New legislation allowing tenants to buy their beer from any supplier has prompted Britain’s biggest pub landlord, Enterprise Inns, to radically rethink its approach to estate management.
Nearly half of the UK’s 50,000 publicans are already free to buy beer from any supplier. That freedom is about to be expanded nationwide, breaking the centuries old “beer-tie” agreement which allows breweries and pub owners to charge tenants above-market prices for beer and spirits in exchange for lower rents and other benefits.
Now — in what market watchers describe as a pre-emptive strike against a predicted profits fall — Enterprise Inns has announced it is selling off 1,000 of its smaller public houses. The West Midlands-based landlord also intends to create a property rental arm and expand its own managed pubs.
In a statement issued from its Solihull headquarters, Enterprise said it would continue to offer tied deals, but also increase the number of premises it manages directly from the present 16 to at least 850 by the autumn of 2020.
The Stock Exchange listed company also announced plans to drastically increase its commercial property division — which includes free-of-tie pubs as well as retail developments — from its current 185 sites to between 900 and 1,000.
The strategy announcement came as Enterprise reported a 0.6 per cent rise in its six month net income to £178m, with pre-tax profits up £2m to £57m.
Simon Townsend is chief executive at Enterprise. “We have been operating only the leased and tenanted business model since the company was founded in 1991, so this is the biggest change to that strategic direction we have ever undertaken,” he said.
“This new strategic direction will ensure that we generate the greatest value from each of our assets, and will also accommodate the requirements of the new legislation.
“This is a sustainable strategy for our business which embraces different operating models to best serve our publicans and their communities whilst delivering greater value to our shareholders,” added Townsend. At the end of the day, his company will slim down its pub portfolio from 5,200 to 4,200 by 2020.
Commenting on the property shake-up Mark Brumby, of financial advisers Langton Capital, said: “Enterprise has concluded that it needs to manage its estate much more actively … This was to be expected but, at around 800 units, it could be a little larger than had been previously thought.”
Enterprise Inns was founded by Ted Tuppen in 1991 on the 368 premises it acquired from Bass. In 2002 it added another 1,864 former Whitbread pubs when it bought the Laurel Pub Company and its purchase of the Unique Pub Company added another 4,054 pubs. Many of those have since been sold off or closed.
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