... And good riddance to the beerage
Simon Nixon
Usually the passing of a major UK company into foreign ownership — and with it the ending of British pretensions to global leadership in another industry — is the cue for national soulsearching and recrimination. Not so the demise of Scottish & Newcastle, which finally agreed last month to be carved up by Denmark’s Carlsberg and its Dutch rival Heineken. Except perhaps in its native Edinburgh, the brewer of Fosters and John Smith’s bitter is likely to go unlamented — either by its shareholders or customers.
Nobody who remembers the shabby state of British pubs until just a few years ago — the grotty furniture, the limited choice of mass-produced beers, the appalling food and stinking urinals — will shed tears for the last of Britain’s big brewers. For decades, the beerage, as the brewing elite were known, were a cosseted bunch of arrogant monopolists — until their comeuppance arrived in 1989 in the form of the Thatcher government’s ‘Beer Orders’. That shake-up delivered a golden age for beer-drinkers and pub-goers, for which the demise of the big brewers has been a price worth paying.
Britain has always had an ambivalent attitude to brewers. ‘The beerage’ originally referred to the large number of brewers, including the Guinness and Bass families, represented among the peerage. Brewers used their enormous wealth to grease the political system, bankrolling the Conservatives who duly obliged by preserving the industry’s traditional privileges — including ownership of vast pub estates that sold only the brewers’ own beers. What the workers thought of the beerage was clear from the old song: ‘I’m the man, the very fat man, who waters the workers’ beer,/ And what do I care if it makes them ill,/ If it make them terribly queer,/ I’ve got a car and a yacht and an aeroplane,/ And I water the workers’ beer.’ By the late 1980s, the brewers may no longer have been watering the workers’ beer but many believe they were still taking the ordinary beer-drinker for a ride. The price of beer rose sharply during the 1980s and for no obvious reason. The industry had been through several waves of consolidation, leading to the closure of dozens of breweries and the disappearance of many local brands. But instead of passing on cost savings, the brewers appeared to be abusing their control of the pubs. When Elders, the Australian owner of Courage, launched a hostile bid for S&N, the Monopolies and Mergers Commission concluded this was a step too far. It didn’t just block the deal, it proposed a complete restructuring of the industry in what became known as the Beer Orders. It’s easy to quibble with the way the Beer Orders were introduced. Even today, nearly 20 years later, many in the industry believe they were the victims of a radical free-market experiment. There is still resentment at the way Lord Young, the then Trade and Industry minister (interviewed opposite), decided to implement the MMC’s recommendations with little consultation, announcing his decision on the Today programme before he’d told the brewers themselves.
But there can be little arguing with the outcome. For beer drinkers and pub-goers, the decision to force brewers to reduce the size of their pub estates to a maximum of 2,000 outlets and the requirement that all tied pubs should offer at least one ‘guest beer’ has been a huge success. In the hands of new specialist pub operators such as Punch Taverns and Mitchells & Butlers — currently in takeover talks, following M&B’s disastrous foray into financial hedging — Britain’s drinking dens have been transformed. Filthy boozers that had barely changed since the 1950s have been turned into chic new bars and wholesome gastropubs where women and families are welcome.
Best of all, the quality and range of beers on offer has improved. Thanks to the ‘guest beer’ provision, smaller independent brewers have flourished. There are now 500,000 brewers in Britain. Most are local microbreweries, but several traditional regional brewers, such as Adnams, Wadworths, Fullers and Young’s, have also survived in the new environment.
Last week, Greene King, the Suffolk group that has shrewdly acquired a number of independent brewers, reported beer sales up 6.9 per cent in 2007 in an overall beer market that declined by 2.3 per cent, suggesting the market for good British beer is growing at the expense of foreign lagers — and even the quality of lager has improved.
The losers from the Beer Orders were shareholders in the big brewers. But that’s partly the industry’s own fault. Largely run by family members and ex-army officers, the brewers were amateurish and complacent. Most embarked on disastrous diversifications into hotels, retirement homes and holiday parks. One by one, Whitbread, Bass, Allied and Courage quit brewing or succumbed to takeovers until only S&N remained. At the takeover price of 800p, S&N shares returned an average 8 per cent per year since 1989 — compared to the 10 per cent return on the FTSE 100. Even its most loyal shareholders won’t be sorry to see it go.
Simon Nixon is executive editor of BreakingViews.
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