UK beer giant Marston’s overcharged tenant on cask beer

One of the UK’s biggest breweries and pubcos has been found to have ‘significantly’ overcharged a tenant on cask beer and rent, following an investigation from the pubs code adjudicator (PCA).

The ruling sheds some light on the reasons for the decline of cask beer in the UK.

The governing body published a ruling on 5 December 2019, saying that the company had broken industry rules and described its treatment of a licensee as “significantly deficient”.

Marston’s, which makes beers such as Pedigree, Young’s and Hobgoblin, charges pub landlords per cask rather than for how many pints they would yield, meaning they could lose out on profits due to wastage beer. Rents for tenants are also calculated on the basis that the entire cask is sold. For example, a cask which holds 72 pints may only yield 68, as the rest could be yeast sediment. The pubco could pay duty to the government on the number of saleable pints in the cask, but then charge licensees for the higher rate.

Marston’s did offer a 2.5% allowance for wastage, but this was judged to be too low by adjudicator Paul Newby, who plans to step down from his role in May this year.

The PCA rules that Marston’s allowance for wastage used to calculate the rent rate for the Cheltenham-based Railway Inn, was “inappropriate and inadequate”.

Ed Anderson, who runs the Gloucestershire-based pub, now has a new deal with the pubco, but has not yet been compensated for the overcharge.

A spokesperson for the beer firm, which employs 14,000 people and has 1,400 pubs within its portfolio, said the ruling will have “no consequence” for the industry as a whole.

“Sediment in beer and operational wastage are just two of many factors that are taken into consideration when negotiating a pub tenants rent,” the spokesperson said. “Wastage has always been accounted for in public house rent assessments. There are no consequences or ramification across the industry as a whole arising from this particular award.”

“Mr Anderson has recently entered into two MRO deals and the PCA has confirmed the matter is closed.”

“Any subsequent actions that Mr Anderson wishes to take should be done so through the appropriate channels as the PCA has stated that this matter is closed, and we have received no formal contact to the contrary.”

A recent survey of pub landlords carried out by the PCA found that 31% of those managing tied pubs are not confident about the way their tenancy is handled. Around 400 licensed pub managers were interviewed, with operators including Ei Group, Admiral Taverns, and Marston’s. This score varies significantly by pubco with 42% of tenants surveyed from Ei Group saying they disagreed with the statement they are “confident” with the handling of their tenancy, compared to 5% of those surveyed from Admiral.

Cask beer sales have been in decline for some time in the UK, which many in the industry have blamed on allowances on wastage being unfairly small.

Tom Stainer, the chief executive of the Campaign for Real Ale, said the lobbying group “has always maintained that supplying cask beer to tenants based on the premise of 72 saleable pints per cask is a bad business practice used by pub companies to extract extra profit from their tenants.”

“This ruling also recognises the realities and skill involved in keeping cask ale in excellent condition. Pressure on licensees to sell as many pints as possible from a barrel of cask beer can result in a bad quality pint for the consumer.

“Pub companies of all sizes need to ensure that they take notice of this ruling when calculating tied rents from now on. This will go some way to further redressing the imbalance between tied tenants and their pub companies, and also improve the quality of cask ale served across the UK.”

Read more:

3 reasons cask beer is declining in UK pubs, and 3 ways it can change