Twenty years ago, the infamous Beer Orders Act prompted a massive change in the pub industry resulting in that controversial beast, the pub company (pubco). For those of you too young and innocent to know about this entity, during the recession-hit post-Thatcher 1990s, the Beer Orders Act was a blunt instrument to separate the few major breweries from their tied pubs.
The previously established model had operated successfully for generations with a benign structure of owners over managers and tenants. The people who ran these pubs were the guv’nors. They knew their business and their customers and operated as father confessors, marriage guidance counsellors, psychotherapists, social workers and alcohol abuse advisers, without realising it. All this changed with the dramatic selling-off of pubs to the newly formed pubcos, but of course, because of the 1990s recession in some areas, nobody wanted the pubs. The result was pubs were cheap and owner-operators started buying in to run their own pubs; the pub market was changing. With the rise in popularity of real ale, beer sales were improving and North Shields, for example, became a free trade boom-town with at any time up to ten pubs selling cask ales. Up to 60 different ales were on sale within walking distance. Ale trails developed from the ferry landing or the stations.
My pub, The Magnesia Bank, which I bought from a brewery, became one of them, along with The Bell and Bucket, The Wooden Doll, The Tynemouth Lodge, The Chainlocker and many others. All because pub values had fallen through the floor and pubs were boarded up.
Enough of the history lesson, let’s get bang up to date. We are the middle of a recession, we have a few property companies (pubcos) owning a large number of pubs. Pubs are being boarded up at the rate of 40 per week and guess what, pub property values have fallen through the floor. The big mistake some of the pubcos made was that they knewthe price of everything and the value of nothing. While they inflated the price of the bricks and mortar, thus increasing the potential rental value, they ensured the pubs’ failure, because they didn’t understand the real asset value of a pub is the guv’no.
So, history is repeating itself. Now is the moment you young entrepreneurs can buy into the pub property market. Learn your trade and give the customer the benefit of your product knowledge.
I always found that meeting the needs of the minority in a group of people dictates where the rest go. For instance, take any group of blokes; the cask ale drinkers will dictate where the lager drinkers go, and the vegetarian dictates where the diners go. Charge a fair price, but always offer value for money and you’ve got a sound business. And help put the British pub back to where it’s meant to be; at the centre of the community.