Pub beer sales continue to drop
29 October, 2009
BBPA urges government to act on tax to help pubs
Beer sales in pubs are continuing to plummet and the government should cut tax to give the sector a boost, according to the British Beer & Pub Association (BBPA).
The trade group’s quarterly beer barometer for the UK shows that beer sales in pubs in July, August and September were down 4.7 per cent on the same period last year.
In that time supermarket and off-licence sales have gone up 4.4 per cent leading to a drop in the overall market of 0.8 per cent.
The 4.7 per cent drop in pubs means that 4.3 million fewer pints were drunk by customers in those months.
And, according to the BBPA, as well as helping contribute to the 52 pubs closing every week, the decline is also resulting in a drop in tax revenue for the government of £174m in the first nine months of the year.
BBPA chief executive Brigid Simmonds said: “These latest figures signal that overall beer sales are beginning to stabilise, but beer sales in pubs continue to decline, contributing to a pub closure rate of 52 per week. This is a fragile situation, that could well be jeopardised by the wrong decisions on tax in the forthcoming Pre-Budget Report.
“Government should announce that when VAT goes back up in January, it will cut the eight per cent tax increase it put on beer in the Pre-Budget Report last year, which coincided with the VAT decrease. This would be revenue neutral for government and a boost to beleaguered pubs.
“Beer sales are the backbone of Britain’s pubs, which employ thousands, and act as the hub for many communities. We have already suffered beer tax increases totaling 20 per cent in the past two years – a tax increase of £600 million during a record recession. Further punitive tax increases could snuff out any recovery, with further job losses.”
Readers' comments
Steve W - you completely misquote me, I was merely pointing out that if someone buys a freehold (for example, as distinct from a free-of-tie lease) their additional investment in the freehold asset deserves no protection from the effects of the possible removal of the tie. Freeholders didn't pay that extra money to be free-of-tie, they paid it (presumably) in the hope the value of the real estate would increase. You might also like to ask yourself the question why Enterprise Inns are embarked upon a massive sell off of freeholds on a sale-and-leaseback arrangement. They need the cash more than the real estate, and can get rid of the real estate without compromising the underlying business.
Ed, essentially yes I would agree that no-one forces a tied lessee to sign the contract. It's the difference between what he is led to expect and what he actually gets is the problem. We need to be careful to distinguish between tied tenants and tied lessees. I have tried to make the point continually that, although they are not without problems, tied tenancies are far less problematic than tied leases. The tied lease (every Pub Co's favourite) is the very worst of all worlds and has not a single beneficial feature when compared against the other available rental options.
Roger - how can you possibly say that investment in a freehold has no bearing on what you should be making from the business operating from that freehold?? You do not buy a freehold pub with two 'business' opportunities in mind (one a pub and the other a property investment), the lump-sum investment is for the whole thing and it is absolutely proper that the business (the pub) MUST provide a return on that investment, otherwise just go and buy a block of flats! Anyone buying a business does so with their eyes open and, as far as I'm aware, nobody in this country is ever forced to buy any business, tied or otherwise? I just find it incredible, for example, that somebody can expect to make the same earnings from a 20K investment in a poor tied lease as somebody who has made a 700K investment in a freehold pub (and this is why Colin gets so wound up by statements such as yours)? Are you seriously suggesting that if I bought a vast chinese restaurant freehold in London, I should expect the same earnings as somebody running a corner-shop chinese takeway lease in Bolton, and all of my additional earnings should only come from the property investment alone? Absolute twaddle...
Roger I thought your pub was a freehold? Does this make you a property speculator as well? Ken Nason
Roger - would you also agree that nobody forced tied tenants to sign their legally binding contracts?
Hi To me, as a tied licensee and blonde, the whole iresponsible drinking debate is very simple when broken down, Good publicans(myself included) monitor their customers drinking. The consuming of alchohol is carried out in a cotrolled environment with controlled pricing. The sale of alchohol in off licences and supermarket is not controlled and encourages people to drink even more, when its so easy to just crawl upstairs at home, therefore the more alchohol we, as a nation consume, the more health problems we will incurr. In the long term, as more pubs close, there is another impact, this being our social skills, very okay sitting at home drinking with family, but pubs have always allowed us to interact with many types of different people, this cannot be done at home. To me as a publican for 20 years, this is what running a community pub is all about and these are very dark days for the Community pub. Cheers
When will Mr Matlock cease spouting the mantra that freetraders have taken a greater financial risk than the tied lessee. They haven't taken a greater financial BUSINESS risk. There are two types of freetrader. (1) The FOT lessee who in reality buys his business for little more than the equivalent tied business. Indeed there are many FOT leaseholds which are infinitely better (cheaper) buys than equivalent tied leaseholds. (2) The freeholder who pays an awful lot of money - for a business, PLUS a freehold interest in a lump of real estate. No-one forced him to make that large investment in real estate - nor is it necessary in order to enjoy freedom from the tie. What on Earth has a freeholder's speculative property investment got to do with the debate about tied and freetrade supply prices?
Ant - that's a daft statement? Freeholders have no more 'choice' of what to charge than tied licensees? Maybe a bit more flexibility, but certainly not more freedom?
FREEHOLDERS HAVE GOT A CHOICE WHAT TO CHARGE/ITS UP TO THEM WHAT THEY CHARGE/THEY CAN MARKET THERE PUB HOW THEY WANT /IF THERE CHEAP OR DEAR THATS FINE WITH ME.
FOT Licensee - you felt so "sorry for him" that you dropped your prices by 20p/pint!! Looking at the thread title - excuse my naivety but if 52 businesses per week are closing in any industry then this MUST require lower sales volumes? Hardly news is it?
I am a free of tie licensee, I sell my beer 20p cheaper than the tied tenant down the road, I feel sorry for him, as he cannot drop his prices, I decided to drop mine a few months back because trade was dropping, I am now busier then before so I have been able to make up the difference in my volume. It can't be easy being tied these days.
Nick I am slightly confused as to exactly what tied tenants want. I think most tenants other than the vociferous fanatics, would agree with you that you could (and agreed to) live with the tie it is only the cost of buing from the landlord that is the problem. You then attack neighbouring free of tie for setting their charges at your level as if it was some sort of personal attack and profiteering.Surely this is to your advantage because, as you say you are restricted in what price you can charge and any undercutting of your prices by them would be pressurising your margins in competing. So they are maximising their profits whilst not offering you a price war so why the problem?Is it not every businessmans aim to maximise their profit? Ken Nason
I feel very sorry for pubs who are tied in to beer prices...but I see no mention of the the legislation of the NO SMOKING BAN...we all must fight against this draconion law it has had the biggest impact on the trade in recent years. the loss of pubs & Clubs inc loss of Jobs is why pubs & Clubs are shutting at an allarming rate, The industry is fighting against a nanny state who are only interesrted in running our lives. The cost overall is millions in lost bar trade & amusement machine licence and lost jobs with bar staff joining the dole queue....WHEN WILL THE GOVERNMENT LEARN.
Double digit list price increases have been the norm for some years and have underpinned the pubco model, particularly when guessing at rent increases as desired by profit hungry BDM's etc. This has led to a situation where many hapless occupants of todays pubs find themselves at a hopeless disadvantage. Those of us who realised this in time took to moving around in tune with rent review periods but the brewers etc. invented yet more restrictive 'deals' to preempt this. Result lots of very inexperienced people running pubs and nobody with real expertise interested in taking them on.
A few pence reduction in beer duty will make little difference to the pub trade. We all know the real reason why the majority of pubs are closing.
Nik, "if the FOT houses get cheaper prices to start with then why aren't they passing on their benefits to their customers." The first point is that invariably they are taking and have taken greater financial risks than tied tenants so why should they ? Secondly( and I tire if asking the same question ) HOW MUCH would prices reduce in tied houses if they were free of tie? I'm not looking for a 'ballpark figure', someone needs to state a guarantee and set it in stone. We've already had a response from a tied someone who actually thinks that 3.50 a pint and a tenner for bangers and mash is not ripping of the customers so I'm not too optimistic.
Colin, my neighbouring FOT pub sell sit's beer at exactly the same price as me. When I took on my business and worked out my RSPs to make my business viable he put his prices up. Without the tied estate the FOT licensees would not be able to justify their price lists so you have to question who is ripping off punters and squeezing most out of them!! I really wouldn't have a problem with being tied if the wholesale prices where realistic and gave the opportunity to make some profit! The profit that I do make goes back into my business to make my offer better for my customers and doesn't all go in my pocket for my own gain. I want to make a living but at the same time my business needs to adapt and move with the times and for that I need to invest. I can see why FOT houses see the tied operators as moaning but at the end of the day,if the FOT houses get cheaper prices to start with then why aren't they passing on their benefits to their customers instead of keeping their RSPs the same as tied houses???????????? Who is mugging who??
All we need now is for someone to present the following: 1) Beer sales in pubs are falling 2) Beer sales in off-licenses are increasing 3) Hospital admissions related to alcohol (whatever that means) are rising/binge drinking increasing/insert Daily Wail headline here. 4) The trend appears to be that as off license sales increase so do problems caused by those that drink too much alcohol 5) Penalising pubs serves little purpose in reducing the problems presented.
Jane, I am always pleased to acknowledge an exception to any rule so good luck to you. By the way, Matlock is my surname.
As a tied house landlady I take exception to the comments of Colin from Matlock. We are just as professional as our freehold neighbours in fact more so than some of them, we encourage resposible drinking and moderate prices as much as possible. Whilst a neighbour of ours who pays no rent and is free to buy beers from anywhere has not seen fit to drop his prices or pay his outstanding bills!! This actually works in our favour, along with if you visit our pub you'll find myself or my husband behind the bar not as our freehold neighbours swanning around usually inebriated in someone elses pub.
Karl, it would appear that "Sales of beer in tied pubs are falling at up to twice the rate of non-tied pubs." is something you blame on price. If that is so, please advise ( as you have been asked MANY times before ) to guarantee that newly FOT licencees would reduce their prices and if so, by how much. You see, as far as I can gather, all of the disgruntled tied licensees appear to aspire to a lifestyle that they simply haven't invested in as the freeholders have. Assuming that your comment is backed by hard evidence, the reason for it is far more likely to be that Freehold licencees are in the main far more professional than their tied 'cousins'.
Ashley, what planet are you on? pubs are empty because the customers feel ripped off by some of the prices they are asked to pay and quite rightly so! I totally agree that the tax should be drastically reduced but this will mean nothing if the benefit doesnt filter down to the punter.
Don't you just love statistics and how they are presented to support a case? Ken Nason
Brigit you have acknowledged that beer sales continue to drop, then why have you not convinced your bosses Ted and Simon this is the case.
We are the ones who promote the binge drinking and the boozed up culture of Britain?...and our local Asda is promoting a case (15 bottles) of Carlsberg for a fiver as a halloween special. So come on then who is at fault? Surely the stats speak for themselves
Here we go again. Everybody to blame except Brigid Simmonds' members. Sales of beer in tied pubs are falling at up to twice the rate of non-tied pubs. Even the OFT managed to pick up on that point. As pubcos and brewers have driven up prices in pubs customers seem to have voted with their feet and preferred, understandably, to buy from supermarkets and off licenses. Many tied tenants, faced with outrageous prices for beer and with unsustainable rents have moved sales to higher margin products and away from beer as effiently as they can. Growth for many brewers, as demonstrated in Shepherd Neame's recent figures, is coming from the supermarkets and free of tie pub sector.
Well done Brigid, now you have to come out with a statement that your members will pass on those reductions to the tenants.