In a response to the Government’s consultation on the future regulation of pub companies & tenants on behalf of its c1,300-strong Star Pubs & Bars pub business the company called for the need of real investment, innovation and professionalism in the pub sector “to reverse the current decline, and to get more happy customers through the doors”.
The company said: “The evidence presented by the Government for action is weak and misleading and simply does not justify the extent of the proposed intervention in our business model, particularly when the Government recognises that ‘many pub companies treat their tenants well’.
“The evidence presented by the Government relating to complaints has been shown to be wrong as it relates to enquiries on a wide range of issues. At the heart of the debate is the issue of whether or not pub companies are charging too much for beer (wet rent) and also charging above market rent rates (dry rent). We do not believe that the Government has provided any evidence that this is the case.
“We recognise that there is a high profile campaign for pub company reform, however we believe that this is driven by a vocal minority of tenants and former tenants and does not reflect the positive relationship that we have with the majority of our tenants.
Heinken said that there would be a number of unintended consequences if the proposals go ahead.
It said: “It will restrict the lifeblood for pubs - investment- leading to closures for some pubs in the short term and continued decline in the medium and long term for others. Tenants who are already operating at the higher end of the income scale will benefit most while those on low incomes, whom the Government wishes to help, will receive less support. More pub companies will be forced to adopt a purely commercial property relationship which will remove the partnership approach and be detrimental to many pubs.
The company said also said that the proposals fail to recognise or tackle the various challenges which must be addressed if the sector is to reverse the trend of declining pub visits and sales.
These include fiscal pressures (e.g. high duty, business rates and VAT); reduced consumption away from home in favour of at home drinking; increased competition for leisure and household expenditure; legislative changes (e.g. smoking ban); social changes (e.g. rise in mixed-sex drinking and dining occasions); and historic lack of investment in research to understand and address changing customer demands.”
It also said that there was a significant risk that the proposals will lead to a large number of pubs being disposed of by pub companies.
It said: “With little available capital and the banks tightening their lending criteria, there is a risk that there would be insufficient willing and able buyers to match this increase in supply. A large number of disposals would therefore impact negatively on the market by reducing the value of existing estates and would also reduce the value of individual freehold properties.
“It is already difficult for pub companies and freeholders to sell pubs due to the lack of buyers in the market. In recent years there has been an increase in purchases from supermarkets as they seek to expand their convenience store networks. Large numbers of disposals is likely to mean the loss of more pubs to alternative uses.
“Pub companies and their national distribution networks offer a low cost route to market for many cask ale producers and small and micro brewers. Market data from CGA Strategy shows that the leased and tenanted sector stocks more cask ale brands than freehold and managed pubs. Mandatory free of tie options and the proposed Guest Beer would reduce the ability of pub companies to continue to support this sector.”
The group laid out a number of alternative approaches it believes the Governemnt could take to aid growth in the sector.
There include: Putting pressure on major lenders to increase availability of lending to tenants for investment; encouraging greater investment in the pub estate through improving capital allowances; reviewing business rates and consider a business rates holiday for the first year of a new pub tenancy; supporting a reduction in VAT for food served in pubs to match the rate for supermarkets; and supporting skills and training in the sector to identify the next generation of innovative and entrepreneurial landlords.
Lawson Mountstevens, managing director of on trade at Heineken, said: “Despite good intentions, many of the Government’s proposals to reform the pub sector are misguided and there will likely be unintended consequences for pubs across the country if fully implemented. To reverse the current decline, and to get more happy customers through the doors, we need real investment, innovation and professionalism in the pub sector.
“Star Pubs & Bars’ aim has always been to work in partnership with our publicans to help improve their offering to customers. We have no desire to manage a decline, and we will continue focusing on the factors that will attract more customers back to the great British pub. That’s why we’ve already invested over £600m in purchasing and improving our pub estate since 2010, and why we will continue to invest heavily to improve our pubs, with £13m invested in 2013 alone.
“I believe that for the vast majority of tenanted pubs and publicans, self-regulation is working but of course it can continue to improve. Rather than putting in place proposals that will not only fail to tackle the issues facing the sector, but will also make matters worse, we are calling on the Government to work with us on a more ambitious agenda for growth.”
