Monday, 20 June 2011

Listen to the pubco piggies squeal!

So Free of Tie would destroy the business model of most pubco's according to Punch? This tacit admission that their model is flawed is the most self-damning statement since Gerald Ratner trashed his own brand ... they cite such reasons as having to be a tied estate to get the level of discount they currently enjoy.

I, for one, would be extremely surprised if any supply contract was dependent upon the FOT/tied status of the estate being supplied. Supply contracts to pubcos are predicated upon one thing only - volume.

If a pubco has mixture of FOT/Tied pubs on its books it is for them to supply the FOT at sufficiently attractive rates that retain the barrelage - along with a reasonable credit stance - if they were to fail to provide what other suppliers to the free trade are offering then they would probably lose the business.

There is no doubt that a truly FOT model for the pubcos would result in the collapse of their business as they would be unable to generate sufficient income from beer discount and sustainable market rents to pay for their borrowings... hence the announcement that (for instance) Punch is to dispose of 2,300 sites that are uneconomic for them.

My guess is that many of these sites would be economic for their current tenants if realistic prices are achieved for the purchase of their respective freeholds as despite what others say I believe that the FOT model will always be inherently more beneficial to a tenant / freeholder than a tied one.

It has to be as there is one less mouth to feed from the pie!

In the words of one of my best mates "Boo Hoo Squish Squish" for Punch et al ...

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