The sale of over 3,000 Punch Pubs to Heineken and Patron Capital Partners
What strange times the licensed trade is living in. Leased pubs becoming managed pubs. Tied pubs having the potential to release their tie and trade freely for the first time in hundreds of years. CAMRA are even looking at changing their essential policy on keg beers. Is this a paradigm shift in the way the industry operates or have we seen it all before? I’ve not heard any comment on the fact that Heineken, as a brewer, can command a stocking policy on any MRO option lease they grant. This is believed to be circa 50% of the total stocking list of each establishment but is something that will need ratifying. Should the sale of the Punch pubs to Heineken complete this will provide an effective brand tie to those tenants, previously with Punch, granted a new MRO lease. For those of us who remember the Beer Orders of 1989 it looks like the trade just wasted 37 years. Would this sale call into doubt the credibility of the Pub Code, only launched less than 5 months ago in July 2016?
Heineken/Patron Capital Partners improved their bid (15th December 2016) for the Punch Estate, revising the initial offer of 174p per share up to 180p. This seems to have found favour with a number of the Punch Directors and it is believed that Heineken, a Dutch owned brewer with global distribution, would take 1,900 of the Punch sites with Patron Capital Partners having the remaining sites.
David Forde, the Managing Director of Heineken UK describes the bid as a ‘huge vote of confidence in the great British pub’. We must wait and see, but securing distribution for Heineken UK brands is a huge vote of confidence for someone. Stephen Green, of Patron Capital Partners believes that the strong financial security that their offer brings to the Punch Estate will ensure it has an ‘excellent future potential’.
What could that potential be? If Heineken can effectively buy distribution for their brands what will other brewers do to counter? At present brewers can offer incentives for licensed trade operators to stock their brands and develop the strength of a brand through a marketing and advertising strategy. If nearly 3,000 outlets (1,049 existing Heineken sites and 1,900 from Punch) cannot change half of their stocking policy then this is as much of a tie as the licensed trade had before the Beer orders came into effect in 1992. After the Beer Orders, the big brewers had to limit their estate to 2,000 pubs. If this take over by Heineken of the bulk of the Punch Estate completes then what will the limit of a brewery owned estate be? What will other national and international brewers do to secure distribution? Could every licensed trade outlet in the UK be owned by a single brewer so achieving a 50% stocking policy?
Strange but interesting times as always in the licensed trade. More will be written about this take over before it happens or otherwise, and if it does complete more will be written about the consequences to the industry.