Why tied houses existed

I’m weirdly fascinated by the Britain’s tied house system. Mostly because no other country had anything quite the same. Not even all of the UK had it – Scotland and Ireland were never as dominated as England and Wales were by brewery-owned pubs.

Which begs the question: why did the tied house system come into existence? Clearly it must the result of specific circumstances which prevailed in England and Wales.

I would try to piece all the details together myself. But someone has already done the work for me. May as well use that. It’s slightly more complicated than I had assumed. These are some interesting points about the technical aspects:

“Very early in commercial brewing history, brewers found advantages in controlling their retailers. There were some technical reasons why brewers found reliable exclusive retail outlets economical. Beer was perishable and had to be handled carefully because bad handling and slow turnover could ruin the reputation of the product. Public houses with small sales could not economically stock the supplies of more than one brewer if the beer was to be sold in good condition. Above all, draught beer, because it was unbranded, was a product on which reputations could easily be lost by misrepresentation. The relative security of sale in exclusive outlets enabled the brewer to estimate demand more closely and so to avoid the waste of over-brewing his perishable product. The resources and advice of the brewer also helped the publican in his sales policy. More important, the capital resources of the brewer were available to the publican.”
"Effects of Mergers" edited by P. Lesley Cook, article written by J. E. Vaizey, 1958, page 400.

I suppose much of this doesn’t apply if you’re selling keg beer. It isn’t so perishable. It’s struck me before that the tied house system is one of the factors in the survival of cask beer in Britain. In the parts of the UK where cask disappeared, Northern Ireland and Scotland, there were few tied houses. And in British colonies like Australia and Canada cask soon vanished.

Similarly, when the close tie between brewer and pub for the most part disappeared as a result of the Beer Orders, I thought the quality of cask beer suffered. When brewers owned their retail outlets, it was much easier for them to keep an eye on beer quality. And the supply chain was much shorter and more direct.

I hadn’t realised most pubs were tied quite so early:

“For these reasons the tied house system was an early feature of commercial brewing, and by 1800 over half the ordinary publicans and, for some types of beer, publican-brewers were tied to some kind of commercial brewer. The tie became more important as the century progressed and it was by means of loans and mortgages that the big brewers came to acquire the exclusive right to deal at certain outlets. The tie was thus in part a result of the characteristics of the trade but its strength lay fundamentally in the licensing system. The sale of alcohol has been, broadly speaking, under the control of the licensing justices for some centuries. At times the number of licences has been severely restricted, as in the period 1780 to 1800. The more stringent licensing justices became in granting licences, the more valuable an exclusive dealing arrangement with an existing licensee became. The advantages of the tie were increased by the restriction of freedom of entry. In the period 1830 to 1869 there was 'free trade in beer', and the number of beer licences was unrestricted. The tie remained important; probably over half the houses were tied to brewers in 1830, and a not significantly lower proportion in 1869, when restrictive licensing was reintroduced. The tie from 1830 to 1869 was accompanied, however, by freedom of entry of new firms, and a number of existing brewers date from that period. The restriction of this freedom of entry gave the tie its contemporary importance, dating from the period after 1870, to which we now turn.”
"Effects of Mergers" edited by P. Lesley Cook, article written by J. E. Vaizey, 1958, page 401.

Though it’s significant that the author says “for some types of beer”. London Porter brewers didn’t usually tie pubs for Ales. Probably because before 1830, most didn’t brew any. That changed after there was a surge in the popularity of Ale after the 1830 Beer Act.

From what he’s saying, there probably would have been fewer brewery companies founded in the middle of the 19th century, had the Beer Act not been in effect.

In the last few decades of the 19th century, several factors combined to make tied houses increasingly important to brewers.

“The importance of the tie increased as the population rose and the number of licences was reduced, a reduction reinforced by the movement of people from abundantly licensed town centres to suburbs where few licences were given. The licensing system reinforced the natural imperfection of the retail market which arose both from the spatial competition between public houses on different sites and from consumer loyalty. Loyalty seems to rest mainly on affection for the publican rather than on a positive preference for the products he sells.”
"Effects of Mergers" edited by P. Lesley Cook, article written by J. E. Vaizey, 1958, page 401.

Customers’ loyalty to the landlord rather than the brewery would explain why brewers were so keen on attracting and keeping good tenants.

As an ever increasing proportion of pubs were tied, it became very difficult for breweries to expand in an organic way. There was only really one option left:

“The tied-house system, therefore, has been extensive since the earliest days of commercial brewing and as commercial brewing expanded so the importance of the tie increased. While there were numbers of free houses available the commercial breweries could expand by selling more at wholesale, attracting more trade to their houses and by obtaining more tied houses. As the number of these dwindled after 1869 a competitive rush arose for the remainder. Between 1886 and 1900 the proportion of tied houses rose by one-third from about 70 per cent to more than 90 per cent. When the supply of free houses had practically gone, the main means of expanding sales for most firms was by merger and acquisition of other firms.”
"Effects of Mergers" edited by P. Lesley Cook, article written by J. E. Vaizey, 1958, pages 401 - 402.

I think 90% tied is the high water mark. That short period 1886 to 1900 when brewers were trying to mop up the last available outlets saw pub prices rise to silly levels. Once virtually all pubs were tied, buying rivals and their tied estate was the only route to expansion.