War and Profit

Just because there was a war didn't stop landlords needing to earn money. Extra taxation on beer to help pay for the war had pushed up its price. Shortages of just about everything else fueled inflation, too. What effect did all this have on a publican's profits? In WW I there had been extravagant tales of publicans earning fortunes from rising prices. Probably greatly exaggerated. But what about WW II.

Luckily, I've some numbers to hand. Funny that.

THE EFFECT OF WAR ON RATE PER CENT. OF GROSS PROFITS.

The rate per cent, of gross profit earned in licensed houses has been materially affected by the changes in the retail prices of beers and spirits brought about by the two post-war Budgets. The rate per cent, of gross profit varies from house to house, depending as it does upon whether the tenant is tied or free, whether he is tied for wines and spirits as well as beers, what classes of beers he sells, what proportion his sales of beers are relative to his sales of wines, spirits and non-intoxicants, and in particular the proportion of sales in the saloon bar compared with those of the public bar and "off" sales.

We have been shown some illuminating figures relative to an average London "tied" house, which clearly show the effect of war conditions upon the rate per cent, of gross profit enjoyed in respect of the commodities sold in this typical house, as follows: -

	Pre-war rate per cent. of gross profit.	Present-day rate per cent. of gross profit.
Spirits ......	33.63%	34.75%
Wines ......	44.50%	42.88%
Beer and ales	27%	21.75%
Bottled beer	30.13%	26%
Tobacco......	17.75%	14.88%
Minerals......	35.75%	31.50%

In the case of this average house the result has been that, whereas the stock sheets showed a gross profit of 28.375 per cent, prior to the war, to-day the figure has dropped to 86 per cent., a decline of 3.375 per cent. It should be added that in the case of this house it would he necessary for the total takings to have increased by 16 per cent, in order that the licensee should obtain the same gross profit as before the war. Even so, his financial position would not be so good, since the cost of wages, keep of staff, gas, electricity, glass, cleaning materials, etc., etc., coal and many other items of expenditure have risen considerably, apart from statutory charges such as rates, water rate, property tax, etc. It should be added that the house to which the above figures relate is tied for all malt liquors but free for wines and spirits.
"The Brewers' Journal 1940" page 555. (Published July 17th, 1940.)

As you can see, the percentage profit had declined a little, with the exception of spirits. A few percent decline, but still a decline. The markup on draught beer seems pretty low. Interesting that the lowest percentage profit was on fags and the highest on wine.

It would be nice to see more detail on the profit of different types of beer. Hang on a minute. There's that Barclay Perkins price list. It lists both wholesale and retail prices. It's from a little later in the war, 1942, but it's still illuminating.

One thing to bear in mind. The price list gives public bar prices. In the saloon bar, the retail prices would be 1d a pint or so higher. So the level of profit would be higher than shown.

Let's begin with the draught beer:

	wholesale price	retail price	% profit
Pale Ale	120	144	20.00%
Farmer Ale	120	144	20.00%
IPA	66	84	27.27%
Doctor Brown Ale	130	156	20.00%
No.1 Southwarke Ale	108	144	33.33%
Stout	130	156	20.00%
Best Stout	81	102	25.93%
Milk Stout	151	180	19.21%
Russian Stout	132	168	27.27%

Now there's a surprise. The biggest percentage profit is on what was probably the largest seller in most pubs: X Ale. That sort of makes sense, as it was barely stronger than A, yet cost 1d more a pint.

Now if we add 1d a pint to get saloon bar prices, something fascinating happens:

	retail price per pint	wholesale price per barrel	wholesale price per pint	% profit
A	10	186	7.75	22.50%
X	11	204	8.50	22.73%
XX	12	228	9.50	20.83%
XLK	13	248	10.33	20.51%
KK	16	308	12.83	19.79%
KKKK		416	17.33
BS	16	308	12.83	19.79%

For a start, the percentage mark now looks very much like the one given by the Brewers' Journal: a little over 20%. And the profit margin on the cheaper beers jumps ahead of that on the stronger beers.


Here are the bottled beers:

	wholesale price	retail price	% profit
Pale Ale	120	144	20.00%
Farmer Ale	120	144	20.00%
IPA	66	84	27.27%
Doctor Brown Ale	130	156	20.00%
No.1 Southwarke Ale	108	144	33.33%
Stout	130	156	20.00%
Best Stout	81	102	25.93%
Milk Stout	151	180	19.21%
Russian Stout	132	168	27.27%

Note that there's much more variation, from 19.21% to 33.33%. Again, it's lower than in the Brewers' Journal. Factor in the extra price in the saloon bar, and it's very similar.

A gross profit of 20 to 25% on beer. A bit rubbish, really. I'm sure it's much higher now.