Wednesday 10 June 2009

The Pub-tie and fair-share negotiation

Last month a parliamentary inquiry called for the Competition Commission to launch an investigation into the “tied” business model used by pub companies such as Punch Taverns and Enterprise Inns.
See free 84-page report on Pub-companies business model

This week's resulting gut-reaction by Pubcos promising self-regulation is already too little, too late in a lopsided power-battle…
As the grocery sector is well aware, by the time market-imbalance attracts the attention of government, the issue has developed momentum that cannot easily be diverted, and leads to the inevitable 3-year distraction from the day-to-day survival strategy currently required, especially in the pub business.
Essentially, pub-companies appear to have fallen into the old power-trap where acquiesence is mistaken for whole-hearted agreement. Many of us who have stood at a bar entertain fantasies that we could do a lot better than 'mine host' in optimising the public house model.
Unfortunately, some amateurs actually make it to a tenancy arrangement with a brewery or pub-company. This usually involves negotiation of rentals related to tied beer-supply, support materials/services and agreed barrelage-related KPIs. This is a complex package, and is not easily compared like-with-like with alternative supplies, especially for those lacking experience of the pub-business. The inevitable crude comparison with supermarket beer prices, coupled with lack of transparency can make the contract seem indefensible, eventually resulting in government intervention.
The need for Fair-share negotiation has arisen from the same supplier-retailer imbalance in the grocery sector, and could represent a way forward for the beer-tie relationship…

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