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Volume 949: debated on Tuesday 2 May 1978

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asked the Secretary of State for Prices and Consumer Protection whether he will make a statement about his discussions with the brewers.

My right hon. Friend the Minister of Agriculture, Fisheries and Food and I met representatives of the Brewers' Society in December 1977 to discuss the Price Commission''s report on beer prices and margins. At that meeting we identified a number of areas where we wish to see changes made in the brewing industry, and these have since been explored in depth at a series of meetings between the Society and officials of the two Departments. Considerable progress has been made in these discussions, and my right hon. Friend and I accordingly met the brewers again today.The matters under review have fallen into three main areas. The first is the frequency of price increases. In recent times the major brewers have been accustomed to seeking increases every three months for at least part of their product range, and at the December meeting my right hon. Friend and I pressed them to make their contribution to the deceleration of inflation by extending the period between their own price increases. I am now glad to say that all price increases notified by the major brewers to the Price Commission since our first meeting have been accompanied by undertakings concerning the frequency of price increases. These undertakings cover periods ranging from six to 12 months. Subject to exceptional and unforeseen circumstances, therefore, their prices should remain generally stable until towards the end of 1978 or later. My right hon. Friend and I welcome this helpful contribution to reducing the frequency of price increases in the economy at large.The second major area of concern was with competition within the brewing industry. The Price Commission's report commented upon the unusual degree of vertical and horizontal integration within the industry and upon the barriers to competition resulting from it. In the recent discussions the brewers have pointed to the reduction over the years in the proportion of licensed outlets owned by them. They have now forecast that their present policies will lead to a continuation, and indeed acceleration of this trend. Furthermore, they estimate that by 1981 brewery-owned public houses will account for just on one-half of all beer sold, compared with two-thirds in 1967.We recognise that the publican "sells" a composite product comprising drink, food, environment and service. This makes competition between outlets particularly important. The Monopolies Commission in 1969 identified the dangers of local monopolies of brewery-owned public houses and during our discussions with the brewers we have urged upon them the need to press forward with action towards eliminating these monopolies. As a result, the Brewers' Society is now conducting a comprehensive review of the extent of local monopolies as a basis for a systematic programme to be produced within six months of further exchanges beyond those that have already taken place in the past few years. Such a programme must inevitably be spread over a period of years, but it is essential to the further development of competition in the industry that local monopolies should be progressively eradicated, and I welcome the brewers' determination to make real progress in this direction.I shall of course discuss developments in this matter with the industry from time to time, and meanwhile I have made clear to the industry my intention to examine any further proposals for mergers between firms in the industry with particular care.My right hon. Friend and I have also discussed with the brewers how the tied house system can be relaxed in order further to reinforce and stimulate competition within the public house. Brewers' tied houses already sell other brewers' canned and bottled beers on a considerable scale, as well as other brewers' draught stout and draught lager. However, following our discussions the brewers—representing over three-quarters of all tied houses—have now agreed to examine how draught ales too could be exchanged in areas where there is a demand. Such a step would be a very welcome extension of competition. As a further incentive to their tenants to maximise their sales and compete vigorously the major brewers have also expressed their intention to phase out as quickly as possible the practice of charging "wet rents"—which increase with the volume of sales—to their tenants.The third main subject of discussion with the industry has been investment, since the Price Commission also commented in its report upon the effectiveness of past investment in the industry. The brewing sector working group of the Food and Drink Manufacturing Industry EDC, on which the industry and Government Departments are both represented, is now undertaking a substantial study of both past and planned investment with the object of ensuring that the implications of past performance for the future are fully understood and acted upon; and I am confident that this co-operative enterprise will contribute materially to the future efficiency of this major industry.These very wide-ranging discussions with the industry have been conducted in a co-operative and constructive atmosphere which offers a promising basis for the future relationship between the Gov- ernment and the industry. The Government very much welcome the real progress that has been made towards increasing the competitiveness and efficiency of the brewing industry.