opinion pubs

Who is Selling Beer ‘Too Cheap’?

Illustration: "Wodge of cash."

Some breweries sell beer so cheap that it’s impossible for decent outfits to compete.

That’s an argument we’ve heard multiple times in the last couple of years, usually without naming names, because, as one brewer put it, ‘lawyers are expensive’.

At the more innocent end, it’s breweries making the cheapest beer possible, without particular regard for quality, hoping to scrape a profit by selling a lot of beer on narrow margins. We think that’s primarily what the then MD of Moorhouse’s was getting at here:

The ever increasing number of new brewers entering the growing cask-ale market, he says, has led to some ‘micros’ using Progressive Beer Duty (PBD) tax relief to sell beer at rock bottom price – rather than invest for the future. PBD, a sliding scale of duty, was introduced in 2002 to help small brewers compete.

Spend any amount of time in one area of the country or another and you’ll learn to spot the local bargain brewery: they’re the ones that always crop up in the pubs with FOR SALE signs outside, where the publican is on the phone having a pleading conversation with a creditor, with vultures circling. They’re fodder for Real Ale Pubs that can’t really afford to offer a choice of cask but also can’t afford not to, and that’s can’t get away with charging (ballpark) more than £3 a pint.

In our experience, though, this bargain beer might well taste fine, especially if it’s been looked after well and you’re prepared to accept straightforward over stunning. From the research we’ve been doing in the last year or two we’ve learned that the market has always demanded a range of price points, even at the price of quality: in Liverpool in the early 20th Century, for example, Bent’s was the bargain brewery whose beer was as rough as its pubs, and that served a need. And if cheap breweries disappeared overnight these pubs and their customers wouldn’t suddenly have lots of extra money to spend on painstakingly perfect ales full of Citra or Sorachi Ace — they’d just give up on ale altogether.

We don’t think there’s anything wrong with this, other than that, if you’re the kind of person that worries about The Industry or the health of cask ale culture, it doesn’t do much to win over those who find real ale bland and/or mildly unsavoury.

But then there are the suggestions of outright dodginess: selling beer off the books; offering two casks for the price of one; selling outdated beer, and so on. Dave Bailey of Hardknott expressed his frustration about that kind of thing here:

[Reduced scrutiny by government] is a clear signal to go ahead and pretend that beer is being destroyed, when in fact it is being sold ‘without paperwork’ for cash, no questions asked. Beer duty and VAT no doubt being evaded. I know quite a few business friends that think this is not only OK, but the only thing that can keep a business alive in a tough competitive time. After all, it’d be doing the beer drinker a service by getting the cost of their pint down.

Yvan Seth, who works as a beer distributor, commented on last week’s placeholding post with more of the same:

There are some out there who will offer you an extra cask, off the paperwork, as an incentive to put in an order. This is so clearly dodgy that the general suspicion is that these casks are off the books everywhere – no duty, no VAT, etc. And you probably have to be a bit dodgy yourself to even be offered this.

That really does sound bad, and clearly offers an unfair advantage, but if people in the industry know and seem to know who the culprits are (we don’t just mean Dave and Yvan — there’s lots of gossip on social media) we have to ask… Why is it still happening?

8 replies on “Who is Selling Beer ‘Too Cheap’?”

Stray observation from the brewery side of things: when we started pimping our wares around the Central Belt, we had one landlord phone up and ask a) What kind of discount he could expect if he paid in cash, and b) How many free pins we’d be willing to throw in for “continued business”. I don’t doubt for a second that some other breweries trying to get into the scene would jump at the promise of a steady outlet – my opinion is still that the moment you pull your trousers down over pricing, you can’t undo it.

Yes, worth noting that some of the pressure here comes from some landlords – not just promiscuously dodgy breweries. I get new contacts regularly asking for special deals… which makes me wonder if some of this even permeates distribution. (I know right away that these discussions will never go anywhere to a sale, so generally make short work of ending the conversation.)

Whilst the big brewers like to get upset about PBD the interesting thing here is *most* of the complaints I hear come from small breweries, usually ones in less cosmopolitan areas. And there are a key few breweries that are regularly named in these complaints… albeit not always in a public way.

As I posted in the placeholder… some of it is just that some small breweries have a very different economic position compared to ones that have hopes of growing and employing people. These little “lifestyle breweries” are likely doing it by the book, but making low cost beer with very low overheads.

Regulatory oversight: The new AWRS thing *might* fix this. But we’ve all yet to see how that’s going to be monitored and enforced… expectation is that it will be under-resourced like most of these things and thus just a wasted regulatory burden. AWRS enforces a paper trail for all beer from source to pub cellar – and there is an onus on buyers to (lightly) verify their supply chain & have the paperwork for all their stock. In theory there will be HMRC inspections to enforce this…

Also worth pointing out there are two things here…

One is where folk are clearly fraudulent. All the “cash deals”, “off the record” sort of sales. That is crime and needs to be stamped out.

But we cannot “fix” the fact that some folk are willing to play at the “loss leader” sort of game thinking it gets a foot in the door, or some simply do have lower costs*, and many are just desperate and offer prices that let them barely scrape by. This is some of the fundamental economics of the game… and the trick is to not compete (solely) on price if you can avoid it.

[*Albeit some of the lower costs may be dodgy. Plenty of very over-loaded vans full of beer out there, and van drivers not really even getting minimum wage, and incorrect insurance, and dodgy diesel… the list goes on.]

There is a lot of Cheap beer out there, and a lot that has to be dodgy, at the price its being sold at. The economics of the beer world are simple there are 25-30Pubs a week closing and 4 breweries a week opening (last Time I checked). & Alcohol consumption is going down.

Moorhouses (with a few other similar sized regionals) have been bleating on about PBD allowing small brewers to undercut brewers on mid to full duty, but This is just hot air! yes some people use PBD to sell at a lower price, but that’s not the majority, some people also completely ignore Duty & vat full stop and sell beer for cash no paperwork, & use other peoples casks and minimal labelling to mask their criminality. Changing PBD wont stop that happening.

Many of the regional brewers complaining of smaller brewers using pbd to undercut, have used PBD to grow to the size they have and then found they have hit a massive wall, and many of these regionals are selling beer at £50-55 a cask which is far less than it needs to be for a smaller operation to make a basic living.
Moorhouses sell lots of Beer to Wetherspoons, Spoons pay a pittance for cask beer & I as a small brewer could not survive on the margins that spoons pay, so don’t supply, (I also do not use PBD to discount) therefore if Mhouses want their argument to stick they need to get out of the bargain basement trade first, you cant have your cake and eat it.

The issue as I see it is many small brewers don’t understand what PBD is (its for investing in growing your business), and there needs to be a change in the visual aspect of beer duty for everyone in the supply chain to be more aware elements that make up a cask or bottle of beer.

If Duty was separated from the product price, and charged at full rate on invoicing then claimed back at the correct rate via the duty return, then nobody would be likely to use PBD to discount it would make a more level playing field.

It would also make the tax element of a pint more visual to the retailers, who would then be more likely to pass this information onto the customers. This I would hope in turn would then take the pressure off the brewer/wholesaler to discount as much, because the retailer would arguing over a smaller number that does not contain the unavoidable (tax element) of the product. & when separate brewers should then be able to justify why their small batch high cost quality ingredient beers, should command a decent price on the pumps, & the tax is tax, not an exotic ingredient.

Separating Duty wont avoid criminality, the only way to do that is be vigilant and report it if you experience it, we will never see a decrease in duties whilst many are avoiding taxes all together.

I agree with Shane. Also to note is the practice of wholesalers in the market who want huge discounts for pallet orders. Small breweries pay for haulage (and return if not ecask). All the wholesalers want credit terms and the good ones pay on time but others do not. Small brewers then are chasing after monies owed rather than being able to use funds for further investment. If you take that funding gap across the whole market its a lot of money in wholesalers, regional brewers and pubcos pockets and not in the hands of the smaller players who are trying – on the whole – to move the market forward.

I suspect more sour grapes than dodgy deals. The pbd in most cases will hardly compensate for poor economy of scale. Idea that new breweries starting out are forced to do offers freebies and to completely undervalue their own time and labour seems believable and idea of a landlord being so desperate as to spend an afternoon ringing around trying to beg a free pin or a tenner off seems believable. equally once brewed for an operation with surplus empty casks then a choice to sell cheap rather than down drain may make sense as long as cheap is more than cost of the tax ( delivery costs may be time and money for most people but maybe not if you are on the scale of thinking of it as detour on way home from work) maybe a few more failing pubs should try brewing themselves

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