Subjects: The micro-pub movement, defining craft beer, pre-loading and Groceries Code clues on pubcos regulation 

In an earlier era, it might have been called “back to basics”, a return to the two core themes of the British pub that have defined it since the first Anglo-Saxon alewife hung a green bush from the eaves of her hovel to show that she was open for business: drink and chat.

At least three more “micro-pubs” popped up this week, one on the edge of Wolverhampton claiming to be the first such outlet in the West Midlands, another in Hucknall, Nottinghamshire and a third (which was granted its licence but still has to obtain planning permission) in Devizes, Wiltshire. These openings bring to more than two dozen the number of micro-pubs opened since Martyn Hillier founded the genre in 2005 with The Butcher’s Arms in Herne, Kent.

For five years, Hillier marched pretty much alone, before a burst of openings beginning in the second half of 2010. Seven new micro-pubs appeared in 2012, and ten so far this year. This may not yet be a tidal wave: but it certainly appears to be more than a ripple.

The essence of a micro-pub is not just that it is small – most have only one room, and a capacity of no more than 25 or so customers before things start to get uncomfortably sweaty – but that it eschews almost everything the modern pub chain owner would regard as essential in today’s British boozer. There will be no TV, juke box or gaming machines, and no food except traditional snacks. It will almost certainly sell only cask beer (most likely from local small brewers), cider and wine: no spirits, no famous-name lagers. The big opportunity for entertainment is the chance to chat with the other customers, who may or may not be complete strangers.

This is, of course, very far from a new idea. The local village alehouse provided just these facilities for centuries. A tremendous boost to the country’s stock of small drinkeries came with the Beerhouse Act of 1830, which resulted in tens of thousands of mostly small beer-only on-licence outlets with limited facilities opening in cities, towns and villages: the micro-pub is in essence the beerhouse for the 21st century. While licensing magistrates began to cull these beerhouses in their hundreds at the start of the 20th century, shutting them down as “surplus”, many survived pretty much unaltered to well past the Second World War, except that almost all eventually acquired licences allowing them to sell spirits, along with the trappings of modernity: not just a proper bar, a carpeted floor, electric lighting and decent toilets (I still remember fondly the outside gents at an isolated beerhouse in the Hertfordshire countryside in the 1970s, where you could gaze up at the stars while going about your business) but gaming machines, televisions, keg beers and lagers, food beyond crisps and pickled eggs.

As the very last of the unreformed beerhouses disappear, however (there are reckoned to be fewer than 20 “unaltered” pubs left in Britain), the micro-pub appears to be resurrecting their best values. The slow rise since the 1950s of the home as the place for entertainment and relaxation, and drinking, rather than the pub, placed increasing pressure on pubs to attract people through their doors. But pubs’ efforts to compete with the home, paradoxically, badly damaged their ability to be what the American sociologist Ray Oldenburg called “the third place”, that haven which was not-home and not-work where people could go and relax from the pressures of home and work, and talk and laugh and joke and interact with others with whom one had no relationship of responsibility. Instead many pubs became places where it was impossible to relax: too noisy, full of flickering distractions, full of strangers who you couldn’t chat with, even if you wanted to, because you couldn’t hear each other.

There has been, and still is, a suggestion that the coffee bar is replacing the pub as the “third place”, the community hub where friends meet up and meet new friends. But to believe this is to underestimate two important factors: the importance of alcohol as a social lubricant, and relaxant, and the role that the pub plays in Britain’s image of itself. Think of the vital parts that The Rovers Return, The Queen Vic, The Bull in Ambridge have their hugely popular fictional societies. Britons of all kinds and classes wish to live in communities where they had a Rovers Return or a Bull of their own to use as their third place. Our self-image is that of a pub-going nation. No Briton ever said after work: “Coming down the coffee bar?”.

The micro-pub movement, by stripping back to the basics, appears to be trying to fill that need for a third place where people can interact with others in the community that many clearly feel is lost in many pubs today. It is a point that seems as yet unremarked, incidentally, that the micro-pub movement only took off after the ban on smoking in public places: with barely one in five people in Britain smoking today, it appears too few people wanted to spend time in small smoke-filled rooms for the idea of a pre-smoking ban micro-pub to work.

There will have to be at least a hundred times more micro-pubs open before it can even start to be called a genuine movement. They will have to be opening in more varied places than small towns. But if and when that starts happening, pub chain owners are going to have to think about whether the pub offer has become unnecessarily overcomplicated in the past 50 years.

When it comes to the craft beer category the question is: how do you define the undefinable?

Unlike the American Craft beer category, where inclusion is based rigidly on the size of the brewer and independence from non-craft brewers, the British craft beer movement is much more loosely defined (and more fiercely debated). Many brands already have many “hand-crafted” credentials, making the differentiation of modern craft beer more difficult and contentious.

To understand the resurgence in craft beer brewing, we at CGA Strategy have gone back to look at the origins of the American movement which, with broad brush strokes, can be summarised as: Following the 1979 deregulation of brewing in the USA, enthusiasts, disillusioned with monolithic beer companies, were given the opportunity to start brewing. This led to the revisiting of old beers and styles, with the focus from the brewers being to provide a high quality, interesting product.

In the UK, we see craft beer brewing looking back at the ‘great tradition’ of beer with its many styles, reappraising it (where necessary) and bringing it into the 21st Century. The rapid growth in the number of breweries, combined with greater experimentation in styles (such as Black IPAs and Saisons) and hops highlights a healthy brewing fraternity looking to bring new experiences in great beer to the people. Hearteningly, looking to the past has also led to the resurgence of interest in classic beers, styles and recipes, both from Britain and the continent (particularly Belgium and Germany).

Equally important is the focus on quality and consistency. Any bottled beer is susceptible to being light struck – some colours more than others. To minimise the effect that light has on craft beer we see a more limited range of different package types. Thus, brown bottles have replaced clear, whilst 330ml cans are increasingly seen as a viable alternative package type, to maintain quality of liquid. Sticking with the method of dispense, high ABVs, limited availability and high prices have opened the consumer up to drinking draught craft beer in pints, halves, thirds and flights – a far cry from the traditional round of pints. The glassware associated with these brands will often highlight this fact not with branded pint glasses, but smaller sizes and more of a niche aesthetic.

Finally, these are modern beers with the reappraisal of branding and packaging central to the target audience. Whether a label has a retro or lo-fi feel, a modern feel or bespoke illustrations from Ralph Steadman, the craft in packaging design is often a key selling point. With so many beers and brewers out there, a clear and consistent, fresh approach to branding is essential to generating interest and ensure beers stand out in the increasingly crowded bars and shop shelves.

So how has all of this informed the creation of a framework for craft beer?

Price: Firstly, we assessed the price point of a product. Craft beers are traditionally made by smaller brewers who aren’t able to enjoy the luxury from economies of scale of production and distribution networks. Consumers expect this and are prepared to pay a premium for a craft product. Therefore our first criteria was a high average price point.

Quality of Distribution: CGA segment the market by outlet style and the quality of the outlet within that style. As a smaller, more niche product craft beer is typically distributed in higher quality outlets than not, so we looked for brands having over 75% of their distribution within ‘gold and platinum’ outlets.

Size of Distribution: Craft beer brands are naturally smaller and harder to get hold of than large mainstream brands. Only a handful of the brands that we identified were in more than 1,500 outlets.

Packaged Dispense type: As noted above, there is a focus on quality above all else. Here we looked for beer distributed in brown bottles or cans.

Draught Dispense Type: We did not differentiate by cask or keg.

Perception of Brewer: The modern consumer is unlikely to be aware of whether a multi-national owns a particular brand or not. We have therefore not excluded brands owned by multi-nationals within our definition of craft (Goose Island and Blue Moon are the obvious brands to reference here).

We used the above criteria to create a short list of brands. From here, we assessed each brand individually and asked:

1.) Does the beer differ significantly from the styles available to mainstream consumers in the last ten years. Is it a classic style made with New World hops? Is the brewer generally attempting to challenge or create something interesting or resurrect a style?

2.) If a brand is British or American is the branding modern, is it inclusive? For continental beers or brands that have been revived we relaxed this. With greater awareness of the diversity in beer, there is renewed interest from the greater public in classic beers (particularly those from the places like Belgium) where updated branding may not be appropriate.

3.) Has the brand been historically widely available in GB?

Using these criteria will not meet everyone’s expectation of what craft beer is, particularly for those who are more inclined to follow the American definition. For those in the know, there will undoubtedly be some discussion as to whether a particular brand should be considered as craft or not (and we welcome the dialogue that will arise from this). However, we believe we have created a collection of brands which the average consumer would recognise (even if they were unable to name them explicitly as craft) as being different from what they have previously been exposed to, which ultimately is the point of craft beer. It’s good, interesting beer, brewed by people who care and want to get others excited in their passion.

A very ordinary piece of research conducted in the Plymouth night-time economy appears to have led to some quite extraordinary claims. Researchers Adrian Barton and Kerryn Husk of Plymouth University have concluded that “Alcohol use has risen as a result of three interconnected factors: price; availability; social acceptance of public drunkenness”. Well, it’s not a good start when you get even the most basic of facts wrong about the context you’re researching – sorry guys, but alcohol consumption is, er, falling and has been since 2004! But they go on to say that current policy in the night-time economy (NTE) is based on a ‘pub-club’ model of drinking when it should be based on a ‘home-pub-club’ model. This is a reference to ‘pre-loading’ – the practice of drinking at home before going out.

The research sampled 597 drinkers out in Plymouth’s NTE over a period of six months between late 2010 and early 2011. The young people questioned said they didn’t feel safe in the NTE and prefer the safety of drinking with friends at home. The researchers concluded: “It would appear that those charged with designing pubs and clubs fail to either understand or accommodate the needs of young drinkers, with the result that they prefer to drink at home in spaces that can provide the environment required for early evening drinking.” Barton and Husk added: “In our minds, pre-loading is a significant cultural shift. At present policy makers’ understanding of the how and why this practice is limited. As a result alcohol policies are failing to understand the significance of pre-loading….seeing it as only being a result of economics.”

It appears that of the 597 people sampled 406 were aged 17 to 30 and of those 268 had pre-loaded, i.e., 44% of the whole sample. So, can we conclude that 44% of people out in the NTE pre-load – and that this is the major cause of crime and disorder on a Saturday night? Well, not quite. Having read the newspaper reports of this research, I then read the research. It appears that all 597 of the people surveyed completed the researchers’ questionnaire before they were released from the police cells! All of them had been arrested and charged with offences of crime and disorder. So, to select a group of offenders and then to draw sweeping conclusions about how licensed retailers just aren’t designing their pubs properly to “understand or accommodate the needs of young drinkers”, is simply a bizarre conclusion. It would be more accurate to say that pubs and bars are not designed for the needs of young offenders who demonstrate an abusive use of alcohol – well, I should hope not! And what of the 56% of the sample who had not pre-loaded? What caused their offending?

I don’t deny that there is a problem of people drinking at home and arriving in the NTE drunk. But I doubt that this is a new phenomenon. My earliest recollections of working in Liverpool’s NTE, when I was a student, involved people bringing miniatures of spirits into pubs and bars with them. At the end of the night under the fixed seating and in the toilets we would find lots of empty vodka bottles! This isn’t quite pre-loading at home, but it’s a very close cousin. People have always supplemented their night out with cheaper off-licence booze, the only new thing about this is that we’ve given it a new medical-sounding name and thereby convinced ourselves it’s a new phenomenon.

Meanwhile, in the far-flung reaches of the Canadian province of British Columbia mainstream alcohol research is in an even more parlous state. You may recall headlines only a few months ago about “compelling new evidence from Canada” about the effectiveness of minimum unit pricing. This was research to which our own Tim Stockwell contributed. Stockwell, who was one of the authors of the notorious Sheffield Alcohol Pricing Model, produced research from British Columbia to the effect that a 10% increase in the price of a ‘standard drink’ (a bit like a ‘unit’ here) resulted in a 34% decrease in alcohol-related hospital admissions and deaths. ‘Proof’ that minimum pricing worked! This research was based on the period 2002 to 2011. Dr Sarah Wollaston MP even recommended that David Cameron should familiarise himself with this ‘evidence’ before abandoning minimum pricing.

Well, now Tim Stockwell and others have produced some new research from British Columbia. In this research they state the opposite of what had previously been asserted: “The rates of hospitalisations in BC for conditions related to alcohol have shown a significant increase since 2002, reflecting an overall increase in alcohol consumption in the province.” Their solution? To raise the price of a standard drink from $1.07 for both the off and on-trades to $1.50 for the off-trade and $3.00 for the on-trade. This blows a hole in their previous research and gives the lie to those who believe that a minimum price here would only ever affect the supermarkets.

Whether they quote a mathematical model that proves hiking prices works, or that it doesn’t because they aren’t high enough, seems to depend not on science, but on which audience you want to convince.

On holiday recently I experienced some wonderful professional licensed retail, in the middle of nowhere. Turns out mine host (who was running a pub and small guest house with its own recording studio) had received Scottish & Newcastle training in an earlier part of his career. It would be understandable for this man, and the many trying to run their businesses and keep up to date with wider industry news, to have missed the recent activity with the Groceries Code. So what is it and why does it matter?

The government is, of course, considering a statutory code for pubs. Will it go there? Well, most but not all consultations end up being implemented. So statistically it is likely that it will. Occasionally governments do U-turns (minimum pricing is a prime example) but that is usually when big business really gets its act together. The pub industry does not have a good track record on this. Moreover, Vince Cable is less likely to be swayed by lobbying than a policy advisor close to No. 10. So it will probably happen.

But how might it work? It is highly likely that the model used will be based on the Groceries Code Adjudicator, which went ‘live’ on 25 June of this year. It appeared because ‘self-regulation didn’t work’ and its key features are: A part-time ‘expert’ adjudicator; A small back office of civil servants and lawyers; it applies to the biggest supermarkets (the top ten); likely annual levy is in the region of £80,000 per year; supermarkets also have to pay investigation costs (perhaps £100,000 to £200,000 a time); the adjudicator can then fine supermarkets up to 1% of UK turnover; anonymity of complainants is guaranteed in law; it has taken four years to get to this point and it’s not fully up and running yet; there is a likely maximum of only four investigations a year; arbitration is also an option (without anonymity); there is a focus on pre-contract awareness.

A few thoughts arise. If this happens it will clearly be expensive for the pub industry. As there may be fewer paying, their annual levy may be even higher. The current pub processes have a much higher throughput than four cases per year so a large waiting list may develop.

How will they prioritise? The Groceries Code priority criteria are: impact on supplier or sector (including consumers); strategic importance; risks and benefits (likelihood of changing behaviour/practices); resources (how intensive will the investigation be).

So, if the complaints justified it, you could imagine three or four thematic investigations each year each looking at a different part of the code (rent, pre-entry, dilapidations et cetera). It could well have a more selective and strategic feel, seeking to highlight and challenge endemic problems rather than processing a large number of smaller and repetitive claims. Crucially though, any fines go to the treasury, not the wronged party. The adjudicator can arbitrate instead though, which is not anonymous and starts to look much more like the current pub process. In that case, the tenant can get the money. It will be interesting to see how the balance between grocery investigations (and fines) and arbitration emerges.

But, as with pubs, perhaps the real benefits for supermarket suppliers may well be in the pre-contract ‘education’. Naive signing of complex contracts has always been at the core of the problem. The current pre-entry training for pub tenants will no doubt be of interest to the Groceries Code office.

Finally, don’t hold your breath. Statutory regulation will need an Act of Parliament. The fastest a bill on statutory pub codes could get Royal Assent is probably next Spring. It could be up and running as early as two months after that, as there is an analogous office in place. Some readers will, of course, be aware of all this as alcohol supplies to supermarkets are in scope for the Groceries Code. For the rest of you, who are hopefully too busy running your businesses to get involved in endless gossip, I hope this is a succinct take on what the future might look like. Grocers showing publicans the way – the old family brewers would be turning in their graves!