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Beer Tie

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About this deal

Fair Pint and the GMB had been lobbying the European Commission not to renew the opt out for the beer tie. The pub companies have borrowed heavily to expand their portfolios and since the credit crunch they’ve been forced by the banks into massive sell-offs. Some of these pubs have become free houses, but many others have been converted into other uses such as supermarkets. Their view is that the tie forces tenants to pay unnecessarily high prices for their beer which according to CAMRA can be 60 – 70% more than non-tied pubs. This impacts on their profitability and ultimately results in too many pub closures. Since the day that it was announced, CAMRA has raised serious concerns about the proposed Carlsberg Marston’s Brewing Company and choice for beer drinkers, pub goers – and over the future of British beers, brands and breweries.

He said: “The review into the pubs code must be an honest one, which means accepting the reality, which is that there is no genuine MRO option available to tenants and this must be rectified or it will be clear that the government have and never had any intention to deliver on promises made to parliament.” Fair Pint were encouraged by our meetings with MEPs and Commission officials and there is a real concern about the impact of the pubco model on British consumers and individual tied publicans. His case was helped by publicity whipped up by the dispute, not to mention romantic regard for the Blue Bell, a 200-year-old pub whose interior has not changed since 1903 and where York City football club was formed. Rupert Croft, partner at law firm Maitland Walker, said: "The most notable change is that the definition of market share of 30% will now include buyers as well as suppliers, but this is unlikely to affect pub companies.Pubs in less affluent areas of Britain are in danger of becoming extinct. They have been priced out of the market by rapacious landlords and the supermarkets. If we don't look sharp we are in danger of losing them forever.

Merger activity has accelerated hand-in-hand with globalisation, driven by the search for increased economies of scale and larger markets. While demand for beer in the UK and Europe has remained fairly static, demand in China and the rest of Asia has accelerated. For example, during 2011, sales of beer by volume by AB-InBev grew by just 0.4% in Western Europe compared with an 11% growth in beer volumes in China. In contrast, sales by volume to Easter Europe actually fell by around 5%. The preferred marketing strategy is to focus on non-price competition and developing premium brands which command a higher price. Globally, this means targeting the growing middle classes in China and India who prepared to spend a little bit more on premium brands. The new system would let tenants have their ties reviewed and where appropriate, move to a market rent with the freedom to buy their beer from other suppliers. Tenants can adjust their prices to better meet the needs of their customers and compete more effectively. Like most landlords who seek an MRO option, Pybus never got his. Instead, the former British debating championships runner-up thrashed out a deal face to face with his landlord, the pubco Punch Taverns.However, in the UK around 50% of pubs are still tied to major brewers for their supply and, according to research by CAMRA, the ‘beer ties’ adds around 6-7% to pub prices. While there have been some challenges with parts of the implementation of the code for all involved, the BBPA and the companies covered by the code continue to work closely with the adjudicator and other stakeholders to resolve these,” the chief executive, Brigid Simmonds, said. T he Competition and Markets Authority exists to promot e competition for the benefit of consumers – therefore it i s disappointing that they are seemingly disinterested in investigating something that will have potentially anti-competitive effects on the UK beer and pub market. Challenges arising from supermarket pricing, pub regulation and punitive leases all have a cost. And that cost is a dire selection of the cheapest brands of beer, "ready" meals, poorly trained staff and management, delayed refurbishment, increasingly desperate price promotions and so on. In other words, a disheartening experience for the customer creating a spiral of decline, leading sooner or later to yet another closure statistic. What is it we stand to lose?

The tie system also allows people to become pub tenants with smaller personal investments. This helps to make the sector more accessible widening the pool of potential applicants. According to data from the British Beer and Pub Association, there have been 739 MRO applications since the system began three years ago. Only 57 resulted in MRO tenancies. The BBPA, whose members include the six largest pub companies, believe the pubs code is working well. They say the tied option does not make financial sense for them and the pub would be more profitable – as well as offering cheaper and better beer – if they were free of the tie. The ‘tie’ system refers to the structure of businesses where pub companies buy a pub and then lease it to a tenant landlord who pays rent to the pub company. The agreement also ties the tenant into buying their beer from the same parent company. Proponents of the bill argue it ends an archaic system and will make pubs more profitable. Opponents including the government argue that it will result in pub closures and job losses. The new rules have kept the same threshold of market share - 30% - under which the exemptions will apply.

The brewing industry

Clarke says he helped draft the pubs code regulations but has still been unable to make them work. He and Law still do not know whether they will get their MRO or end up signing a new tied tenancy with “onerous” conditions. Even if they get their wish, they will have wasted three years of time and money. According to dozens of pub landlords around the country, already wrestling with the rapid decline in the number of Britain’s pubs, the reality has been very different. The small business minister Kelly Tolhurst recently announced the first statutory review of the pubs code and the way it is arbitrated, via the pubs code adjudicator. It is vital that the CMA steps up the plate, thoroughly investigates the proposed joint venture between Marston’s and Carlsberg, and help s to ensure there is fair competition , access to market for brewers, and decent consumer choice when it comes to beer and pubs up and down the country.”

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