Last week, there were two somewhat similar news stories, with St Austell Brewery buying Bath Ales, and Camerons buying the pub estate of Leeds Brewery. The two deals were not exactly the same, as St Austell also bought the brewery, while Camerons didn’t, but both involved acquiring pub estates of 11 and 7 pubs respectively, mostly high-quality venues on prime sites.
|Leeds Brewery's Duke of York in York|
For anyone who sets up a microbrewery and grows beyond a certain size, there’s always a siren voice saying “why not buy a pub to give you a guaranteed market for some of your production?” There’s an argument for it, but you have to remember that you’re getting into an entirely different kind of business. You’re entering into a whole new world of loans and mortgages, and you have to remember that most of the sales won’t be your own production. You may also deter competing pubs from buying your product.
If a brewery wants to expand, it seems to me that there’s a clear choice between becoming primarily a free trade brewery, as opposed to a tied estate brewery. There’s a case for each strategy, but, if you try to ride both horses at the same time, you’re likely to come a cropper. Locally we have Fool Hardy, who started off as a brewpub operation in the Hope, and have now expanded to a second pub, the Spring Gardens in Compstall, but don’t really sell into the free trade. And on a larger scale, Joules have built up a substantial tied estate of maybe twenty or so pubs now, but do little free trade business.
On the other hand, the recent crop of highly-regarded local craft breweries haven’t shown much interest in acquiring pubs and bars. It must also be remembered that the financial risks associated with building up a pub portfolio have over the past few decades caused a number of breweries to come to grief for reasons unrelated to brewing performance, such as Trough, Smiles, Archers and Copper Dragon.
I’m not that familiar with Leeds Brewery’s tied estate, but on the face of it, the deal seems to make sense, to cash in to concentrate on brewery expansion. Richard Coldwell, on the other hand, is a touch sceptical. By all means, once you’ve reached a certain size, buy a bar, or even two, to serve as a brewery tap and a showcase for your products. But any new brewery needs to recognise that, in acquiring a tied estate, they’re venturing into a very different business from brewing.
I’m also rather doubtful whether, in the current marketplace, the tied estate route is really the best path to expansion. Yes, it seems to work for Joules, but, much as I like their pubs and their general approach, I continue to harbour doubts as to whether it’s really a sustainable long-term business model. In general, customer demand is ever more for choice, choice, choice. If you do want to concentrate on tied houses, you need to establish a clear concept, identify the kind of location where it’s likely to work, and maximise the amount of your own production sold through the pumps.