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Wine suppliers say scrapping beer tie will have limited effect on wine

Published:  24 November, 2014

Wine suppliers say the vote to break the beer tie will have a limited effect on wine sales - while it may open up the market, most leaseholders are already free to buy wine from a supplier of their choice.

Last week the House of Commons voted on a new clause to the Small Business, Enterprise and Employment Bill, which means pub leaseholders would be contracted to their landlords for 'market rent only', leaving them free to source beer, and other products, from wherever they choose.

Although the move has been welcomed by pub licensees and a number of campaigning groups, others are less positive, believing it will increase entry costs to the industry, cut investment and ultimately accelerate pub closures. Major pub groups like Enterprise Inns and Punch Taverns have warned the move will put pubs and jobs at risk as it will limit invesment in the sector. Share pices in to the major groups were hit on the back of last week's announcement.

British pubWill the vote for 'market rent only' pub leases affect wine sales?Wine suppliers are unconvinced that vote represents a major opportunity, given the 'bigger picture' around the issue. 

As for wine suppliers, although in theory the move could present an opportunity for some, in practice this is likely to be very limited.

Mark Riley, sales director at Bibendum, told "We don't see that the vote to break the beer tie will have a major impact on wine suppliers. The majority of food-led operations already have the option of choosing to be free of tie for wines and spirits. It may open up the opportunity for tenants in previously tied establishments to be more expressive in their wine choices, but they may choose to continue with the pub company due to efficiencies of scale when wine is only a minor category within their drinks proposition."

Andrew Bewes, managing director of Hallgarten, Druitt and Novum Wines, told that since a lot of beer ties don't include wine, it shouldn't have a major impact. But, he said, "from a free-trade business perspective it could open up the market to individual suppliers - but the bigger picture is that as a whole it will accelerate the closure of pubs and could potentially decrease the market".

He said the immediate effect of the review would be increased fixed overheads for publicans.

But Simon Clarke, Enterprise licensee at the Eagle Ale House in Battersea, who has been campaigning for fairer pub rents and the ability to buy products on the open market, said the news could benefit smaller wine suppliers.

"I do see the possibility of the market opening up for better wine suppliers. Smaller suppliers who would like to get into the pub market may have been stymied by bigger firms who already supply pubcos."

Although recognising the opportunity is limited, given most pubs can buy their wine freely, a number are restricted to buying from their pubco, and Clarke said the choice was "not particularly great" and restricted to big names only. "If you're expecting to pay £15 to £20 for a bottle of wine at the pub, you would be hoping it's not something you see in the supermarket for a third of that price."

However, for pubs that aren't tied on wine, often pubcos offer competitive prices on wine, as licensees are free to shop around and they want to encourage sales.

Mark Brumby, analyst at Langton Capital, said "emotions are running high", but added that the tie "has always been a low cost way into running your own business for the capital-strapped tenant. That will have to change. The free-trade could expand and risks will be passed downstream from the property owner to the individual operators".

Legal action is likely at this point - it would focus on the "legality of the decision of the government to 'insert itself' into legally binding contracts between tenants and their freeholders", said Brumby.

Are you a wine supplier or pub licensee? Share your views on the topic by tweeting @HarpersWine, commenting below or emailing Gemma McKenna