Friday, 25 January 2019

Turning Japanese

There was shock news this morning when it was announced that Japanese brewers Asahi were buying Fuller’s brewing business for £250 million. Fuller’s will retain their pub estate and enter into a long-term supply contract with Asahi. It’s fair to say this came as a complete bolt from the blue and hadn’t been even hinted at by any commentators on the industry. It’s also surprising in that the major international brewers, with the exception of Molson Coors and Sharp’s, had in recent years largely turned their back on the British cask beer sector.

Asahi already own the Meantime brewery in London, and a number of brands including Grolsch and Peroni, but they aren’t major players in the British beer market, so the deal doesn’t really raise any competition concerns. From a purely financial point of view, it is entirely understandable that the directors said yes to an offer it was hard to refuse.

However, it is disappointing news in that it represents a further blow to vertical integration in British brewing. This has historically been a key factor in establishing distinctive identities between different pubs. If you don’t have any stake in brewing, then the temptation is inevitably going to be to stock the same popular beer brands that all your competitors have, thus overall reducing the amount of choice available to drinkers. This was well summed up by Tandleman here:

The track record of vertically integrated businesses that have sold off their breweries to concentrate on running their pubs is a distinctly mixed one. Young’s is still in business as an independent company, but whatever happened to Boddingtons or Eldridge Pope? And the company loses its distinctive USP and just becomes just another business running an estate of pubs that must be ripe for merger or acquisition. What is there that distinguishes a Young’s pub in the customer’s eye from a Stonegate or M&B one? Brewing is something that is in the blood, while being a landlord of pubs is just another way of making money.

While the future of the Fuller’s brewery is secure for the time being, there must be a question mark over its long-term survival given that it occupies a prime piece of West London real estate. And there’s another brewery located about 60 miles to the north that I’m sure would have some spare capacity to fit the Fuller’s beers in if they asked nicely...

There will also be questions about the future of the Gales beer brands, and of the Dark Star brewery in West Sussex that Fuller’s bought only recently.

24 comments:

  1. There is no room for mid sized cask ale brewing. They smelt the coffee and sold out. There's money in a middle class gentrified casual dining restaurants.

    It's either macro beer or shed filth. Take your pick.

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  2. There'll certainly be money in the pubs, when the company eventually ends up in the hands of an investment fund 'in the interests of the shareholders' and the Fullers signs over the doors gradually disappear, leaving nothing but an even-more-shadow-of-its-former-self London Pride being churned out of a Bedfordshire industrial estate.

    The remaining independent family brewers with a large tied estate and strong nationally-distributed brands (yes, you, Shepherd Neame) will no doubt be watching with interest.

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    1. Interesting that you're already assuming that Bedford (or Wolverhampton) is the inevitable end-point of the Fuller's brands. I don't think Shep's beers have a very good reputation now, so they wouldn't make such an attractive target. Fuller's are the one heritage ale brand that even crafties show some respect to.

      Badger might be of more interest - they're very big in the off-trade, but have stopped distributing their cask beers outside their own tied estate.

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    2. Bedfordshire was more of a generic rather than a specific location, but the sentiment remains. Either way, I think the brewery will be doomed because of its development potential, as will most of the beers it brews. Cutting the estate away from brewing makes stark business sense because its near £560m value and the revenues from it far exceed those from brewing. I think Sheps would fit the bill for a similar sale for the same reasons - their estate is worth some £300m. Hall and Woodhouse as a company is worth a tenth of Fullers and while their bottled brands have some national distribution, volumes are nowhere near Fullers or Sheps, and I believe they're already on Marston's radar anyway...

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  3. I haven't had a Dark Star beer since the Fullers takeover.

    This is not because I'm boycotting them or anything petty like that. I simply haven't seen a new Dark Star beer available anywhere for over a year. The idea that distribution and availability inevitably increase when a large party comes on board doesn't really seem to hold true.

    Indeed it may have had the opposite effect - the sort of pubs that I like to drink in have themselves deliberately stopped taking Dark Star beers.

    Conversely, I have had quite a few Fullers beers in the past year.

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  4. The FT had a decent take on this suggesting there is little in mid sized brewing. It's either economies of scale or small brewers duty relief. Go big, go small or go home.

    Robinsons have a similar dilemma. The business is a pub estate of middle class casual dining restaurants. The brewery is almost a seperate business. Many of the mid sized breweries are in that space.

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    1. The Stafford Mudgie26 January 2019 at 02:10

      CL,
      Yes. “As a mid-sized brewer” Fullers “said it was being squeezed between the global brewers and the 2,000 smaller brewers across the UK”. Fullers says that tax breaks given to microbrewers and the power of the big global drinks firms has left little space at the bar for those in the middle.
      Most worrying perhaps is that the 'new nationals' make far more money from pubs than from brewing and the two tend to be run very much as separate businesses. And without the 'new nationals' there would be precious little 'recognisable' real ale about for 'the ordinary drinker', the oddly named offerings from the 2,000 smaller brewers not being worth the risk.
      It should also be remembered that Fullers have won the Champion Beer Of Britain more often than any other brewer - and that in recent years they have been more innovative, and are probably better respected, that other 'big' breweries.

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  5. This is very depressing news for those of us who love the likes of Taylors and Wadworth. I used to love Youngs and still love Fullers. Youngs beer is tasteless now brewed in Bedford. Fullers brewery will be closed and sold off for housing soon. You can forget Dark Star too.

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  6. Afaik, fullers was a public company which means that the board has some kind of a legal duty not to turn down 'offers they can't refuse'. Private companies have more freedom if their proprietors' hearts are still in it. How many of the remaining smoke-stack breweries are public/private?

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    1. This is a point made by Martyn Cornell in this blogpost, which puts a much more positive spin on the news than most people have.

      Marston's and Greene King are widely-held public companies, but most of the other remaining family brewers are either entirely private or have a majority of shares controlled by the founding families. This certainly applies to Sam Smith's and the four in Greater Manchester.

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  7. A sound business decision.

    Would many of you miss Fullers. I actually can't remember the last pint of Pride or ESB that was anything better than OK. Of course, pubs influence quality as much or more than the brewery, which just shows that few.pubs care much about pushing their Pride these days. If I'm wrong, tell me where it's great, rather than OK.

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    1. The Stafford Mudgie27 January 2019 at 08:45

      Martin,
      You might be wrong as rarely do I use a Fullers pub without hearing something like "the Pride's drinking well today"!

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    2. I go to Fullers pubs maybe 10-12 times a year.

      I cannot remember the last time anybody in my party ordered Pride in one. Literally not once in the last decade or so.

      You can get Pride anywhere, so it follows that if you're in a Fullers house, one takes the opportunity to have Chiswick or ESB or Seafarers, or their current seasonal etc. Is this logic not followed universally?

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    3. Anchor and Hope, on the Lea Navigation in Hackney, serves the best Pride in London.
      AP.

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  8. I admit to feeling sad that another family owned company sold out to a large buyer. I am a big fan of Fullers especially the ESB. However, I also think that all the gloom and doom has more to do with us than any guaranteed negative result of such a purchase. I take heart in a lot of what zythophile wrote in his piece. I also think about the two people I met in Manchester recently who asked me what "London Pride" is? I was shocked two people had never seen Pride before. Perhaps Asahi will develop this untapped market and keep the current quality. Their track record says we should give them a chance.

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  9. The Stafford Mudgie28 January 2019 at 01:43

    But Chiswick Bitter is now just an occasional beer.
    Long gone are the times when it one of their three main cask beers.

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  10. Everything in this country is for sale. When Corbyn nationalises it all, then it'll return to the people hands. Then we'll have the people's bitter.

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    1. Something to look forward to. We don't need hundreds of different ales, all basically the same, different shades of brown. We need one decent one. I like the sound of Corbyns Peoples Bitter. I'd vote for that.

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    2. Surely it would be People's RED Barrel?

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    3. Beer under Corbyn:

      "E could 'a drawed me off a pint,' grumbled the old man as he settled down behind a glass. 'A 'alf litre ain't enough. It don't satisfy. And a 'ole litre's too much. It starts my bladder running. Let alone the price.'

      'You must have seen great changes since you were a young man,' said Winston tentatively.

      The old man's pale blue eyes moved from the darts board to the bar, and from the bar to the door of the Gents, as though it were in the bar-room that he expected the changes to have occurred.

      'The beer was better,' he said finally. 'And cheaper! When I was a young man, mild beer -- wallop we used to call it -- was fourpence a pint. That was before the war, of course.'

      'Which war was that?' said Winston.

      'It's all wars,' said the old man vaguely. He took up his glass, and his shoulders straightened again. 'Ere's wishing you the very best of 'ealth!'

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    4. Been there, done that. Carlisle State Brewery was nationalised until 1973 and I remember the bitter as being no better than Greenall's.

      That isn't praise.

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  11. None of the comments above mention the valuable real estate as mentioned by PC. A long time ago I suggested to my wife that it would make a grand site for a new Chelsea football ground...

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    1. None other than my comment then? "Either way, I think the brewery will be doomed because of its development potential"

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  12. Especially depressing as Fuller's have just won Champion Bottled Beer Of Britain with their excellent 1845. I fully expect beers like this and ESB, due to their limit appeal, to disappear in short order. Asahi only bought Fuller's for the mass appeal of the bland London Pride. And what is the future, I wonder, of Fuller's prestigious annual 'Vintage Ale'? Beers like this, expensive and with very much beer nerd minority appeal, must surely have no future anymore. If I were a financial advisor (which I am not) I would definitely be advising people to buy up all available Vintage Ale bottles immediately, given the second hand value and the fact the new company are highly unlikely to continue production. Luckily, I have 13 bottles from previous years ������

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