If Becks cost 49p in a supermarket

[Brendan]

If x is the cost production and y is the overheads of the pub then z is me not taking any notice whatsoever of what is in the fridges while I order a pint of Guinness.

[Jah Lush]

Just as long as it's not Red Brendan.

[Brendan]

Doubt it Jah as I have checked the Guinness website and the only places that seem to be doing it are O'Neils. Being a happily engaged man I have no inclination to sleep with any australians and I can't really think of any other valid reason for going to an O'Neils.

[spadetownboy]

snorky Wrote:

-------------------------------------------------------

> IN reailty, the price if drinks is irrelevant to

> most.

>

> The perception is a different matter

>

> If you go out and drink 10 pints a night at ?2.50

> and suddenly move to the Bishop as yer local and

> pay ?3.50, then thats ?70 a week difference

>

> But no one on this board is in that league I

> think.

>

> 3-5 pints a couple of times week - maximum - thats

> about ?10 a week tops - the price of a taxi back

> from London bridge or a sushi & salad at pret -

> its nothing for most people - is a small

> houswarming " gift" from a tat shop on LL or a

> piece of decent meat for 2 at William Rose.

>

> Pubs charge what they can , because once they have

> their market sorted, they know the boundaries of

> their greed. Usually.

>

> as I said, you dont pay for the drink usuallym

> b=you opay for brand/ location and enviroment.

>

> otherwise we would all sit in the playground

> drinking Buckfast on a saturday night

ahh buckfast, the old lurgan champagne, certainly brings back a few memories. back to the becks,bottled stuff is fine but that becks vier the draught stuff is piss water, i wouldnt give it to injuns.

[char1ie]

scor46 Wrote:

-------------------------------------------------------

> The question was posted to find out what people

> think or really know about the ?Great British

> pub?? Why are the majority of pubs so expensive

> yet Wetherspoons can charge so much less than

> everyone else? This is not a pop at any pub or

> supermarket chain, it?s a real question.

You'd be the best person to tell us about that Steve. If you need pointers I guess for Weatherspoons it is about a strategy of low cost, multi-locations and discount prices. For somewhere like Lewis & Clarke the aim is trendy, central, well-located with great lighting, friendly staff and 'exotic' drinks and cocktails. High prices, high costs, very high start-up cost.

Business strategy guides your decisions. Are you a local boozer (CPT), a high street trendsetter (Black Cherry), gastro (Palmerston), student hang-out (Inside 72), etc. Once you have decided what your strategy will be then the decor, service, prices, service, product choices and music must all fit. If your choice of strategy is right and you make the right decisions then you will succeed - like all these boozers are doing.

If your pub or bar is a local boozer trying to be a gastro, or a trendsetter that doesn't quite work, then you are screwed. Tell us about your strategy.

Charlie

[Mark Dodds]

Charlie's missed the point just like everyone else. (edit sorry beer loving chaps and chapettes I don't mean to sound clipped but I'm in the pub business and know exactly where Scor46 is coming from and, I suspect, wanting to go to on this thread).

This is not about strategy. It's about operating a business. All businesses must make a profit. Even charities must run and operate a surplus to stay in existence.

This is simply about how much you pay for something against how much you sell it in order to remain in existence as a business. It's wholesale costs and general overheads versus retail income and the mark up that must be applied to any product, whether widget, cardboard box, Barbie doll, just charitable cause or a pint of beer, in order to keep going and do more of what you want to do.

[char1ie]

I haven't missed the point Mark. Operating a business and the strategy behind that operation are one and the same. As Steve mentioned in an earlier post, how do Weatherspoons sell a pint for ?1.73 when the pub next door sells the same thing for ?3.67?

Your example is a bit simple. Two businesses with the same overheads and wholesale costs can easily price differently. "how much you pay for something against how much you sell it" is determined by your strategy. Look at Easyjet vs British Airways. Both fly to Ibiza but I can get the Easyjet seat for ?29 where the BA seat costs ?189. Generally both airlines have similar costs - same plane, same airports, same fuel, same staff numbers. Different strategy.

Charlie

[char1ie]

I guess Steve isn't making as much as he'd like and is thinking about a new project, expansion or a refurb or refit at the GC. Mid-life crisis?

Charlie

[Mark Dodds]

Charlie good point on Wetherspoons. I'll come back to you on that later, in the meantime:

I pay ?1.19 for that bottle of Becks. Steve pays ?1.25. Why on earth do we do that when it's readily available for a LOT less?

The point of this thread has nothing to do with Becks. Becks is used because it?s an easily recognisable product that's nationally available in a package that everyone knows. We all know it can be bought for 49p (someone above pointed out he's bought it for 45p) and we all know the same product can cost as much as ?3.75 in a bar.

All the points about status, what a bar can get away with charging and so on are relevant in part but miss the point which is this: This is about TIED pubs and their relationship with the Freeholder. And how that relationship affects the price you ? we, all of us ? pay in a pub; and how much profit the pub owner is able to get by selling their BEER.

49p including vat is what a supermarket can justify selling a bottle of Becks for (as with San Miguel, Fosters, Kronenbourg, Grolsch et al ? they?re all on offer pretty much most of the time). Even as loss leaders this works for them. Supermarkets offset a low margin on bottled beer against their volume of sales and their huge product ranges; price structuring and buying power.

TIED pubs operate on leases which oblige the leaseholder to buy beer wholesale from a supplier decided upon by the building?s freeholder. The vast majority of pubs in the UK operate under tied leases. FREE HOUSES are pubs which are FREE OF TIE ? i.e. the person running the business can go to any brewer and negotiate a product range and purchase price of their own choice. If they don?t like what the brewer offers ? they go to another supplier and get what they want there.

The BEER TIE is a legal construct outlawed in most other markets such as Europe and the ?States but which is still perfectly legal here because the UK pub industry attracted luxurious ?block exemption? from European law when we joined the EEC fully following heavy government lobbying by stating that most pubs in Britain survive only as a result of the huge amount of support (known as ?counterveiling benefits?) Freeholders and brewers provide publicans. Support, in commercial relationship terms usually means things such as marketing and promotional goods that provide advantages over competitors; a combination of free stock, point of sales material, sales incentives, industry training, general hand holding and business expertise a big business gives to little business in return for a little business selling the big business?s products ? as a franchisors offer franchisees as part of their business model.

I own a 20 year lease on The Sun and Doves pub, on Coldharbour Lane in Camberwell. My Freeholder is Scottish & Newcastle Pub Enterprises and their nominated beer supplier is Scottish & Newcastle Limited (used to be called Courage). They are both owned by Scottish & Newcastle Plc. I buy beer from Scottish & Newcastle from their wholesale price list with a non negotiable discount of ?42.24 per brewers? barrel (36 gallons).

The wholesale price of that bottle of Becks to me, after my discount, is ?1.19.

The entire catering industry operates on a gross profit margin of 65% or the cost price of a retail product should be no more than 35% of the price paid for it. This is a time honoured rule of thumb established over centuries of trading which means that all the overheads of a business, rent, rates, wages, light heat, marketing and so on, everything needed to keep a catering business going and making a profit (assuming people actually come in and buy the food and drink) will be met if the 65% gross profit margin is achieved over every thing the seller sells.

We sell a bottle of Becks for ?2.95.

If I apply a gp of 65% to my ?1.19 Becks I get a target selling price of ?3.39. If I apply the same to the supermarket Becks I get a target selling price of ?1.41. We lose 40p on every bottle of Becks we sell.

When these rules are applied to draught beer the figures are much worse. I?m in a terrible rush right now and can?t fill in any more detail.

The truth is that ALL beer sold in TIED pubs is sold as a loss leader. Tied pubs don't work unless they are really busy - when sheer volume of turnover through the business generates an operating profit that keeps the wolves at bay. The truth is that the PubCo's makes MUCH more profit out of every bottle, or pint, of beer that is sold over the counter than do the people who are opening the bottle, serving the pint, doing all the work. An another CRAZY thing about this is that the PubCo's make more profit out of the beer than the brewers as well. The PubCo's have so much buying power they negotiate fantastic discounts with the brewers, because no brewer can afford NOT to supply the PubCo's. There is so MUCH more than this inequity, this imbalance in the market, that almost no one outside of the business knows about that it's impossible to recount properly here.

The PubCo's have got everyone over a barrel mate. The irony is they can't run pisspups in breweries! Having a discussion about all this over a beer or two can establish the reality remarkably quickly.

Scor46 might be able to elucidate further. Before I come back to this. RENT on TIED pubs has not even been whispered about yet!

[scor46]

There are a lot of good posts on this thread but apart from Mark I don?t think anyone has any idea what is really going on in the pub business. The original question was:

If a bottle of Becks costs 49p in a supermarket what?s a fair price for a tied pub to be charging for the same? Remember overheads: rent, rates wages, light & heat maintenance and repair of the property, and the need to earn a living out of running it all.

A ?fair? price to sell the bottle of Becks would take into account all parties concerned in the sale, from the brewer to the customer purchasing the bottle over the pub counter. As it?s a buisness the pub owner needs to make a profit or there is no point owning a pub. In my opinion a 10% profit margin is realistic (10% of net turnover)

Easyjet 11% (profit% against turnover)

JD Wetherspoons 7.3% (profit% against turnover)

All bar One (Mitchells & Butler) 9% (profit% against turnover)

Punch Taverns (Pubco) 16.4% (profit% against turnover)

So factoring into the equation as a rule of thumb all average pub industry costs : Wages 25%, Rent 15% Repairs & Maintenance etc and a Pub net profit of 10% then the real price for a bootle of becks should be ?4.11.

Using the same industry figures in a tied-pub:

Stella ?5.10 a pint

Kronenburg ?4.30 a pint

Guiness ?4.68 a pint

Fosters ?4.20 a pint

I sell becks in my pub at ?3.00 a bottle, using the same figures above I make a ?2% loss selling becks. (Stella ?16%)

Now lets look at who is making money out of the bottle of Becks:

Tied-Pub -2%

JD Wetherspoon 15%

Phoenix / Plough 33%

Pubco (Pub freeholders) 61%

If the law changed tomorrow and I could buy Becks off the Brewer I could sell Becks at ?2.00 a bottle and still make a net 10% profit margin. Wetherspoons have got it right

What does all of this mean? Pubcos own 80% off all the pubs in the UK and because of this the pub industry is in turmoil! Inflated beer prices, 15% of all pubs close down or change hands every year. The average time for a tenant to stay in a pub is 18 months, thousands and thousands of people have gone bankrupt or lost all of there savings because of the Pubco?s.

Charlie, strategy has nothing to do with it because we are talking about percentages across the whole spectrum of pubs irespective of turnover.This pub industry is finished unless the law changes. I would be happy to sell Becks at ?2 but a fair price at this time is ?4.11 a bottle. Would my pub be full if I sold it at that price so that I could earn a living?????

[Mark Dodds]

IN terms of pricing I suppose you could say that Wetherspoons acts as the supermarket of this industry. But it's not all about loss leaders there. It's about basic operational costs, property value, economies of scale.

Wetherspoons, although a chain, is independent. It is entirely FREE OF TIE and owns its properties, or where rented they are free of tie. It has enormous buying power and can sell beer at a decent profit, and almost anything else, at prices that would put businesses like mine and Steve's out of circulation overnight.

Tim Martin's business model is built on a clear understanding of the massive gap in the market between tied and free of tie business, the industry pricing structure and how to get the discounts his business does in order to sell at prices he's always regarded as 'fair' way back then. He's done very well out of the gap I think but has not changed the industry.

If anyone reading this is really interested in why they are being ripped off there's very good reading available at the department of trade and industry. I don't have the link to hand but if you put pubcos vs tenants into google you will find it. Steve may supply link.

[SeanMacGabhann]

This has all been very enlightening from a punter point of view.

Of course, I knew that tied-pub operations were, in my consciousness, filed under "not good" but this is very interesting.

What other options are available to licensees such as yourselves? Obviously the big "pub" locations are already-owned and under pressure to deliver or sell to property developers but what of the options to opening small boutique style bars owned wholly by yourselves? Or is that hindered by licensing restrictions?

[Mark Dodds]

Aha Mr MacGabhann. Straight to the nub.

Virtually all pub buildings are owned by PubCo's now. Some that will never work because of location will become development sites for residential eventually but the PubCos business is in keeping a hold on as much as they can before legislation changes and puts them out of business.

Our options are limited only by the fact that we've got major financial eggs tied up in the baskets we've already got.

Licensing wise the only difficulty is that new licences in non bar premises are often difficult to get passed through local authority and local consultation processes (lareg companies have a better track record at this than do individual operators). After that it's just about investment.

No one on this forum, being sane, would / could believe the story of my last rent review which was due in September 2005, has been through over a year of arbitration and still has not been decided absolutely. The arbitrator's decision, which went against us, is currently sitting as an application to the court of appeal. If the court accepts the application and we win on the grounds presented, we may set a precedent that could change the way pub rent reviews are carried out across the whole industry. If the court rejects the application. It's the long and winding road for me.

[SeanMacGabhann]

And this, dear reader, is why I bang on about chains/big companies (beyond a certain point) being a bad thing

The possible-shiteness of small operators should not be a barrier to any one of us doing better - but we now have 2 local landlords who obviously WANT to run a good business AND give us better prices prevented from doing so - bot in their current positions and potential alternatives. And none of the rest of us could afford to do any better

Sigh.........

[mockney piers]

It does make depressing but, as you say, enlightening reading, I'll join you in a collective sigh and remember not to drink beer in your pubs mark/steve, I'll now feel guilty :-/

[Mark Dodds]

Yes. Great logical thinking Mockney. Don't support these two because we're being frank about being ripped off by our PubCo Freeholders. There's not much room to escape from this as a punter you know. Spend your money at any of the other pubs mentioned here - they are all tied as well, the Bishop EDT, Palmerston, Magdala etc and if the odd one isn't (Franklin's, the Silver Buckle, Oh. The Bear, Camberwell New Road are free) then they really are ripping you off aren't they? Because they could afford to do it a little cheaper if they wanted. On the other hand that's when it gets down to brand and style and pitch and whatever.

All very tedious.

[SeanMacGabhann]

methinks Piers was being slightly sarcy Mark (about the setup - not about you) - you probably won't find better supporters of pubs than MP or myself - just a shame the situation is what it is...

But really appreciate the info and will have to make the journey from Plough-land over to Camberwell more often

[scor46]

Mockney just bring your own beer... its cheaper for us!!!

[Mark Dodds]

Thanks Sean. I've always wanted to meet Piers anyway - I know him a bit through flickr - and I haven't many friends left now. If you do come over this way I'd love to buy you a drink. By the way did I mention that we're starting a saturday night dj thing at The Sun and Doves from this weekend 24 November. I'm hoping to get a couple of well known Dj friends who's talents I;ve never called upon to make a few appearances, just like we got Jamie Cullum to play a couple of times on Sundays at our free live gigs. All that heart and care and we don't make any money on our beer. It's enough to make you weep.

If it really was my business it would be different - and the beers would be a better selection too. That's another story.

I started a CAUSE on facebook (how I came to have a facebook account is another silly one) David Taking on Goliath: http://apps.facebook.com/causes/view_cause/32953?h=plw&recruiter_id=3435535 it would be great if anyone reading this could take a moment to look at it and sign up if you have a facebook account already. I think you have to take the poison chalice and get an account to do it otherwise. Sorry!

[SeanMacGabhann]

Oh I believe you Mark - and Saturday sounds good but this particular Saturday am committed - but will absolutely try and get over there soon (might be an early-in-the-week post-work drink - who knows, maybe even Alan Dale will join us ;-) )

BTW - Very droll scor46, like it

[mockney piers]

Oops, sorry Mark, should have made the emphasis on beer in your pubs, rather than drinking beer in your pubs per se, a bit more obvious, as didn't realise i was taking money out of your pockets with the loss leader thing. I'll be sure to have some wine and maybe some food next time ;)

[SeanMacGabhann]

of the last 5 posts, 3 of them have been edited at least once by the author

much diplomacy in action me thinks.. ;-)

:)-D

[mockney piers]

Although mine, typically, were for poor grammar ;-P

[david_carnell]

I empathise with your plights entirely, Mark, Steve.

My girlfriend used to run a pub in Surrey before we moved here. It was taken over by a PubCo and destroyed the lives of the owners/employees and ruined a community pub that sold great beer at reasonable prices. Should you wish to find out more you can here: Save The Riser

I seem to remember it was legislation passed back in the 1980s that started us down this slippery slope although I think it was meant to have the opposite effect.

What should we, as a drinker, try and do though?

[Mark Dodds]

Write to your M.P. - Seriously - Say you have noticed that tied pubs you know seem to be suffering lack of investment and have poor product ranges, ans that anecdotal conversations with landlords suggest they are being squeezed by their Freeholders - on rent and wholesale beer prices - and ask them what happened to the recommendations that came out of the Departmenr of Trade and Industry Select Committee Hearings (2004/5) looking into the relationship between Pubo's and Lessees.

That would be a start. Your MP will pass it on to the proper mandarin and you'll get a bland answer that doesn't address your questions. Look at that answer and write back to your MP and tell them you aren't satisifed with the reply because it's absolutely clear PubCo's are completely ignoring the Committees recommendations, that public money has been wasted in holding the hearings to no effect, and say you want to know what the DTI is going to do about this flagrant disregard by PubCo's of what the DTI says they should be doing in the best interests of the Public and the Industry.

My typos are increasing due to a stiff blue bandage on my left index finger which is holding a deep scalpel cut together. An accident related to the footy being on instead of the quiz at the Doves.

Editing prior to this post due to diplomacy as rightly spotted above!