Much debate still rages in relation to stocking requirements within a Market Rent Only (‘MRO’) agreement.
Firstly this issue only applies to the Pub Owning Businesses (‘POBs’) that brew their own products, such as Heineken (Star Pubs & Bars), Greene King and Marston’s.
All three brewers as above propose quite different levels of stocking requirements within their MRO “full response” leases.
Generally to date I have found that by far the most restrictive stocking requirement has been proposed by Heineken, who usually propose within their MRO lease a stocking requirement for all keg products.
Clearly the legislation does allow for some form of stocking requirement, but is a stocking requirement to cover all keg products compliant?
In a word – NO…
If we review the legislation, Section 68(7) of the Small Business, Enterprise and Employment Act 2015 (“SBEEA”) states:
The contractual obligation is a stocking requirement if—
it relates only to beer or cider (or both) produced by the landlord or by a person who is a group undertaking in relation to the landlord,
it does not require the tied pub tenant to procure the beer or cider from any particular supplier, and
it does not prevent the tied pub tenant from selling at the premises beer or cider produced by a person not mentioned in paragraph (a) (whether or not it restricts such sales).
Clearly a stocking requirement for all keg products is in breach of this legislation, as it would prevent the tied pub tenant from selling beer produced by another person.
Therefore the question is what level of stocking requirement may be considered compliant.
Unfortunately this is not always a straightforward question to answer, as to be compliant with the legislation the stocking requirement may not be unreasonable.
What may be considered reasonable at one site, may not be reasonable at another.
For example, let’s consider a site previously owned by Punch Taverns that has recently transferred to Heineken ownership. This site has no history of having ever stocked a single Heineken product. It would be far less reasonable for Heineken to impose a stocking requirement at this site compared with a site that they have always owned with a history of purchasing products from Heineken’s core portfolio.
Another example – I would suggest Greene King would have a far stronger case to impose a stocking requirement at a site that has always been, and is clearly signed as a Greene King site – as compared to a site that was not long ago part of the Spirit Pub Company.
Therefore one has to consider the individual site, and the impact the stocking requirement may have in determining whether reasonable or not.
However, crucially – upon receipt of a MRO “full response” – one only has a narrow window of opportunity to reject the full response.
So if you consider the stocking requirement would have an unreasonable impact on your business, it’s vital to seek some advice on the matter.