Enterprise Inns defends beer tie and attacks Government as profit falls

The boss of one of the UK’s largest pub companies, Enterprise Inns, has criticised the Government’s policy on duty and defended the beer tie.

In the company’s six-month results statement, chief executive Ted Tuppen said conditions remained very challenging for the pub sector due to weak consumer confidence.

He added that the Government’s decision to continue raising alcohol duty above the rate of inflation did little to tackle problem drinking while “undermining the livelihood of every licensee”.

Tuppen also defended the beer tie, which has been blamed by unions, campaign groups and some tenants for putting them under increased pressure and, in some cases, out of business.

The Business and Enterprise Committee will announce its findings into the beer tie tomorrow, and Tuppen was robust in his defence of the business model, based on exclusive purchasing obligations.

“We are passionate about our pubs and their role in the communities they serve,” said Tuppen. “We are currently spending £1.4m per month on rental support and special discounts. We have also frozen prices on five key brands across the estate from February this year, costing us an additional £700,000 per month.”

The chief executive argued there was no material difference between the prices charged for drinks in tied, free or managed houses; the tie offered a low cost route into the pub business; Some 1,708 brands were available to tenants and food was not tied.

Enterprise also claims that the closure rate of the 25,000 pubs owned by the seven largest tenanted pub companies, regional and family breweries is approximately one third of that for the remaining 32,000 predominately free and managed houses making the rest of the pub sector (CGA Strategy 2009).

Turnover at the group in the six months to 31 March 2009 was 8% lower at £404m (2008: £438m).

Pre-tax profit was £9m (2008: £122m) after a revaluation of the company’s pub estate and interest rate fluctuations lead to an exceptional charge of £94m. Excluding exceptionals, pre-tax profit fell 28% to £103m (2008: £132m).

Enterprise sold 151 pubs in the six-month period for £44m and its estate currently stands at 7,616 pubs valued at £5.6b. Net debt stands at £3.7b.

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By Chris Druce

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