least we've got away from 2x pricing.

    You've overlooked this though:

    which outlines the £100 or £160 per barrel (£31 or £49 per 11 gall) discount which Punch give from what must be your quoted list price.

    (Carlsberg direct list price £152 -

    Star are similar (£100 discount or so) for their products.

    If you're going to argue with figures, at least compare net price with net price, and not net with list!

    1. Thanks for this opportunity... busy right now but will come back to this later. meantime just this:

      I really can not understand why you insist on telling me, again and again, that I'm wrong when I report that tied supply prices are DOUBLE open market? WHY do you do that?

      Why would I 'make it up', as you always imply, if any anonymous keyboard prodder - like you for example - could just pass by and prove me wrong? Why would I do that? I am one of the Pub Persuaders, one of the Pub Professionals, one of the People Who Know What's Going ON.

      It's VERY SIMPLE: I know what's going on because I had Tied leases for sixteen years and was ripped off rotten all throughout... And I have a massive network of tied publicans (as well as free of tie) who keep me up to date with what is happening NOW.

      Now I BEGAN saying tied prices are DOUBLE Open Market when I was a tied tenant doing 400 barrels a year and PAYING DOUBLE open market prices. I didn't IMAGINE it. I was PAYING it. When you are a tied tenant there is no point shopping around for prices because you cannot buy them - so tied tenants don't do research - because there's no point. Do you get me? Why would tied tenants want to KNOW how much they are being RIPPED OFF for when knowing would only make their miserable tied down existence even worse?

      When I realised that even though I was the busiest pub in town charging the highest prices for my draught beers and could only possibly achieve 49% gross profit (when the target I wanted to hit was 60%) or else put my beer prices up to levels that would have all my customers walking out without buying a pint - when I'd been promised that my rent was low and my prices slightly higher to compensate the tie - at that point I knew something was up... I began looking around at why I couldn't sell beer at enough of a retail mark up to make me earn a living after paying for wages and everything else to keep the business going ... Back then some of the beers I bought through the tie - I'm NOT making this up you know - were MORE THAN DOUBLE open market prices.

      NOW the price differentiation between tied and open market is even greater than it was since Pubco's have upped their profiteering incrementally

    2. I'm not on a side here. Having spent a few days reading (and watching) your posts and videos I can't figure out why there is a need for any ambiguity on either side. There seems to be a pattern (not just from you) of throwing out unsubstantiated stats, and when asked to provide the source data, to respond with a list of personal credentials - but still failing to provide the source stats. That you are well credentialled and have personal experience is great, but doesn't make any difference at all to the accuracy of an argument. It seems that the difference between the actually paid tied beer price (not list) and the wholesale price is still substantial when the accurate numbers are used - so why not use them? Your argument remains sound and your numbers would then not cast unnecessary doubt on that argument.

      In just a few days engaging with people on this matter it would seem that tenants and ex tenants unhappy with their treatment by pubcos seem to think that their experience makes them an authority regardless of the accuracy of the information they present. Those trying to find the true picture, to get accurate numbers, and to create reasoned debate get shouted down as if not having been shafted by a corp personally means their ability to reason and discuss is worthless.

      Presenting arguments that shout about the pubcos sole profit making motivation but not recognising the inconsistency when then saying pubcos deliberately drive tenants out and drop rents to re lease - thus losing revenue is just one aspect of this for example. The numerous unsubstantiated (or found to be wrong) numbers are another. The "all pubs gone by..." headline is obvious cobblers for numerous reasons for example.

      My frustration is that I'm sure all of the arguments lean the way you state - but by the way they are presented by numerous in the #bastardpubco brigade damage the argument rather than assist it. I haven't seen anyone arguing with the points you are making - only with the exaggerations and over statement.

      Craig @grumpy_old_twat

    3. Right then Craig you Grumpy Old Twat, I've gathered some information about current pricing. I can't insert it here because the text box doesn't allow for live links and images so, I suppose, I'll have to start up a new post. Will do that now... and hope to add more as more prices come in my way.

      Meantime here's one message from a Sheperd Neame tenant:

      "Peroni sells for 1.17 pounds at tesco (with offers quite often bringing that price down. I buy it in at 1.78 from the pubco"...

      The tenant didn't have an invoice to hand so he called credit control:

      "When I called to get the pricing, they got really shirty with me, asked who I was, I told them, they said why do you want to know? Weird. I said just checking my GPs and I can't find that invoice. She eventually told me, just seemed all a bit paranoid..... is it called paranoid - when she was right to be?

    4. Craig, apologies, I'm still waiting for recent invoices and price lists that show the DOUBLE price thing - I've got Free of Tie at £80 for a Carslberg 11 gall against Tied at £152.26 so far but the DOUBLE is coming, I hope tomorrow. Everyone's busy.

  2. Given constant selling price, reduction of 50% in cost price would take GP from 49% to 74%, not 60%, but we're getting a bit technical there.

    I've never seen you say tied prices USED TO BE twice FOT prices - you've always used the present tense.

    If they were indeed twice in 2011, and they're only about 1.7x now (illegitimately comparing net to list) then surely the gap has lessened, not increased, in percentage terms.

    (If you could have quoted a present day example of 2x in your original post, why didn't you?)

    The other slightly dishonest part of the tied vs FOT price argument is that, as you are aware, in a rental calculation tied vs FOT for exactly the same circumstances, every extra £2k of beer cost means £2k less net profit, means £1k less rent - so the net effect is only 50% of the difference.

    1. Your pedantry doesn't change the fact that I haven't invented anything at all about "double the price". Your splitting hairs against a statement I make quite often, quite rightly for effect, and your implying that I deliberately exaggerate for effect does not alter the fact that I HAVE paid double the price through the tie for various products and so have all tied tenants. It's just not all products all the time...

      Just because ALL products are not ALWAYS double the price doesn't take away the fact of the statement that pubco's charge DOUBLE for beer than if it were free of tie... They DO. Whatever the mark up tied pubco's add to beer is scandalous, outrageous profiteering that is only made possible in a Cartel situation. That you stick to this point again and again just shows what an irrationally pro pubco person you are.

      Tied tenants pay double for products from their pubco that they could get for half the price IF they were free of tie. If a tenant walks into a wholesaler or cash and carry and buys one keg they have exactly the same buying power as someone, say a Hairdresser, with a Bookers/Macro card who wanted to buy a single keg of draught beer for a party. That is: No buying power. If you are free of tie you go direct to the brewer and say I'll be doing 300 / 400 barrels a year, I'm interested in using your products for most of my draught dispense, what deal will you cut me? And they come back with an offer that works out close to half the price a tied publican would be paying...

      A tied tenant, of course, is never in a position to have that conversation - and an open market publican is rarely in the situation of being bothered to think, even for a moment: "I wonder how much my prices compare to what a tied publican would be paying for their beer?"

      WHEN a tied tenant has a free of tie pub as well, then they don't get on the blower to the press or Vince Cable to say 'Ere mate I'm being ripped off rotten ..." they just get on with it and continue with their nose to the grindstone. And WHEN does a free of tie publican ever go out and get a tied lease? Pretty much never. And if they do they quickly realise how unprofitable it is and look to assign the lease as quick as possible.

      A tied tenant cannot negotiate a volume discount with a wholesaler because they are tied but they can walk into a wholesaler anywhere in the country with a wad of cash in pocket and get a keg of Carlsberg for £80 when they are paying £140+ through the tie.

      So in the instance, as I reported to New Statesman, my weekly beer delivery as ordered without volume discount from a local wholesaler was around £800 less than if I'd ordered the very same products through the tie. That proves to your pedantic satisfaction that as a tied tenant I was not being charged DOUBLE the open market price. No, I was paying four fifths more than I would have been if I were free of tie. The fact is on some products I did pay double, and if I have been in the free sector I would have shopped around with my pub's healthy volumes, gone direct to a brewer, and negotiated a price which overall would have been half the price I was being charged through the usurious tie.

      So in this instance of New Statesman (which you will point out I do not have PROOF of anyway) it's not double it's just out and out profiteering by the pubco's as a matter of course. As you persist in supporting the right of pubco's to charge tenants £140 for an 11 gallon keg year in year out when the tenant could buy the same keg direct for £80 as a one off purchase of one keg or, with some polite negotiating if they were doing decent volume, get it down to £70 quite easily.

      Good grief. That was off the cuff, no idea if I've expressed myself clearly

    2. Maybe you'd like to excuse the behaviour outlined in an article in the Western Morning News today

      "A friend’s son has taken on one such pub, one of a portfolio hastily accrued by a property company at the beginning of the current wave of closures. The company borrowed heavily to finance the acquisitions and is now saddled with considerable debt problems.

      Had he read the small print in the contract, or had it scrutinised by a decent solicitor, it is unlikely he would have signed up to a deal whereby he has to buy all his beer from the landlord – which applies a mark-up to every single barrel once it leaves the brewery, thus trousering a large proportion of the profit that should have gone into the pub’s tills.

      But he is now discovering to his further cost just how devious such landlords can be in extracting more money from a tenant – particularly when they themselves are under the financial cosh.

      Prior to one bank holiday weekend he submitted his beer order. It failed to arrive, despite frantic phone calls. Faced with the prospect of his pumps running dry he hoofed it round to a local brewery and bought a few kegs direct, just to see him over the weekend.

      His original order arrived on the Tuesday, closely followed by the owners’ regional manager, who demanded to know why unauthorised beer was being sold. The explanation was offered. A couple of days later my friend’s son received a letter informing him that he had been in breach of contract by buying and selling beer other than that supplied by the landlord, and was being ‘fined’ £5,000. Oh, and there would be another £1,200 to cover ‘legal costs’."

      That's normal, everyday stuff from pubco's. Suppose your retort is "Well really. He can't complain, he signed the contract"

    3. Your evidence is meaningless when I know how much I paid for beer and how much I could have bought it for. I had a free of tie place in Islington where I was getting beer from S&N Retail while being supplied the same stuff on my tied place and some of the products were HALF the price delivered to Islington which is DOUBLE the price delivered to Camberwell by S&N Pub Enterprises

    4. Firstly S&N Retail were the managed (and previously tenanted) arm of S&N plc. It's unlikely that they supplied your FOT premises.

      It seems that things must be getting better. Current Star and Punch prices about 1.4x free trade - as evidenced (with 2014, not 2011 data) ad nauseam.

    5. Just to add to the set a random EI vacancy @ £140 / brl discount.

    6. Nothing you do is random.

      And so? Vacant pubs advertised on pubco websites are bound to be offered out at what they try to make look like dead good offers - all these pubs very obviously are failed business or else they wouldn't be on the market would they? The pubco's are desperate for new tenants - huge swathes of the national estate is under temporary leases - you know all of this anyway or else you wouldn't be devoting so much time to trying to nitpick everything here.

      My agenda is solid. You can find my email address, bio, telephone number and by googling my name, articles about me. Who are you? A bored tied pubco Business Development Manager trying to prove that there is balance and fairness in your world of deceit and underhand dealings?

      Craig, if you read this here by any chance, apologies, I'm still waiting for recent invoices and price lists that show the DOUBLE price thing - I've got Free of Tie at £80 for a Carslberg 11 gall against Tied at £152.26 so far but the DOUBLE is coming, I hope tomorrow.

    7. Vacant pubs are the only ones for which I have information which is documented, published and accessible to anyone.( Although deductions can be made from EI and Punch's GPs)

      (And the celebrated Pattenmakers, which you will recall was an existing tenant seeking renewal was on £50/brl discount)

      You're making the sweeping assumption that every vacancy is created by failure. Tenants move to other tenancies, buy freeholds, die, retire, move into greengrocery..........

      Who I am is irrelevant to the facts of pricing, but all I'm doing here is challenging your assertion that, without qualification, tenants are PAYING twice free trade prices.

      Once your documented, published and accessible to anyone evidence that some ARE paying twice is posted I will accept that some are; I hope you will equally accept my evidence that some aren't.

      It's not black and white - it's shades of grey.

    8. Your obfuscation shows you to be a pubco apologist of the highest order. While proof of the DOUBLE price profiteering, as opposed to your 1.67 times, I think you calculated, mere total rip - off wends its way perhaps, the point I've been making is that the pubco's abuse people, pubs and places for irrational short term gain, routinely, all the time. The evidence is everywhere in plain sight. Far from easing, as you attempt to attest, the pubs closure crisis is obviously only accelerating. Open your eyes (everyone!), open Your EYES!

      What have you to say about this?

    9. It's a piece by a LibDem politician in support of the campaign to stop pubs changing use without planning permission. I don't support that campaign, but good luck to those who do. But I don't think it's (the issue, not the piece) just about pubcos. Free trade pubs close as well. I can't quantify the numbers in either sector, nor, I suspect, can you. But I'd be willing to consider evidence.

      Interesting piece in the PMA today - although he's at odds with his landlord about solar panels there's a tied tenant who's been with Star (and its predecessors) for 33 years - it can't be all bad!

    10. I've just checked back to see if there's anything new on pricing, but have refreshed my memory on the meaning of obfuscation.

      If there's anything I'm not making clear, just point it out and I'll attempt to clarify it.

    11. Everything you write is obfuscation. Your'e a nit picker - you split hair over anything that puts a pubco or family brewer in a bad light... which is most things they do, they are reprehensible, they've lost all contact with the damage that they are wreaking everywhere. And it's obvious that you support this behaviour.

      While you're waiting for the invoices...

      Bring someone forward who's a tied lessee - from anywhere, a pubco or family brewer, and ask them to put in public domain their admiration, support, and positive concern about their freeholder.

    12. When pubco's have trotted out their self commissioned self congratulatory tenant surveys proving the majority of 'tenants are happy in their business relationship with their pubco' I've asked them, and so have loads of other people, many times, to find just ONE tenant who's happy with their business relationship. They've never managed it - you know why? Because everyone hates them. Because everyone's being ripped off rotten.


    13. Always happy to oblige.

    14. It occurs to me that there's an easy way to settle this pricing issue.

      EI's GP for 2012/3 was 42.2% on beer and cider. This means that, on average, they were selling beer for 1.7 times what they bought it for.

      They are unlikely to pay more than the individual publican buying a few kegs a week, so their multiple of individual free trade pricing is likely to be less than 1.7, but let's stick with 1.7.

      Crudely speaking that means that for every tenant paying double there will be one paying 1.4x. The double can not be a global figure.

      Then let's say that the average tenant buys £80k of beer and cider. (EI 2012/3 £433m sales from 5493 pubs at year end).

      He's overpaid against the comparable FOT tenant by £33k, reducing his net profit before rent by £33k, and the rent bid by £16.5k.

      His position is that he's £16.5k worse off than the equivalent FOT tenant before taking into account (cue cries of anguish) any countervailing benefits.

      That's the scale of it. Some will be much worse off; some will be not so badly off.

      (Perhaps the chap in the link above is one of the 97% who didn't respond to the online consultation and/or one of the 74% who would sign up again.

      It's shades of grey, not black and white.

  3. Craig's point is well made.

    In the Sun article that's being tweeted around, a tied publican is quoted as saying "there's no profit in selling beer.... they've left us with absolutely no margin"

    That implies a GP% of zero, which is nonsense.

  4. You know what the publican meant - that they aren't making any money.

    Tied publicans fixed overheads are much greater than they would be if they were free of tie, their ability to make clear trading profit is eroded by the financial burden of the tie and their breakeven is much higher than it would be if they were free of tie.

    You know this, and all your arguments that lean toward saying the relationship between the tied pubco/family brewer and their tenants are fair, reasonable and sustainable are disingenuous.

  5. The average Sun reader will take the statement at face value, as I'm sure was intended.

    It's spin - which is fine so long as we recognise it as such.

    After all the GP on tied beer will be somewhere in excess of 40%; and that's his margin on the incremental pint after break even is reached.