As the UK brewing industry becomes increasingly centralised, the country’s reg ional brewers are seeing more and more potential routes to the market disappear.
Where there were once six national brewers: Allied, Bass, Courage, Scottish & Newcastle, GrandMet and Whitbread, there will very soon be only three controlling more than 80 per cent of beer supply. And sales of traditional ales are falling by an estimated 11 per cent per year.
Against this background, some regional brewers fear a time may come when their brands are more easily available in growing overseas export markets, than in the UK. One regional brewer says: “Traditional ale is declining but not necessarily because of consumers’ preferences, it is because our route to market is being restricted.
“The centralisation of the retail outlets, together with companies with vertical integration – supplying their own outlets – is restricting the ability to stock other products from other suppliers.”
The situation leads Nigel McNally, head of marketing at Bedford brewer Charles Wells, to say: “It may mean that in a few years’ time my beers will have more opportunities for being marketed abroad than in the UK.
“Given this situation, UK consumers who appreciate ales from independent family brewers will have more chance of drinking them in France, Italy or the US than their own country.”
The nationals are still very much the route to market for many of the regionals through the guest ale provision, established in the 1989 Beer Orders, which gives tenants in national pub estates the freedom to buy a cask ale from outside their landlord brewer.
But with Scottish & Newcastle’s takeover of Courage in 1995 and the impending takeover of Carlsberg-Tetley by Bass – the Monopolies & Mergers Commission reports on the 200m deal on March 24 – there are now less players to negotiate either a permanent guest ale listing or even a short-term slot in a roll ing guest ale programme.
In the early Nineties, small independent breweries such as Adnams of Southwold, Suffolk, grew dramatically on the back of the guest ale provision. Others like Fullers have benefited as big brewers bought their top ales in bulk for national distribution.
But with the concentration of brewing power into fewer hands, the regionals are finding trading conditions increasingly tough.
Even the Office of Fair Trading’s decision last week to allow the Inntrepreneur estate of 2,900 pubs to supply the beers of its choice to its licensees – not just from its existing supplier Scottish Courage – might not help the regionals. Its tenants will remain tied to whatever new agreements Inntrepreneur makes.
In fact, the OFT move could make the situation even more difficult for the regional brewers. The new undertakings may prompt Inntrepreneur to cherry-pick brands from an almost limitless range of big and small brewers to improve consumer choice and give the regional brewers a new route to market.
Under the arrangements, Inntrepreneur’s new tenants will lose the right to take a guest ale, to the alarm of the Campaign for Real Ale, which thinks the “guest beer law” should be extended to all large pub operators, not just all large brewers.
Stephen Cox, CAMRA campaigns manager, says: “The DTI announcement does provide that publicans will have a wider choice than the current range supplied by Scottish Courage, but it will be a range decided by Inntrepreneur, and could be merely the range of another national brewer in addition. There is far too much opportunity for favouritism and stitch-up.”
The UK market is increasingly skewed in favour of the nationals, which can offer both their tenants and the free trade (pubs not owned by brewers which have the freedom to buy beer from any supplier) attractive discounts. With the mergers, tied tenants have access to a much broader portfolio of powerful, heavily marketed brands and less desire to bring in less well-known ales.
Sales of traditional ales are in decline at a rate of about 11 per cent a year. Cask ale is a living beer which must have a certain rate of through put or it will go off – giving some unlucky drinker a bad pint.
If a smaller range of unusual ales is offered, consumer interest falls, and sales dip in a vicious circle.
If the role of the guest ale becomes just a gimmick, to be listed very infrequently and for a very short period of time alongside a handful of big brands, the small brewer also suffers.
Paul Nunny, deputy managing director of Adnams, says: “I don’t build a customer franchise if my beer is here today and gone tomorrow.”
This fall in cask ale sales has been blamed on the rise of nitrokegs, pasteurised beers such as Bass’s market leader Caffrey’s, which have had an incredible impact on the market in less than three years.
Nitrokegs are as easy to keep as a lager – landlords do not have to be trained to keep them as they do with cask ales – which means the ales are consistently of a high quality.
Served chilled, they appeal to younger drinkers raised on a diet of ice-cold lager, as well as seasoned stout and bitter drinkers. And because they need a more elaborate system of cooling equipment, unlike the cask ale which can just be changed with a different beer clip, there is more incentive to have them permanently listed on the bar.
The upshot of increasing market concentration is a heavier emphasis on marketing and innovation among the big regionals. Charles Wells has launched an illuminated bar top font, to bring an attractive point of difference to its nitrokegs and cask ales.
Colin Stump, commercial director of Mansfield Brewery, says his company is planning a heavyweight regional TV advertising campaign. He says as the big brewers merge their expertise the pace of new product development in the market will inevitably quicken. “We have got to be bloody fast followers,” he adds.
Meanwhile, Stephen Oliver, brewing and brands director at Marston’s, says his company has concentrated its best efforts behind servicing the most important accounts – where Pedigree is a permanent or “neo-permanent” beer rather than a less profitable guest.
The selling power of the national brewers has to some extent been checked by the rise of the independent non-brewing pub chain – operators such as Greenalls and Pubmaster. As trading conditions get tighter, the big regionals with the vision to invest in brand building will continue to see their ales in demand.
But the future looks bleaker for the also-rans – the brewers which cannot afford much marketing investment and who cannot get their beers listed outside their tiny tied estates. They may be faced with the crunch decision of choosing between being brewers, or just pub owners.