Saturday, 25 April 2015

Tied houses again

By 1950 the tied house system as we know it had been around for 60 years or so. But it wasn’t without its critics.

As I’ve already mentioned, it was the indirect result of government interference in the licensed trade. A shortage of potential outlets for brewers was created by making new licenses almost impossible to obtain and by aggressively delicensing existing pubs.

Before the 1880’s breweries had tied houses, but they were only a small part of their trade. The vast majority of pubs were free, though, as today, there were also loan ties.

Let’s make this clear: most pubs ended up being tied because brewers wanted to secure outlets for their beers. Bear that in mind while you read this:

Profit and the Tied House
There has been some appreciative comment upon the attempt made under the above heading last month in these columns to set out the true facts about the tied house system: what it means and why it is in being. Too often, and for too long, there have been statements and questions raised which are based upon the supposition that the tied house system exists because it is a fruitful source of revenue to the brewery. That supposition is entirely without any foundation at all, for it can be clearly demonstrated that the difference in the margin of profit to the brewery as between the beer it sells through its tied houses and the beer which it sells in the competitive free market does not, when all the factors are taken properly into account, amount to a row of pins. The tied house system came into being of sheer necessity to save the licensed house from bad times, to improve and restore it to its proper place in the service of the public which no other system could have done. It enables the vast majority of retailers to conduct their own largely independent businesses, the public to continue to enjoy the advantages of licensed houses bring in the main run by individual "landlords," and the brewery to run its long-term productive programme on lines which make for economy in costs. The tied-house system has but one serious defect—the name by which it came to be known from the outset. Its critics are too prone to jump to the conclusion that a licensee being tied means that he is bound hand and foot. Nothing could be further from the truth.”
"Brewing Trade Review, 1950", page 13.

So the tied house system was all about breweries serving the public rather than providing profit for the brewery. Why the hell did they bother having them if they provided no profit? The argument that the profit margin was much the same as in the free trade is irrelevant. The vast majority of a brewer’s income came through beer sales in their tied pubs and off-licences. If only because that’s where most beer sales took place.

“Tied house” seems a perfectly fair description to me of a pub which is controlled by a brewery and obliged to sell its beers.

This sounds like the sort of guff pubcos come up with when trying to claim they’re wonderfully philanthropic organisations, without a thought for themselves.

“The simple fact is that the wholesale and retail sides of the trade have been on very good terms for a great many years. Within the past two years or so they have been going together into ways and means of perfecting a system of mutual consultation which shall make things work smoothly and provide recourse for the settlement of the occasional instance of individual dissatisfaction. That work has now for practical purposes been completed in the panel system which extends over the whole country. The tenant has at his disposal for the asking a 12 months' security of tenure in his house, but it is significant that a comparatively small proportion have exercised the option for a new agreement in those terms. The reason is not far to seek, for the tied tenant by and large knows perfectly well, and has known for many years, that his security is not for three months or for 12 months but that so long as he runs his business properly his tenancy will also run on as long as he wishes to remain. That is not supposition or sentiment, but the hard economic fact that it pays the brewery to leave a good tenant to carry on and to have him satisfied and content.”
"Brewing Trade Review, 1950", page 13.

I’ve seen plenty or arguments between breweries and their tenants documented in newspapers. I don’t believe for a minute the rosy picture painted here. And quite a few of those related to breweries evicting tenants.

There are reasons why a brewery might want to get rid of a successful landlord. They might want to give the pub to someone else, or they might want to put in a manager, if they thought the landlord was making too much profit. Or they might just have had a disagreement with the tenant. I’d have gone before the panel and got my 12 months’ security. You can’t trust money-grabbing capitalist bastards.

I’m sure I’ll have lots more to say about tied houses.


Ed said...

Speaking of tied houses I was interested to see this summary of an article in the Morning Advertiser recently:

"In the year ending on 30 September 2014, the Hop Back Brewery (of Downton, near Salisbury, Wiltshire, in southwestern England) had a turnover of £3.8 million (£300000 more than in the previous year), on which it made a pre-tax profit of £174057 (up from a loss of £96000). The return to profitability is attributed, at least in part, to the conversion to direct management of 2 of the company's 10 public houses, which had previously been tenanted and had performed poorly under their last tenants. The title refers to a plan, announced by the company when it released the economic performance figures given above, to acquire additional pubs and to invest in measures to improve the efficiency of its brewing operations, over a period of about 3 years from the date of the announcement. The announcement also indicated that the expansion of the company's own pub estate was necessary because of increased competition in the sale of beer to the free pub trade, due to the rising number of new microbrewing firms, which is making it more difficult for established brewing companies such as Hop Back to secure regular sales to pubs which they do not own or control."

Phil said...

Pardon the ignorance from an American, but what's the reason for most of the beer in the UK during the 1950s being sold through pubs? Was it because the consumers vastly preferred getting their beer there, or were there restrictions on selling bottles and cans elsewhere?

In many parts of the US to this day, laws on store sales of beer at certain times and days of the week mean you have to go to a bar -- how much of this was a factor in driving breweries to own pubs to maintain their sales channels?

Ron Pattinson said...


it's very simple: price. Even as late as the 1970's draught beer in a pub was the cheapest beer around, cheaper than botttles or cans in a shop.

Phil said...

Thanks for the detail. I wouldn't suppose you know why prices worked that way in the UK? In the US, markup on beer in bars is pretty huge -- in a bar it's tough to get a bottle or can for less than double what you would pay in a liquor store, and often the premium is more.

Was it taxes? Issues with distributors? Price gouging? Inefficiencies in the bottling and canning process?

Or maybe it's the reverse of what happens in the US -- in US bars, food is often discounted and profits come from pumped prices on drinks. Did it work the opposite way in the UK, and reasonably priced beer was used as a way for brewers to get people to buy food in the pubs they owned, with the big profits on food?

Obviously a totally different reason could be in place for pubs offering the cheapest beer far beyond my imagining. I'd be happy for any light being cast on the shadows of my ignorance here.

J. Karanka said...

Phil, at least where I live, bottles are still a bit of a premium product. I can buy three 500ml bottles of beer from my local brewery for £5, which works out around £1.65 per bottle, or I can go to my local pub and drink the same stuff in a pint (568ml) for £2.25.

In some pubs certain beers are cheaper than they are in the shop. I got the Partizan / Mikkeller quad for £4 in the pub the other day when in a shop it would probably have been around a fiver, specially considering how they milk the price on those limited editions. To be fair, I only bought it because it was the best bang for the buck at 10% ABV...