Storm brewing in UK beer business

As foreign brewing giants line up Bass and Whitbread as takeover targets, WCRS and Lowe will soon be forced to choose between big-spending brands. Rival ad agencies are licking their lips at the prospect.

News that WCRS is pitching for Holsten Pils (MW last week) has thrown its 17-year relationship with the &£10m Carling lager account into doubt – and sent a ripple of anticipation through adland.

Breweries may have fallen out of favour with the stock market, but for advertising agencies they still rank alongside cars and airlines as must-have accounts.

That’s why new business directors are rubbing their hands at the prospect of pitching for Carling – the UK’s best-selling lager brand – and eagerly anticipating the next wave of consolidation, which is expected to hit the European brewing industry at any moment.

Many longstanding agency relationships are certain to be consigned to the dustbin as Bass Brewers and Whitbread are swallowed whole by foreign competition.

It is by no means certain that WCRS will part company with Bass, and both parties remain tight-lipped on the subject. A Bass spokesman says: “WCRS is still working on the Carling account and so long as it is contracted to Bass we wouldn’t expect it to pitch for competitive business.”

WCRS declined to comment. But many observers expect a split sooner or later.

The beer producer has been steadily shifting business out of WCRS over the past year, with Publicis landing Worthington Creamflow and the Leith Agency taking over Grolsch.

Bass is believed to be on the verge of selling its brewing operation to a big European brewer, which is almost certain to lead to a full-scale agency review.

WCRS’ relationship with new Bass marketing director Mark Hunter has also been cited as one factor behind a possible split. One industry insider says: “When WCRS has had new projects, Hunter hasn’t favoured them. He has a set way of working which is not to everyone’s liking.

“It’s possible that WCRS thought these difficulties, and the situation resulting from the takeover, outweigh the benefits of having the business.

“At least the agency can now say that it has another iron in the fire [with Holsten Pils].”

Another agency head, who wishes to remain anonymous, says: “I wouldn’t blame WCRS if it resigned Bass. A new owner will call a review as a matter of course and it might feel that WCRS has gone as far as it can with the business.”

If WCRS eventually parts company with the brewer, the likely beneficiaries are Bass roster agencies Publicis, Euro RSCG Wnek Gosper, Roose & Partners and the Leith.

But they are likely to face tough competition from outside agencies.

Leo Burnett has been trying to get on to the Bass roster for several years, having made an unsuccessful pitch for Worthington last year and Caffrey’s back in 1998.

Ogilvy & Mather also pitched for Caffrey’s after losing Guinness to Abbott Mead Vickers.BBDO in 1998.

If Bass’ new owner seeks a safe pair of hands it may favour Grey Advertising, which resigned Woodpecker cider last May to pitch for an undisclosed beer brand.

Creative director Tim Mellors has a track-record of working with drinks brands and the agency is believed to have already approached a number of potential clients.

J Walter Thompson, Duckworth Finn Grubb Waters and other agencies without a beer brand will also be sniffing around for business.

The situation at Whitbread is more clear cut. Most observers believe its relationship with long-standing agency Lowe Lintas is rock solid.

If, as anticipated, Whitbread sells out to Belgian giant Interbrew, it is unlikely to call a wholesale agency review.

Over the past 20 years, Whitbread has worked closely with Interbrew to build Stella from a small niche brand to the UK’s best-selling premium lager. According to some estimates, it is now the fifth biggest packaged goods brand in the country.

Lowe’s subtle, humorous ad campaign is recognised as a major factor behind Stella’s success. According to the agency’s figures, every pound spent on ads generates &£19 in sales. One insider says: “The campaign is still building, which is remarkable after 25 years. Sales are still growing year on year.”

But Lowe does not handle Stella outside the UK, where the brand has a more downmarket position-ing and a very different tone of advertising.

Lowe may have to choose between hanging on to Stella or Heineken if, as expected, Heineken buys Bass.

The choice would be a simple one if the Heineken business were confined to the UK, where little money has been spent on it in recent years, but Heineken is becoming an increasingly important global account for the Lowe Lintas network.

If Heineken buys Bass, it may take the opportunity to relaunch the brand as a premium-strength product in the UK – in direct competition to Stella – so Lowe would have to choose between the two.

By contrast, the Scottish Courage roster will be largely unaffected by consolidation.

A pitch is under way for Beck’s, after the company decided it wanted to move the brand out of Mountain View and in a more mainstream direction. Its other agency relationships appear to be steady.

Scottish Courage is investing heavily in its brands and will this year spend &£56m on its four key lagers: Foster’s, Kronenbourg, Miller and Beck’s – an increase of about 40 per cent. It has also increased its spend on John Smith’s by 60 per cent – from &£12m to &£19m.

Of the other big players, Carlsberg-Tetley’s relationship with Saatchi & Saatchi appears to solid. But if the company is successful in its bid for Bass, it will almost certainly review its agency roster.

Agencies love beer brands because they are a shop window for creativity, their straplines often enter the vernacular and they are usually big spenders.

In truth, the battle for the UK’s beer brands will only begin in earnest when Bass or Whitbread finalise a sale.

When that happens, the game of “booze-ical” chairs between brewers and agencies will make or break more than a few industry reputations.

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