How the Pub Chain Wetherspoon’s won Britain’s hearts and wallets
In Australia, pubs operate much as they all once did in the UK; relying on breweries to deliver beer to be poured out of taps locked up under contract with said breweries.
In October 2017, Sydney based Redoak Breweries launched an attempt to penetrate the market, offering cut priced kegs of beer for $120 (an estimated 50 per cent discount to the then going rate) to encourage publicans to free up taps coming off contract.
As an aside, Redoak has been reported as being a vocal activist against tap contracts. The brewery was also a leader in the formation of the Australian Real Craft Beer Association, and in opposition to the former Craft Beer Industry Association, now called the Independent Brewers Association.
The challenge for Redoak however is that bigger breweries provide a list price, and then offer beer tap infrastructure, refurbishments of venues, as well as rebates and incentives, and even complimentary event tickets and sponsorship deals. Clearly it makes establishing the real price of a keg of beer difficult, if not impossible. The Australian Competition and Consumer Commission however was unable to find anything unusual,handing down a decision that the beer industry in Australia is a fair and competitive market.
Walmart was once locked into similar arrangements but became fed up, deciding it would not be beholden to its supply chain.
Which brings us to the UK chain Wetherspoon’s.
In an article entitled How Wetherspoon’s conquered Britain, Esquire magazine notes: “Wetherspoon’s did everything it could to gain the upper hand in negotiations. At the time, pubs typically relied on breweries to deliver beer and provide dispensing equipment. Wetherspoon’s established its own distribution network, bought its own taps, and forced prices down. Nathan Wall, the company’s former operations director, told me: “It was taken straight out of Walmart: We will not be beholden to our supply chain.” He added: “There’s this urban myth that Wetherspoon’s sells close-dated beer. When I was at Wetherspoon’s we sold 12 million pints of beer a week. The logistics of finding 12 million pints of short-dated beer is just impossible. The reason they get their prices so low is absolutely, 100 percent down to volume and having their own distribution network.”
Business operators unhappy with the status quo in their own industry should continue to read the Wetherspoon’s story here.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Chris
:
As a former UK bartender, I can guarantee you that any pub that ever sold short-dated beer would be out of business (at least with any reputable clientele), and in fact, the bartender / publican has the authority to taste and deem a cask as being unfit to drink.
Hence the term “Free House”, whereby the pub was not only “not owned by the brewery” (if you wanted the pub, you had to buy it off the brewery) but it was also free to sell whichever stable of beers it wanted to. Essentially, as the publican, you rented the pub off the brewery and ran it.
If you drank a particular beer and you liked the location (because it was close to your house) but they didn’t sell it, you found another “local”, it was simple as that.
Roger Montgomery
:
Thanks for sharing those insights Chris