A rose-tinted camra on the past

Reading through its submission to the Office of Fair Trading, one cannot help thinking that Camra, the real ale group, is guilty of looking back on the past through rose-tinted spectacles. Or perhaps that should be a rather large pair of beer goggles? Parts of its memo of last Friday, exercising its right as a ‘super complainant’ to require the OFT to look at anti-competitive practices in the UK pub market, were laughably distant from the reality of life before the 1989 Beer Orders. Most notably it painted life pre-Beer Orders as something of a golden age unlocked front doors, when children skipped through the streets rolling hoops with sticks, and when the beer tie was applied fairly – used exclusively by brewers to guarantee a market for their own products. It said: “Brewers relied on the continued viability of their “tied” pub estates to maintain or increase their beer sales and therefore did not seek to overly exploit or abuse the “beer tie” model to the detriment of ‘tied’ pub businesses and consumers.” That’s not quite how some people remember it. In its submission Camra said that anti-competitive practices in today’s UK pub market were resulting in “high prices, lower amenity, restricted choice and pub closures”. “Lower amenity” really is pushing it. In the four years between 2005 and 2008 Enterprise, Punch, Greene King and Marston’s between them invested £700m in their leased estates. Not too many people remember that sort of rapid-fire investment in tied pubs, before the Beer Orders. Clearly Camra is primarily concerned with real ale and was never going to suggest the beer tie should be removed. It did however proffer that pub companies should not be able to tie more than 500 pubs within their estates. If this were to pass, this would spell disaster for the big pub groups. However, one of the sector’s leading analysts, Geof Collyer of Deutsche Bank, believes both Enterprise and Punch, would see their cashflows increase in an enforced post-tie world. As counter-intuitive as it may seem, Collyer reaches his conclusion by logically working through a number of the strategic steps that the pub companies would likely pursue. On the one hand they would be facing diminished revenues from the loss of massive margins through supplying beer to their estates. On the other hand, with no interest in the trading performance of their pubs they would no longer invest in outlets and they could remove huge swathes of head office functions directly linked to licence support. They would also be eligible for tax-efficient Reit status. It is thought that Collyer will be releasing his findings in a detailed research note in the coming weeks. About the most sensible thing in Camra’s submission was its concluding remarks that “the model is faltering and must be reformed as a matter of urgency”. This does feel pretty accurate. In the face of a recession many licensees are faltering, the model is certainly a long way from perfect, and does need to be evolved. To download Camra’s submission visit: http://www.camra.org.uk/