Ei Group plc, formerly known as Enterprise Inns plc, was the largest pub company in the UK, with around 4,000 properties, predominantly run as leased and tenanted pubs. Ei Group plc was headquartered in Solihull, West Midlands. It was listed on the London Stock Exchange until it was acquired by Stonegate Pub Company in March 2020.
The company was founded by Ted Tuppen, initially with 300 pubs from Bass, as Enterprise Inns in 1991.[2] The company listed on the London Stock Exchange in 1995.[2] The group made a series of acquisitions including 1,864 former Laurel Pub Company pubs from Whitbread in 2002[3] and 4,054 pubs with the acquisition of the Unique Pub Company in 2004.[4][5]
Enterprise Inns had over 9,000 pubs on completion of the acquisition of the Unique Pub Company and it formed part of the FTSE100 Index at that time.[6] However, the decline in the UK pub trade led to its removal from the FTSE100 in 2008.[7] Due to its high level of debt the company stopped paying dividends to shareholders in 2009.[8]
Ted Tuppen stood down as Chief executive in February 2014[9] and Enterprise Inns rebranded to Ei Group in February 2017.[10]
In July 2019 Stonegate Pub Company announced its intention to acquire Ei Group for £1.27 billion.[11] That same month and year, Stonegate pursued the acquisition of Ei Group in a £3 billion deal which will "add almost 4,000 new pubs to Stonegate Pub Company’s 765 existing locations".[12]
Operations
The pubs are operated by tenants, which means that the company collects rent from individuals who operate and often live in the pubs. They also operate (in most, but not all cases) what is known as a beer tie. This means that tenants renting public houses from them are under contract to buy beer, ciders, alcopops and other alcoholic drinks from Enterprise Inns only. Under some leases tenants are required to also purchase other products, such as soft drinks, wines and spirits from Enterprise, although this is not as widespread as the beer tie.[13]
Reflections on business practice
On 12 May 2009, The Guardian newspaper reported how "Enterprise Inns counts cost of bad pub landlords": the recession had forced the company to take action against more than 100 "poor quality and underperforming licensees" since last autumn. It is spending £1.4m a month on financial assistance to help those in distress, on top of the £700,000 a month cost of freezing the price of five lager and ale brands. Chief executive Ted Tuppen told The Guardian: "If people are genuinely struggling and will work with us, we are providing an awful lot of help". The cost of these programmes was however contributing to a slump in profits.[14]
On 13 May 2009, the House of Commons published a report regarding a monopolies inquiry into pub groups.[15] The report "raises a series of questions about the pub company (pubco) tied pub business model and calls on the Government to act urgently, in particular, to refer the matter to the Competition Commission. It challenges the pubcos which operate a tie to prove its benefits by giving lessees the choice between a tied or free of tie lease."[16] The report also raises issues regarding the actual conduct of pubcos in dealing with struggling tenants.[16]
Committee chairman Peter Luff, MP says: "The report explicitly acknowledges that 'not all the problems of the pub industry come from the tied pub model. It is clear there are many pressures on any retail business ... Nonetheless, our inquiry found alarming evidence indicating there may be serious problems caused by the dominance of the large pub companies.'"[16]
According to an article in Private Eye, the select committee asked 1,000 publicans for their opinions regarding their experiences working with Britain's largest pubcos, which includes Enterprise Inns. The Eye states that the committee's findings had "at last shed light on an industry in freefall, with 40 pubs closing [in the UK] every week. Pubcos are essentially greedy property companies with a cuddly name – and they own nearly half the country's pub freeholds."[17]
The Committee commissioned its own independent survey as part of the inquiry, to determine whether the negative evidence it initially received from lessees was typical of feelings in the industry.[16]
"The survey results, printed with the Committee's evidence, underpinned the Committee's findings. 64 per cent of lessees did not think their pubco added any value and while a fifth had had a dispute with their pubco, few (18 per cent) were satisfied with the outcome. The Committee was astonished to learn that 67 per cent of the lessees surveyed earned less than £15,000 pa and over 50 per cent of the lessees who had turnover of more than £500,000 pa earned less than £15,000 – a 3 per cent rate of return. The lessees may share the risks with their pubco but they do not appear to share the benefits. The report therefore concludes that problems which were identified by the Trade and Industry Committee four years ago remain. An imbalance of bargaining power between lessees and pubcos persists and the arrangements for assessing rents remain opaque. Rental assessment should be the basis for negotiation, but incumbent lessees often risk the loss of their home as well as their business if they cannot reach agreement, the report says."[16]
The Eye says the committee found that pubco tenants are initially attracted to run pubs by low entry costs, but soon find that making a decent living is very difficult. Tenants' leases oblige them to buy alcoholic drinks from nominated suppliers at up to twice the open-market price. If a struggling tenant leaves, another tenant can be found to replace them. In the years of booming property prices this practice was successful, but is much less so now, as evidenced by the number of pub closures. The Guardian reported that MPs found an imbalance of power that can amount to "downright bullying" between the big pubcos, such as Enterprise Inns and Punch Taverns, and their tenants.[18] In 2008, one tenant who felt forced to close the pub he ran with his wife said:
"We told Enterprise [Inns] we were struggling and needed some help; they didn't come forward with any. If we were late paying bills we would get threatening phone calls. They could have put a hold on the rent or given us a discount until we managed to get business back up. If we didn't pay bills on time they wouldn't deliver the beer and when they did deliver it they would charge us for carriage. Instead of helping us they were making it worse."[19]
The MPs are said to also want a ban on pubcos selling pub premises with restrictive covenants that prevent them being used as pubs in the future. Ted Tuppen explained the need for covenants to the committee by saying there are too many pubs in some areas and Enterprise used restrictive covenants "because, genuinely, we think these are pubs that have lived their life". However, he admitted that 70% of Enterprise sales have such covenants in place.[18]
The select committee was not generally impressed by the pubcos' senior executives, rebuking them for having given "partial" and even "false" evidence to the committee.[17]
The committee recommended that "the tying of beers, other drinks and ancillary products should be severely limited to ensure that competition in the retail market is restored." The Eye notes that select committee chairman Peter Luff "may be looking to right the wrong created by the Thatcher government's disastrous "Beer Orders" of 1989, in which he was involved."[20]
Shortly following the committee's report, CAMRA issued a super-complaint forcing the Office of Fair Trading (OFT) to investigate this within 90 days. The OFT published its report on 22 October 2009. The report largely cleared the industry of behaving in any way that caused damage to consumers.[21]
Related Research Articles
A pub is a drinking establishment licensed to serve alcoholic drinks for consumption on the premises. The term first appeared in the late 17th century, to differentiate private houses from those open to the public as alehouses, taverns and inns. Today, there is no strict definition, but CAMRA states a pub has four characteristics:
is open to the public without membership or residency
serves draught beer or cider without requiring food be consumed
has at least one indoor area not laid out for meals
allows drinks to be bought at a bar
Renting, also known as hiring or letting, is an agreement where a payment is made for the use of a good, service or property owned by another over a fixed period of time. To maintain such an agreement, a rental agreement is signed to establish the roles and expectations of both the tenant and landlord. There are many different types of leases. The type and terms of a lease are decided by the landlord and agreed upon by the renting tenant.
A pub chain is a group of pubs or bars operating under a unified brand image. Pubs within a chain are tied houses and can, generally, only sell products which the chain owner sanctions. Pubs in a chain normally display their chain branding prominently and may also feature shared aspects, such as menus and staff uniforms.
The Independent Family Brewers of Britain (IFBB) was formed in the 1993 by an informal group of family-owned/controlled brewery CEOs known as the Pimlico Group - all of whom were part of the UK's Brewers Society, now the British Beer and Pub Association.
In the United Kingdom, a tied house is a public house required to buy at least some of its beer from a particular brewery or pub company. That is in contrast to a free house, which is able to choose the beers it stocks freely.
Whitbread is a British multinational hotel and restaurant company headquartered in Houghton Regis, England.
Beer has been brewed in England for thousands of years. As a beer brewing country, it is known for top fermented cask beer which finishes maturing in the cellar of the pub rather than at the brewery and is served with only natural carbonation.
Timothy Taylor's is a family-owned regional brewery, founded in 1858 by Timothy Taylor, in Keighley, West Yorkshire, England. Timothy Taylor's moved to larger premises in 1863 at Knowle Spring in Keighley, where they remain.
Mitchells & Butlers plc runs circa 1,784 managed pubs, bars and restaurants throughout the United Kingdom. The company's headquarters are in Birmingham, England. The company is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.
Slug and Lettuce is a chain of bars that operate in the United Kingdom, with a large number located in London and South East England. As of 2017, there are a total of 70 outlets. Hugh Corbett opened the first Slug and Lettuce in Islington in 1985. He attempted to enhance the public house environment, at a time when standards were often low.
The Society of Independent Brewers is an organisation representing the interests of independent breweries in the UK. Founded in 1980, it was intended to fight the pub-tie system, under which large brewers owned 80% of the UK's pubs. It changed its name in 1995 to reflect the changing aspirations of its members, but retained its original acronym.
Punch Pubs & Co is a pub and bar operator in the United Kingdom, with around 1,300 leased pubs. It is headquartered in the traditional brewing centre of Burton upon Trent in Staffordshire. It was listed on the London Stock Exchange as a constituent of the FTSE SmallCap Index until its sale in 2016 for £403 million to a private equity fund, Patron Capital, acting in concert with Heineken International who acquired 1,900 of Punch's pubs as part of the deal.
Scream was a student-oriented pub chain in the United Kingdom owned by the Stonegate Pub Company. The chain began in October 1995.
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Grand Metropolitan plc was a leisure, manufacturing and property conglomerate headquartered in England. The company was listed on the London Stock Exchange and was a constituent of the FTSE 100 Index until it merged with Guinness plc to form Diageo in 1997.
The Supply of Beer Order 1989 and the Supply of Beer Order 1989, commonly known as the Beer Orders, were statutory instruments made by the United Kingdom Secretary of State for Trade and Industry in December 1989.
Stonegate Pub Company is the largest pub company in the UK, operating around 4,800 managed, leased and tenanted pubs. It is owned by TDR Capital. The head office is based in Solihull, England, and the company is registered in the Cayman Islands.
Courage Ltd v Crehan and Inntrepreneur Pub Company v Crehan (2001) C-453/99 are a series of EU competition law and English contract law cases, concerning the validity of beer tie agreements. After a lengthy course of litigation, the UK House of Lords held that a High Court judge was not wrong to find that competition had not been foreclosed for a pub landlord, Mr Crehan. This finding was, however, on narrow grounds, and ran contrary to the decision of the English Court of Appeal, and appeared different to the European Commission and European Court of Justice. In the Small Business, Enterprise and Employment Act 2015, sections 41 to 73, the beer ties were abolished altogether.
The Pubs Code etc. Regulations 2016 were introduced by the UK Government as part of the Small Business Enterprise and Employment Act 2015. The code was passed on 14 June 2016 and implemented on 21 July 2016.
The hospitality industry in the United Kingdom is largely represented by the country's hotels, pubs, restaurants and leisure companies, and produces around 4% of UK GDP.
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