Brewers poised to win EU stay of execution

Three cheers: Reprieve for tied-house system eases fears of chaos that followed Beer Orders

Britain's tied-house system operated by the brewers is poised to win a two-year stay of execution from the European Union. The EU's decision will relieve fears that it would severely curtail, and perhaps even dismantle, the 160-year-old system that has enabled the brewers to have complete control over the beers that their pubs can sell.

The industry has barely recovered from the huge and controversial upheaval caused by the 1989 Beer Orders that forced the top-flight brewers to sell more than 11,000 pubs. Any similar directive handed down by Brussels now would, in the eyes of many analysts, have caused unnecessary disruption and damage to an industry recovering from the recession but still struggling against the tide of bootlegged booze from across the Channel.

Karel van Miert, the EU Competition Commissioner, is understood to be close to finalising plans that will defer the review due next year of the industry's exemption from anti-competitive laws under Article 85 of the Treaty of Rome. According to a Brussels source, the EU, which has yet to publish its long-awaited green paper on all tied manufacturing and retail operations from petrol to bread, will retain the status quo for Britain's brewers until 1999.

The reprieve, which sources said could be announced very soon, would follow extensive lobbying by MPs, Euro MPs, and the brewers, headed by Bass, Whitbread, Allied Domecq and Scottish & Newcastle, the industry number one. Late last month, Mr Van Miert made a flying visit to Britain to address the North West Brewers and Licensed Retailers Association at a meeting hosted by Gary Titley, Euro MP for Bolton.

At the meeting, which was also attended by David Kay of Thwaites brewery and held at the Jolly Carter pub in Bolton, run by Rees Gibbon, Mr Van Miert signalled his intentions about the industry by saying that he was considering modifying the system rather than instigating a thorough shake- up. That was particularly welcome news for small brewers, which feared collapse if they were forced to part company with their pubs.

Questioned about the "modifications", an industry source said yesterday that Mr Van Miert might introduce an appeals system for landlords to challenge their beer tie with brewers.

An appeal, the source said, would have to demonstrate that the tie restricted trade, and was anti-competitive in nature.

Such a system would be welcome for the hundreds of publicans of the Inntrepreneur pub company, which is jointly owned by Grand Metropolitan and Fosters of Australia. Many of them have challenged - both through UK courts and the EU - the terms of 20-year Inntrepreneur leases that require them to buy beer from Courage - now owned by S&N - at full list prices despite a price war between the top brewers.

Free houses are still able to obtain big discounts of up to pounds 70 a 36- gallon barrel of beer, and the same is true for the new pub companies that were formed in the wake of the forced sale of 11,000 pubs between 1989 and 1992.

Many of the pub groups, from Greenalls which abandoned brewing in the late 1980s to fledgling companies like Century Inns, have used purchasing muscle to extract financially favourable beer supply agreements from brewers for up to seven-year terms.

It is understood that Mr Van Miert has recognised that the tied-house system's dominance of the beer market is not as strong as it used to be and continues to decline. Fresh research by analysts at SBC Warburg shows that the market control exerted by the brewers in the few years since the Beer Orders took effect has weakened considerably.

SBC Warburg says that in 1989 some 52 per cent of the on-trade outlets were tied, and accounted for 43 per cent of total beer consumption.

It now estimates that only 38 per cent of on-trade outlets are tied and account for only 27 per cent of beer sales, and predicts by 2000 that the respective figures will be 30 and 20 per cent.