Europe South Asia Asia Pacific Americas Middle East Africa BBC Homepage World Service Education

Front Page



UK Politics







Talking Point

In Depth

On Air

Low Graphics

Friday, May 7, 1999 Published at 17:42 GMT 18:42 UK

Business: The Company File

Bar brawl

The British pub industry is in the midst of an upheaval which is transforming our drinking habits. BBC News Online's Andrew Yates investigates.

Locals who have remained propped up against the bar for the last ten years may be oblivious to it - but nobody else could have failed to notice the revolution that has engulfed the British pub industry.

Ten years ago the Conservative Government sparked a chain of events which lead to a decade of turmoil for pub landlords.

[ image:  ]
The brewers were forced to call time of vast swathes of their pub estates - only to see them swallowed by a new breed of thirsty drinking giants.

Now Whitbread's planned multi-billion pound bid for the pub chain of Allied Domecq promises to take this transformation of the pub industry to another level.

Ten years ago it was all so simple. The pub industry was controlled by the major brewers, who used the outlets to sell their own beer.

Most of the pubs were run by tenants who were 'tied' to buying drinks from the breweries.

[ image: Nice pub - but who owns it?]
Nice pub - but who owns it?
But 1989 was to prove a turning point for the industry. A monopolies investigation raised concerns about whether the cosy position of the brewers had lead to fast rising beer prices and a restriction in consumer choice.

The government reacted by instigating the now infamous 'Beer Orders' forcing brewers to cap the number of tied pubs they could own and introducing guest beers in pubs.

The implications of the decision were dramatic. It forced the brewers to put more than 10,000 pubs on the market and removed their stranglehold over the industry.

New giants

[ image:  ]
Entrepreneurs saw the chance to own their own pub empires and pounced - leading to a series of major deals. This was when the seeds of a new crop of large pub independent pub companies were sown.

Suddenly new pub brands and trendy bars designed to attract twenty somethings began to pop up on the High Street. Chains such as Firkin, Rat & Parrot and All Bar One came from nowhere to grab a large part of the market.

Slick marketing and brand building became the watch words of the 1990s pub landlord. So much so that the traditional local appeared to be heading for oblivion.

Chain gang

Gradually the entrepreneurs began to build up their estates. The logic was simple - the larger the chain the more clout they have when negotiating supply contracts with the brewers.

While this was going on the brewers were also joining forces against a background of falling beer consumption and chronic overcapacity in the UK.

[ image: The price of beer has still risen]
The price of beer has still risen
However, even with the creation of ever larger brewing giants, the balance of power shifted towards the retailers. And it is this that has lead to the bout of furious pub deal making in recent years.

With their supply monopoly gone, many brewers found little reason to own their own tenanted pubs.

"Why have the hassle of collecting rents if you are not supplying the pubs with the beer," points out Tim Hampson of the Brewers and Licensed Retailers Association.

Instead they wanted to concentrate on creating their own managed pub chains - developing their more profitable branded outlets. So the brewers started selling again.

Drinks queue

This time financial buyers joined the throng to get to the bar.

Overnight a Japanese bank, Nomura, became the biggest landlord in the country after buying the Inntrepreneur pub chain - which has now forms part of the Unique Pub Company. And newly formed operator Punch Taverns purchased 1,400 pubs from Bass. Meanwhile independent pub operators such as Enterprise Inns have gone on a buying spree.

Experts believe that Whitbread's move for Allied Domecq's pub chain will spark another wave of consolidation in the pub industry.

Analysts point out that if Whitbread is successful it will concentrate on building up some of Allied's main brands such as the Big Steak pub chain - but will sell off some of the tenanted pubs it inherits. There will be no shortage of buyers given the aggressive expansion plans of many of the new pub giants.

Another round

Ted Tuppen, chief executive of Enterprise Inns told BBC News Online that the shake-up in the market is set to continue and that he eventually plans to double the size of his chain.

"Within a few years three tenanted pub chains with 5,000 pubs each are likely to emerge," he said.

What clouds the picture is that the financial backers of Unique Pub Company and Punch Taverns are expected to look for a quick return on their money - although fears remain in some quarters of the City that they have bitten off more than they can chew and overpaid for some pubs.

[ image: Pubs have had to move with the times]
Pubs have had to move with the times
Nevertheless the Conservative Government's plan to break up the monopoly in the pub industry appears to have succeeded only in transferring market power to a new set of retailers rather than increasing competition.

So where does this all this leave the average drinker?

With the tie being scrapped in many pubs, customers have been given a wider choice of beers.

Ploughing ahead

The quality of pubs has increased - with the days when stained wall paper and grotty tables were common place, long gone. Pubs have also become more adventurous with their menus - breaking out from just offering customers a ploughmans and a packet of crisps.

With landlords keen to take advantage of the fast growing 'eating out' market this trend is set to continue.

However, the changes in the market has failed to halt the surge in beer prices.

Over the last ten years the average price of a pint of beer has almost doubled to £1.73 - well above the rate of inflation.

Advanced options | Search tips

Back to top | BBC News Home | BBC Homepage | ©

The Company File Contents

Relevant Stories

05 May 99 | The Company File
Whitbread jobs boost

04 May 99 | The Company File
Pub bidding war

02 May 99 | The Company File
Whitbread's huge bar order

Internet Links

Brewers and Licensed Retailers Association


Allied Domecq


The BBC is not responsible for the content of external internet sites.

In this section

Microsoft trial mediator welcomed

Vodafone takeover battle heats up

Christmas turkey strike vote

NatWest bid timetable frozen

France faces EU action over electricity

Pace enters US cable heartland

Mannesmann fights back

Storehouse splits up Mothercare and Bhs

The rapid rise of Vodafone

The hidden shopping bills

Europe's top net stock

Safeway faces cash demand probe

Mitchell intervenes to help shipyard

New factory creates 500 jobs

Drugs company announces 300 jobs

BT speeds internet access

ICL creates 1,000 UK jobs

National Power splits in two

NTT to slash workforce

Scoot links up with Vivendi

New freedom for Post Office

Insolvent firms to get breathing space

Airtours profits jump 12%

Freeserve shares surge

LVMH buys UK auction house

Rover - a car firm's troubles