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Campaign for Real Ale

Campaign for Real Ale

Pub & Beer News

  • Pub Companies – Who they are what they do Wednesday 29 December 2021

    1. A POTTED HISTORY OF THE PUBCO

    Fifty years ago, when CAMRA was formed, the pub landscape looked very different. For a start, there were many more of them – some 75000 against around 47500 now. The majority of pubs (52000 or so) were owned by breweries. The 89 small and regional breweries had 13800 of them and the rest were in the hands of the ‘Big Six’ – Bass Charrington, Allied, Whitbread, Scottish & Newcastle, Watney/Grand Metropolitan and Courage/Imperial.

    Most of the other 23000 pubs were free houses (in name anyway – many tied their beer supplies to a big brewer in return for loans and discounts). Companies that just owned pubs were few and far between – the likes of Sir John Fitzgerald in the north-east and Heavitree in the south west (though they tied themselves to Bass).

    Just about every pub-owning brewery rigorously imposed a supply tie on its own products. As late as the mid-1980s, I remember a Greene King Director recoiling in horror at my suggestion that they allow a few guest beers in their pubs. As a result, new breweries found outlets hard to come by and we customers were hardly spoilt for choice, as a glance at a Good Beer Guide of that era will reveal.

    Then, in 1989, along came the Beer Orders. The story of this epochal legislation (for better or worse) is superbly told in Laura Hadland’s recent Fifty Years of CAMRA book but, in essence, the government acknowledged the stranglehold on the industry exercised by the Big Six and, among other things, capped their pub ownership at 2000.

    By now, because of closures and sell-offs, the Big Six owned fewer pubs between them but the Orders still meant around 11000 pubs coming onto the market. We, of course, dreamed of a new golden age of multi-handpumped free houses galore, but the reality was sadly different. Companies were quickly established, usually with close links to the Big Six, to hoover up these pubs in big batches then negotiate supply deals, invariably with the company who previously owned the place. Enterprise Inns, for instance, started off with the purchase of 368 pubs from Bass, and that’s where they bought the beer from.

    In the years that followed, wheeling and dealing saw companies variously grow, collapse, merge, acquire, dispose – it was very difficult to keep up with who owned what. Some companies concentrated on managed pubs, some on tenancies, a few on a mixed model. Behemoths emerged – by 2004, Punch Taverns and Enterprise each owned more than 8000 pubs, though both had accumulated so much debt that they ran into trouble come the financial crash and subsequently retrenched. We’ll have a closer look at the current pub company scene in the next article.

    A brief history of Punch Taverns illustrates the volatility surrounding pubcos from the 1990s onwards. Punch formed in 1997, purchasing a tranche of pubs from Bass. Two years later, they bought Inn Business (mostly former Whitbread pubs) and then the rump of the Allied estate. The managed pubs were spun off into a separate division called Spirit. In 2003, they acquired their 3100-strong rival Pubmaster plus a couple of smaller companies. Next, Scottish & Newcastle’s managed pubs were snapped up and added to Spirit. By 2011 the impact of the crash was being felt, calling for a ‘strategic review’. Spirit was demerged and, in 2015, sold to Greene King. Come 2016, a takeover bid totalling £403m (plus the taking on of a billion pounds of debt) was accepted; 1900 pubs went to Heineken with the remaining 1300 residing with Patron Capital, though the Punch brand has been retained.

    In the meantime, the treatment of their tenants by many of the Pubcos had become a major issue and, after years of campaigning, the Government was persuaded, in 2014, to announce a statutory Pubs Code aimed at regulating their practices and ensuring fair treatment for tenants. We’ll return to the Code in a future article. In this context, though, it needs mentioning that the currently accepted definition of a pub company embraces breweries that own pubs – and nowadays most such companies have separate management structures for their pub and brewing operations.

    Final comments. Pub companies are here to stay. There is nothing wrong with the basic model and, indeed, there are some excellent companies (mostly smaller ones) who treat their licensees well and clearly see their pubs as more than just property assets. It would, though, be difficult to argue that the ways in which some companies operate raise many issues around their custodianship of what aren’t just piles of bricks-and-mortar but, in most cases, precious and valued community assets. We’ll examine those issues in due course.

  • Pub Companies – Who they are what they do Wednesday 29 December 2021

    2. THE CURRENT PUB COMPANY SCENE

    A pub company is simply a company that owns pubs and there are literally hundreds of them, many with only a handful or even just one pub. We’ll concentrate here, though, on the bigger companies who, between them, own over half the country’s pubs.

    Stonegate

    Founded in 2010 with the purchase of 333 pubs from Mitchells & Butlers, Stonegate grew quite slowly over the next ten years, making a series of acquisitions including brands like Slug & Lettuce, Walkabout and Be At One, until its pub numbers totalled 765. All the pubs were managed houses. A seismic change came in 2020 when Ei Group was bought for £1.27bn, making Stonegate the largest pub company in the UK with 1,270 managed pubs and, as a result of the Ei purchase, 3,200 leased and tenanted businesses.

    Ei itself had been founded, as Enterprise Inns, in 1991, initially with 333 pubs from Bass. The company built up its estate, gaining 2,200 pubs in batches by buying them from other companies or taking them over. In 2002, 1,864 pubs were bought from Whitbread and in 2004, 4,054 from Unique. By this time, it owned nearly 10,000 pubs and was in the FTSE 100 list of top companies. However, it was loaded with debt and the 2008 financial crash required a good deal of retrenchment. Ei also started building up its managed estate, including pubs on retail agreements under the Craft Union brand (we’ll look at this operating model in the next article). By the time of the sale, it was down to fewer than 4,000 pubs.

    Punch Taverns

    The first article included a brief history of Punch to illustrate the volatility around pubco development. In summary, it grew quickly to around 8,000 pubs, suffered under the crash, sold a lot of pubs including its managed division and was taken over in 2016. 1,900 pubs went to Heineken and 1,300 to Patron Capital, who retain the Punch brand. At takeover time, all pubs were leased or tenanted but it’s also now pushing retail agreements (which it calls Management Partnerships). Some pubs were sold but in June 2021 it announced the purchase of Youngs’ tenanted division, bringing the current total to 1,282.

    Admiral Taverns

    Admiral was founded in 2003 by two families and grew quickly to 2,300 pubs by 2007. Many of these were ‘bottom end’ houses disposed of by other pub companies. The financial crash had the usual consequences for over-extended businesses and numbers were down to 1,700 by 2011 and continued to fall. By 2017 it was in the hands of Cerberus Capital Management who sold up to a joint venture by Magners cider-makers C&C Group and estate investor Proprium Capital Partners, by which time there were 845 pubs. The acquisition trail was hit in 2019 with 137 pubs coming from Marstons and 150 from Heineken. The big one arrived in July 2021 when Admiral bought 674 Hawthorn pubs from property firm New River taking the estate to over 1,500.

    Admiral’s pubs are all tenanted or leased and tend to be wet-led community operations. It has a relatively good reputation in the trade though there’s certainly no aversion to flogging off pubs as ‘development opportunities’.

    Star Pubs & Bars

    In 1995, Scottish & Newcastle, one of the original ‘Big Six’ breweries, bought another of them, Courage, making the combined group Britain’s biggest brewer. By 2011, the pub arm, then known as S&N Pub Co, had 1,500 tenanted pubs and 600 in management. Come 2008, Scottish Courage was gobbled up by international brewer Heineken and the pub business rebranded as Star Pubs & Bars. Many pubs were sold but then, in 2017, as previously mentioned, 1,900 were snapped up from Punch. Again there were disposals and the estate currently stands at 2,500.

    Star vigorously promote their retail agreement scheme, Just Add Talent. In 2020, it was fined £2m for breaches of the Pubs Code (which we’ll cover in a later article)

    Greene King

    In 1995, Greene King was a long-established family brewer with 900 pubs, nearly all in East Anglia and the South-East. It then embarked on a ferocious acquisition trail, swallowing up many breweries (the likes of Morlands, Belhaven, Morrells and Hardy & Hanson) and other pub companies. GK itself is now owned by a billionaire Hong Kong property developer. It has some 3,100 pubs, restaurants and hotels, of which 1,200 are tenanted or leased. Its strategy seems to be to move in the managed direction and the ‘Pub Ready’ retail agreements are pushed hard. GK was once renowned for not letting other people’s beers in its pubs but now have a more enlightened attitude.

    Marston’s

    The company was known as Wolverhampton & Dudley until 2007 when it rebranded as Marston’s, one of the many breweries it had taken over in recent years. At that time, 2,500 pubs were owned but the total is now down to 1,400. The tenanted estate, in particular, has been reduced through sales such as 200 to New River in 2013 and 137 to Admiral in 2019. In late 2020, the company took on the running of 156 Brains pubs in Wales. Also that year, Marston’s merged its brewing operations with Carlsberg but this does not directly affect the pub business.

    Mitchells and Butlers

    Formed originally out of the old Bass estate, M&B have 1,650 pubs and restaurants. The multitudinous brands include Ember Inns, Toby Carveries, Nicholsons and All Bar One – as can be seen, the emphasis is on food. Pubs are mostly managed though around 50 are on a lease arrangement.

    J D Wetherspoon

    Since opening its first pub in 1979, ‘Spoons has expanded to 925 pubs and 50 hotels, all managed. Plans for 18 new pubs are in the pipeline,

    Wellington

    Owned by the billionaire Reuben Brothers, the company leases all its 850 pubs on a free of tie basis.