Moodmusic: Am I drinking enough?
So I woke up this morning wondering about beer sales and pub closures. On the one hand it seems to me that there are many more breweries and micro-breweries today than there used to be, and lots more ales on sale? If that's true does it mean that the market for beer is booming? But how does this sit against the big story about pub closures? Walking through Chester the other night I was struck by just how many pubs there were there, and how packed to the gunells they were too. I feel confused. I've just not been keeping up with what's going on obviously. Having spent so much time living and working overseas there are great chunks of my knowledge about UK social history and culture just missing. Time to get educated. Not wanting to spend too many hours researching the question (whoooaaa .... a bit too much like being at the office ....) the quickly acquired and charted data came up with the following.
Brewery openings are up over the last 20 years. Some of these are new, and some of them are "cuckoo" breweries, projects or sub sections of producing "craft beer" within bigger bewery. A testament to the macros being inspired by the success of micros. There are also "brewpubs" included. The closures of breweries happens too of course but there seems to be a net gain over time.
A big change to the pub landscape happened in 1989-1992 with the Beer Orders which saw Parliament break the brewing and retailing ties of the large 6 breweries on their pubs. As a result the large breweries split brewing from retail and over 11,000 pubs were sold to newly created pub-owning companies. These 'brewcos' focused on profitable efficient retailing and on large volume, mainly city center pubs, and have increased their holdings (e.g. JD Wetherspoon). The less profitable small turnover pubs were left as tenancy and leasehold businesses.
Numbers of pubs took a step down in response to this restructuring post 1992, and then took a very steep decline from 2005/06.
Margins and profits may have been affected by the smoking ban that was introduced in 2006/07, and the beer duty escalator which was introduced in 2008. According to other sources, the rate of pub closure has actually slowed down over the past 9 months. It is the managed pubs and tenancies which have suffered the greatest part of the decline. But why, what's preventing profitable business? What does beer production and consumption look like? Its a surprise to find that there has been little change in the total volume of beer brewed in the UK between 1820 and 2000.
Pub retail figures suggest that as pubs have changed in character, the customer base may have increased and diversified, but total beer sales are declining. However, there has been a rise in the popularity of premium beers, which are defined as brands with alcohol contents in excess of 4.2%. The 'brewco' managed houses are successful and take in excess of £10,000 per week with an annual turnover of £0.5 million considered only marginal, most of them taking far more. So for these high volume pubs, trade is good. This trade is partly dependent on the quality and variety of product - beer - to ensure repeat trade. So perhaps the brewcos are good for breweries and the range of beers by micro-breweries, real ale and craft beer producers. they diversify the offer and service customer choice. But aside from the economics of beer sales and profitability, it seems that it is not really a fair market place. Tenants, licensees pay high lease prices (average of £70,000 p.a.), and generate low profits (average £23,000 p.a. which needs to include cover for capital outlay), whilst trading with continuing restrictions placed on what beers they can sell under remaining forms of tie agreements. Then, when the tenanted pubs are closed down, there are often restrictive covenants placed on them preventing others from re-opening pubs and making successful businesses. It is argued that these covenants exist as restrictive practices simply as a means to protect other pubs which breweries or brewcos own within the vicinity. In addition, planning regulations do not protect pubs since permission is not needed when changing the use of pub to, for example, a residential dwelling. The path is open for speculative development to make easy profit.
What I discovered was it's a complicated picture, with success for some, and distress for the small traditional pub and landlord. Causes of change and pressures on pubs are economic and social.
Sources of info
J.D. Pratten. 2005. A new landlord? A study of the changing demands on the UK publichouse manager. Hospitality Management 24: 331–343.
J. Pinkse and M E. Slade, 2004. Mergers, brand competition, and the price of a pint. European Economic Review 48: 617 – 643
Clare Elwood Williams. 1996. The British Pub - An industry in transition. Hotel and Restaurant Administration Quarterly: December 61-73
Updates
CAMRA publishes new Good Beer Guide and announces that brewery numbers in the UK have reached a 70 year high, taking the total to beyond 1,000. Its got people talking @:
Boak and Bailey think about when the beer boom might be coming to an end by looking at the trends in breweries and products.
Boak and Bailey had fun mapping the opening of new breweries too
New to Beer? Here's some information on how to taste what you are drinking
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