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Giants, Evolution and Over Regulation in Brewing

by Pat Saunders

By the 1980s the brewing industry in Britain had become dominated by giant companies known collectively as the 'Big Six'. These were Allied Lyons, Bass, Courage, Grand Metropolitan, Scottish & Newcastle (S & N) and Whitbread. It is in the nature of evolution that some become too big to survive or they are unable to adapt to a changing environment. Aprofound change was wrought in the brewing industry by the Beer Orders of 1989.

In the early summer of 1989 Lord Young had decided to cut the brewers’ pub monopoly. The 'Big Six' were initially told they would have to limit their pub estates to just 2,000 each. This was the recommendation of the Monopolies and Mergers Commission report on the Supply of Beer delivered on 21st March 1989. However, it was in a weakened form that the major proposals in this report were given force through two statutory Instruments, known as the Beer Orders, issued in December 1989. The prime requirement of the Beer Orders was that brewers owning more than 2,000 pubs must dispose of half of the onlicenses in excess of this number or dispose of their breweries.1 The pub sell-off though would not be immediate, as a deadline to comply was set for 1992. By May of that year, Allied Lyons had 700 pubs to sell, Bass 510 and Whitbread 1,250; only Scottish & Newcastle with 1,920 left had reached the target. Grand Met had by then left brewing with a pubs-for-breweries swap with Courage, creating the jointly owned Inntrepreneur Estates Company with fourand seven-year supply agreements.

In 1995 another round in the shake-up process was forecast with the Office of Fair Trading looking at prices pub tenants had to pay brewers. As beer duty had increased it was revealed that in 19932 the brewing industry paid over £12 billion to the Treasury. Beer consumption in Britain was 20% of the EU total yet Britain paid 55% of the duty.

After just ten years of the Beer Orders, the Government in January 2000 launched a review to make sure regulation efficiently promoted competition and safeguarded consumer choice. This had an unsettling effect on the City with predictions like one in ten locals facing closure, as about 6,750 of the country's 65,000 pubs were put on the market. The Beer Orders had seen the number of pub licenses held by brewers cut from just over 50% to 16%. By 2002 the Government felt that the aims of the Beer Orders had been achieved and then revoked them. How each of the 'Big Six' fared follows in a little more detail.

Allied Lyons

Allied Lyons (the then second largest brewer) started to be formed in 1961 when three brewing pub-owning companies, Ind Coope, Tetley Walker and Ansells merged to form Allied Breweries. In 1966 Showerings, Vine Products and Whiteways, which owned Harvey's of Bristol, were brought in to the fold. In 1978 the company merged with J. Lyons to become Allied Lyons. After this the company became more global in its acquisitions, becoming in 1994 Allied Domecq, through the acquisition of the Spanish and Mexican spirits producer Pedro Domecq.3

In 1988 Allied Lyons fought off a hostile bid from Alan Bond, the Australian entrapaneur. At that time the company had just under 7,000 pubs, 1,000 Victoria Wine shops and the breweries, Ind Coope, Ansells, Joshua Tetley, Tetley Walker, Halls and Alloa. By the following year the tables had been turned on Alan Bond; however it had triggered a process of review in the company to cut costs and increase efficiency. Having bought Dunkin Donut in the US, the company sold its Embassy Hotels group, which had 43 properties. Following the 'Beer Orders', in 1990 Allied started to sell off its pubs, 120 pubs in Southern England were sold for £24 million; of these 44 were purchased by Fuller, Smith & Turner of London; 43 in Sussex and Hampshire were bought by George Gale of Horndean; and the remaining 33 were bought by Kent based Shepherd Neame. Planned pub disposals would take place for another two years. However, by 1991 Allied had loses of £150 million due to the assistant treasurer Michael Bartlett speculating in the currency markets at a point when the dollar was losing value. Allied was again vulnerable to take over as profits were dented.

In October 1991, a £500 million merger with the Danish brewer Carlsberg was announced. The deal covered Allied's six breweries and the Carlsberg plant at Northampton. From this deal it was hoped to provide more brands in Allied's pubs, although job losses were forecast. In the following month a deal with Brent Walker was agreed to release 2,300 pubs to comply with monopoly rules. At the start of 1992 a courtship was begun with the Canadian spirit firm Seagrim. However, through the 1990s the effects of the Beer Orders continued. At the end of March 1992 Allied announced the closure of its Ind Coope Brewery at Romford with the loss of 300 jobs. Some 87 pubs were sold to East Anglian brewer Greene King.

A year after the announced Carlsberg- Tetley merger, the Monopolies & Mergers Commission stated that there were three points to be complied with. These were that the new brewer must not worsen the terms of supply to Carlsberg's existing customers, who were regional and local brewers or independent wholesalers. Nor must it reduce the term of the supply agreement between Carlsberg-Tetley and Allied from seven to five years. Allied must allow its tied tenants and lessees after two years to buy up half their annual lager needs from suppliers of their own choice.

By May 1994, just before it became Allied Domecq, the relationship with Carlsberg had started to turn flat with disappointing trading figures. Teething problems and the flood of cheap imports from Europe hit underlying beer volumes by 6%. Allied's main profits were coming from pub retailing and spirits, which spurred the merger with Pedro Domecq. By the end of 1994, Mexico's problems with a 'rumbling volcano' Popocetepol and the president of three weeks devaluing the Peso by 15% had a knock-on effect on Allied's share price. This prompted the sale of the J. Lyons tea and biscuit division. Through 1995 the Carlsberg-Tetley trading profits continued to drop which caused Allied's management to become demoralized.

In July 1995 chairman Michael Jackaman declared a surprise profits warning. He highlighted several contributing factors. The then current company reshaping plans would result in some short-term cost, which would overshadow sound performance. The food disposals would dilute earnings until the proceeds were reinvested. The remaining food businesses were trading in competitive markets. Trading profits were also flattened by selling off the pubs leased to Walker's Pubmaster chain. The over capacity of the beer market meant further cost cuts were needed at Carlsberg-Tetley. The £5 million interest earned on the rights issue that paid for Pedro Domecq in May 1994 was only a one-off. Finally, consumer trends were slow to improve and price rises hard to achieve. Jackaman announced his retirement in early 1996 following the continuing difficulties of Carlsberg-Tetley.

Danish brewer Carlsberg decided to retain its half of the partnership but was open to approaches from other brewers, in particular Bass was interested. In late July 1996, the Huntsman logo for Tetley beers was dropped after having been in use for 76 years. By September 1997 the negotiations for Carlsberg to acquire a new partnership with Bass were derailed by the intervention of Board of Trade Secretary Margaret Beckett. The brewing operations in Alloa, Wrexham and Burton-on-Trent would be closed bringing to an end two centuries of brewing history with the loss of at least 550 jobs. It would leave Carlsberg with only two breweries, one in Leeds and the other in Northampton.

In 1998 talks to merge with or takeover Seagram's of Canada resurfaced. During this year the Victoria Wine chain was merged with Whitbread's Thresher chain. Allied's profits still continued to underperform through 1999. By May it announced the sale of its remaining pub estate. The favoured buyer was Whitbread at an asking price of £2.3 billion, with payment being made in newly issued Whitbread shares. Whitbread would then quit the brewing business. However, this quickly turned into a bidding war as Hugh Osmond of Punch Taverns entered the fray with the backing of Bass, in June.

The deal was concluded in July with cash being paid by Punch Taverns and Bass providing its company shares. In August 1999 the Allied pub estate was then split between Bass and Punch taverns.

Pub share of the main Brewers (1999)4

Whitbread 3,400
Bass 2,600
Allied 3,600
S&N 2,600
Unique pub Co 2,600

In August 1999 Allied Domecq took control of the Korean distiller Jonro. Allied was vulnerable to takeover and rumours surfaced that French drink group Pernod- Ricard was interested. A year later Allied was still pursuing the Canadian distiller Seagram, which held the rights to Absolut Vodka and made Chivas Regal whiskey. By December 2000 Allied had dropped out of this takeover battle, as Diageo emerged as a rival bidder for Seagram. In February 2001 Allied had another, more successful, takeover skirmish, this for New Zealand winemaker Montana with brewer Lion Nathan. Allied then went on to buy Spanish winemaker Bodegas.

The chief executive Philip Bowman who replaced Tony Hales (following the bungled pub disposal) had set about a strategy for rebuilding the Allied group as a wine and spirits company with piecemeal acquisitions. In 2002 they launched alocopops in America with mixed success; although in 2003 the company profits improved. By this time, however, a crisis was developing in the company's pension fund provision. By 2005 Pernod-Ricard renewed its interest in a takeover of Allied Domecq, which with the competition and monopolies regulation would mean the break-up of the group. Also briefly interested in the takeover were rival American backed Constellation Brands, but it couldn't outbid Pernod who finally succeeded.



The company history can be traced back to 1777 when Bass Ale was first brewed.5 The label's distinctive red triangle was the first UK registered trademark, and was painted by Manet in his Un bar aux Folies-Bergere. William Bass set up business under his own name in Burton-on- Trent and, under family ownership, it prospered in the 19th century and consolidated the brewing industry in the Midlands and north. In 1967 Bass merged with Charringtons in London. As well as being a brewer with considerable pub estates Bass also had interests in the leisure industry, having acquired Pontins holiday camps from Coral Leisure Group in 1980. Bass sold these for £55 million in 1987 and then bought 178 Holiday Inns to add to its 100-strong chain of Crest Hotels. Profits towards the end of the 1980s were strong.

Sales of its beers Carling Black Label, Tenants and Charringtons rose 2% in a weakening market. In August 1989 Bass acquired the 1,400 strong Holiday Inns chain in America for £1.3 billion making the company the world's biggest hotelier with 1,700 hotels that generated £200 million in profits.

The early 1990s saw a downturn in profits. In December 1990, its chief executive, Ian Prosser, commented on rises in the price of beer. He said, ‘People forget they are paying for the carpet, the curtains and the landlord's time. Beer pricing is a complex business. What we are actually selling in a pub is not a pint of beer, but a unit of leisure time.’6 In March 1991 a profits warning was issued along with a cash call for £558 million. It then announced it would sell 2,680 pubs to meet Government directives. In March 1991 18 pubs were sold to Leicesterbased Hoskins Brewery. In May Bass bought Granada's bingo halls for £147 million while it considered selling the 1341 Coral Racing betting shops. This, and job cuts by December 1991, helped bolster profits. By May 1993 profits were sinking again, a knock-on effect of worldwide recession following the first Gulf War. In August 1993 Bass sold 44 pubs mainly within the M25 area to Greene King for £17.5 million.

Britain’s New Beerage (1996)7

Market share Pub ownership
Bass/Carlsberg Tetley 35% National brewers 17%
Scottish Courage 31% Regional brewers 17%
Whitbread 14% Freehouse/ Independent 37%
Other 20% Multiple pub operators 29%

In April 1996 Bass began talks with Carlsberg-Tetley for Allied's £500 million share, following the Allied brewery closures. If the takeover had succeeded it would have given Bass a 40% stake in the beer market. That was more than certain to attract inquiries by the Monopolies Commission. The talks soon became tense even though in July Bass and Allied Domecq announced a £200 million deal was imminent. If the planned merger had succeeded it would have created two super brewers, Bass and Scottish- Courage, with Whitbread trailing in third place with only 14% of the beer market.

Even without the intervention of the Monopolies Commission, such a large deal where Bass was taking over Allied Domecq's share of Tetley-Carlsberg was complex. It would involve over 100 separate documents. Bass had agreed to pay £200 million whilst Danish partner Carlsberg would take 20% of the enlarged brewing arm of Bass. In August 1996 this was how the two companies compared:8

Bass Carlsberg-Tetley
Profits £113m £52m
Net Assets £890m £637m
Brands Carling Black Label Tennants Caffreys Worthington Bitter Hoopers Hooch Tetley’s Carlsberg Castlemain XXXX Skol

By March 1997, there was speculation that the merger was running into trouble due to stringent conditions being imposed by the Monopolies & Mergers Commission. Labour's landslide victory in the May General Election further undermined the deal. The new Government threatened to take a tougher line on takeovers and mergers along with a robust competition policy. From this time it was speculated that Bass would be forced into shedding 2,000 pubs and some of its regional beer brands. It was anticipated that there would be 2,000 jobs affected at Carlsberg's Burton-on- Trent Brewery. Labour had gained this constituency, which would affect Margaret Beckett's decision. By September 1997 she had barred the merger.

It is likely that this failed merger left a bitter taste with Bass as it subsequently backed Punch Taverns’ hostile bid for Allied Domecq's pub estate in June 1999. Bass provided Punch with £1 billion for it to be able to cherry-pick up to 700 pubs from Allied's managed estate. By February 2000 Bass had decided to quit the brewing business. A number of other brewing companies took an interest in this valuable offer; as Britain's then second largest brewer was valued at £1.8 billion and had a 25% share of the market. The interested parties included Dutch brewer Heineken, Carlsberg, and South African Breweries (SAB). By June 2000, Bass agreed a sale of its brewing division for £2.3 billion to Belgium rival Interbrew. With the sale went the Bass name and red triangle trademark.

The deal though, like the failed attempt with Carlsberg, was fraught with difficulties. Brussels agreed the UK probe in to the Bass deal and its referral to the European Commission. Following this, in January 2001 Belgium's economy minister, Charles Picque, challenged the Trade Secretary, Stephen Byers, to justify why the UK tried to block Interbrew's £2.3 billion acquisition of Bass. In February the matter was taken to the courts. In the interim Interbrew could retain Bass Brewers until a ruling on the enforced sale of the brewing interests. Interbrew wanted some freedom of choice over how it could make the disposals. In May the High Court overturned the Government ruling.

With the brewing division of Bass having been sold the company went through a transition phase being known as 'Six Continents'. Chairman Sir Ian Prosser eased back on his role in the company and promoted Tim Clarke who had run the pubs and restaurants division, to Chief Executive in October 2000. The company then focused on hotel acquisitions, although the outlook for pubs was less certain. By September 2002 'Six Continents' announced a de-merger into two companies, ‘InterContinental Hotels’ and ‘Mitchells & Butler’. Tim Clarke went to head the pub group while finance director Richard North headed the hotel group. A deal to merge Bass pubs with those of Scottish & Newcastle had been mooted earlier in the year but had failed. InterContinental Hotels sold off a number of properties to return capital to shareholders as a move into managing hotels by leasing them back was made.

For the pub group ‘Mitchells & Butler’9 the name was derived from a Bass ancestor company. Mitchells & Butler was formed by the merger of two Midland's family businesses both owning breweries and pub estates. The pub estate was expanded through mergers and other acquisitions. The important merger occured in 1961 with Bass, Ratcliffe and Gretton Ltd to form Bass, Mitchells & Butler. Then in 1967 came the merger with Charrington United, which then became Bass Plc. Mitchells & Butler's leading retail pub brands include Vintage Inns, Ember Inns, Toby Carvery, O'Neil's, All Bar One and Scream. The 2,000 properties are the pick of former Bass and Allied Domecq estates.



The founder of this company was John Courage born in 1761, who began brewing in 1787. From his five grandsons were produced five family branches of Courage; Robert, Edward, Alfred, Frank and Henry were born between 1830 and 1840.10 By the 1980s the Courage Company was a subsidiary owned by the Hanson Trust and, in September 1986, it was sold to Australian Fosters lager group Elders IXL for £1,400 million. The deal included the Courage and John Smith breweries with 5,000+ pubs, the wine & spirit wholesaler Sacconerd Speed and the 386 branded off-licenses Roberts and Coopers.

The Elders management caused a shake-up in the pub estate by turning 900 managed pubs in to tenanted properties - by paying between £10,000 and £20,000 managers were expected to become selfemployed tenants. Rumours then circulated that Elders would float the pub estate as a separate company. Even without this, tough business practices were imposed. Those publicans taking on trial tenancies for 4 months risked their livelihoods if they failed to meet sales targets imposed by Elders. There weren't too many managers prepared to do this. A proposed float of a pub company failed. In September 1987 John Elliot, the Elders boss, announced Courage pubs would be sold without the breweries that supplied them, making the Courage Pub Co purely a property investment. However, the sale though of the 5,000 pubs by Elders was postponed due to the Stock Market crash in October 1987.

In February 1988, Elders leased 100 pubs to Trust House Forte for them to be turned into restaurants. A few months later in May Elders third attempt at the pub sale succeeded and netted them £1.3 billion. A new company 'Courage Pub Company' was set up as a joint venture between Elders and Hudson Conway in which Elders had a 33.3% equity stake. By November 1989 Elders, like the troubled Bond Corporation and other Australian groups, were facing high interest rates on huge borrowings; on rumours that Elders was debt-strapped, the Courage brewer would be sold. However, Elders hung on.

By February 1993, profits at Courage were looking flat as beer sales dropped. Since buying Grand Met's breweries and putting its pubs in to a joint venture with the same company, Courage had cut jobs. It had also to make a £9 million contribution to the pension fund. In October 1993 beer sales had continued to slide. Courage then planned to spend £25 million on a 12-month advertising campaign, undertook an extensive review of its operations and shed 700 pubs. Managing Director Nick Bunyon said, ‘The UK brewing industry has become increasingly volatile and competitive due to the cumulative effect of falling beer consumption, increased excise duty and imports’.11

In November 1994 it was announced that Courage was to make a new pub deal with Grand Met, as Foster's brewer was expected to sell the Courage beer business. By February 1995 the bidders for Courage were thought to be either S & N or Whitbread. Courage still had five breweries, the UK rights to leading brands like Fosters, Holstein and Kronenbourg as well as its own beers, John Smith and Courage. It had a half stake with Grand Met in Inntrepreneur Estates that owned 4,300 pubs. Around this time it was announced that the Office of Fair Trading would hold another inquiry in to the UK brewing industry.

In May 1995, S & N took over Courage from Fosters for £473 million. This would give S & N a market share of 25% just ahead of then current leader Bass. Up to 2,300 redundancies were expected among employees of the nine breweries, 40 depots and 8 regional HQs, as not all this capacity was needed. Even though this deal was referred to the Monopolies Commission it was given the green light. Courage has since remained a subsidiary of S & N.


Grand Metropolitan

One of the ancestor companies was the Distillers Company Ltd a combination of six lowland grain whiskey distillers formed in 1749; another was the Guiness brewery in Dublin, which also dates from this time. In 1851, Maxwell Joseph established the hotel business that would later become Grand Met. A number of other companies that were acquired by Grand Met were developing in the 19th century in the UK and USA, like Pillsbury, Burger King and Green Giant Company. After the scandalous acquisition of United Distillers by Guinness, Grand Met and Guinness were merged to form Diageo in 1991.12

Grand Met's UK brewery was Watney Mann in Mortlake (formerly Watney Combe Reid), and in the 1980s held a licence to brew Foster's lager. By 1986, when Elders were purchasing Courage, Grand Met were very reluctant to relinquish their 10-year license without compensation to the tune of £250 million. However in October 1986 Grand Met put up for sale Watney's, Truman, Manns, Chef & Brewer, Open House, Samuel Webster, Wilson's Norwich, Phoenix, Ushers, International Hotels and Express Dairies; Chef & Brewer was bought by S & N (in 1993); Samson Group purchased InterContinental Hotels. By 1987 Elliot had failed to buy out the Foster's license and it was agreed to sell Fosters in both Courage and Watney Mann outlets; with this deal Grand Met acquired Courage's Robert Copper off-license and the wine and spirit group Salcone & Speed.

In February 1988 it was confirmed that Grand Met was disposing of 701 pubs for £80 million; 386 in London, the Home Counties and East Anglia were bought by Brent Walker; 210 pubs in the north and Midlands went to Heron International (privately owned by Gerald Ronson) and 105 pubs in the South East went to Gibbs Mew. Of these 80 tenanted landlords questioned the legality of the disposal claiming they should have been given first refusal for the individual properties purchase. Grand Met replied that the size and speed of the sale meant it could not follow the order of events laid down in the code. It had ensured that Brent Walker and Heron would honour the obligation to offer tenants the right to surrender their tenancy.13 Discontent amongst the publicans continued to rumble on.

In October 1989 preparations to sell the Watney Mann brewery interests were underway. Valued at £600 million, the brands included three foreign lagers, Foster's, Carlsberg and Germany's Holstein Export. By then beer only accounted for 4% of Grand Met's profits. In March 1990 Elders were ready to toast a tie up of pubs for breweries swap with Grand Met. In the deal Elders would change its name to Fosters, they would acquire the brewing interests of Grand Met for £400 million. In return Grand Met would transform in to a pub and restaurant business by taking the Courage pubs creating a 9,000 strong-tied pub empire. Yet the talks to complete the deal took at least a year. The new pub company was referred to as Inntrepreneur.

The tenants of the pub estate at Grand Met's Inntrepreneur discontent at high rents saw expression at the 1993 AGM in February with a picket protest. More than 4,700 pubs had taken Inntrepreneur leases since the scheme began in 1989. Rental agreements were negotiated with leaseholders and only 7% had gone out of business in the previous two years as compared with 15 - 20% a year under the old tenancy system. Problems continued for Grand Met with the pub estate into 1994.

In September 1993 Grand Met had sold its 1,654 Chef & Brewer pubs to Scottish & Newcastle. The remaining 6,000 pubs it considered selling in the long term. Losses though at Inntrepreneur Inns and publican discontent weren't conducive to an idea to float the pub estate as a separate company. By November 1994 Grand Met announced it would re-jig the pub business. Chairman Lord Sheppard said, ‘The last four years have been very difficult for the beer trade because of the government orders. They coincided with recession, especially in the property business which did not help.’14

As Grand Met had merged with Guinness to form Diageo it had created a faceless combine. Described by journalist Kirstre Hamilton, ‘A Diageo is a small furry rodent, more friendly than a rat but less sociable than a squirrel’.15 With a change of Chairman and Chief Executive in 2000 Diageo went through a shake-up in which its food division was sold off.16

John McGrath, who retired at the end of 2000, said Diageo would combine its UDV spirits and wine arm with Guinness brewing division and sell Pillsbury (maker of Haagen-Dazs) and Old El Paso Mexican meals to US rival General Mills for roughly £7 billion.

In December 2000 Diageo entered the fray with Pernod-Ricard for the Canadian drinks firm Seagram in a £5.5 billion deal. It was concluded by May 2001 having been cleared by Brussels. The future of the off-license chain 'Oddbins' which Seagram used as a showcase for its brands was uncertain to survive, as neither Diageo nor Pernod wanted it. By July reshaping Diageo continued as non-core business was disposed of, with America's General Mills buying Pillsbury Foods for £3.5 billion. Gallana, the children's media group wanted to buy Diageo's 'Guinness Book of Records' for £40 million. Also for sale was the luxury Gleneagles Hotel, which had been bought by Guinness in 1986. During 2001 though, profits started to slide and by 2002 due to the falling stock market the company's £3.2 billion pension funds had a £342 million deficit when it had previously had a surplus of £500 million. Conditions remained uncertain through 2003 and 2004.

Before After
Divisions UDV UDV/Guiness
Pillsbury 33% General Mill
Guiness 80% Burger King
Burger King
Turnover £11.8 billion £8.0 billion
Profits £1.76 billion £1.75 billion
Key Brands Johnnie Walker Johnnie Walker
Smirnoff Smirnoff
Haagen-Daaz Guiness
Guiness Baileys
BK Whopper Malibu
Jobs* 72,000 30,000
Chief Executive John McGrath Paul Walsh


around 42,000 would transfer to Burger King and General Mills

By December 2004 Diageo had added Acacia and Jude Mountain wines to its top sellers. It paid £133 million for the Chalone Wine Group to gain ownership of a third vineyard in California's Nappa Valley; its' other two Nappa Valley vineyards being Beaulieu and Sterling. With Allied Domecq running in to takeover by Pernod problems, Diageo expressed its interest in acquiring certain Allied brands. It sided with Pernod-Ricard as Constellation Brands entered the fray in early summer 2005.


Scottish & Newcastle

The company known as Scottish & Newcastle was established in 1960; William Younger formed the Edinburgh side of the business in 1749. Then in Gateshead in 1770 John Barras, with his partner William Johnston, started brewing. In 1803 William Younger II acquired the Abbey brewhouse whose history was believed to date back to 1200 when monks started brewing at Holyrood. Then in 1856 William McEwan established the Fountain Brewery at Fountainbridge. In 1884 John Barras took over the Tyne Brewery and in 1890 the Newcastle Breweries were launched. Scottish Breweries were formed in 1931. Scottish & Newcastle has grown in to one of Europe's largest brewers with strong market positions in 13 European countries. 17

In 1986, S & N were interested in acquiring Courage, but were piped to the post by Australian Fosters brewer Elders, making itself vulnerable to takeover. In 1987 S & N succeeded in purchasing Home Brewery of Matthew Brown in Lancashire as a defence. S & N owned Thistle Hotels group, but also built stakes in two other hotel groups, Stakis and Norfolk Capital. With the Home Brewery acquisition came a tied estate of 450 pubs. However, antipodean interest in S & N continued, with John Elliot (Fosters) and Alan Bond (Castlemain XXXX) acquiring up to 5% stakes of shares. New Zealander Ron Brierly also had a 5% stake but was thought unlikely to bid since he was an investor with interests in 60 companies. The American Anheuser- Busch had a 2% stake. In 1988 S & N's position was strengthening as profits improved and it acquired Theakston in Yorkshire. Shares continued to be bought by Elders. By August 1988 their stake had risen to 9.3%. A takeover bid looked serious.

This was opposed by S & N workers in Edinburgh who were supported by the Scottish National Party. Another line of defence taken by S & N was to purchase the 30,000-bed Pontins holiday camp business in a £200 million deal. In January 1989 S & N boss Sir Alick Rankin requested that Lord Young order an investigation in to the purchase of S & N shares by the Australian brewing group Elders. A near 10% holding had been purchased in just one morning taking their stake to 24%. The S & N share price rose as dealers expected the Government to wave through a takeover bid. In February 1989 S & N took 20 City brokers on a two-day trip to their Edinburgh brewery, Theakstons in Yorkshire and Home Brewery in Nottingham. By March though the Monopolies & Mergers Commission blocked Elders £1.6 billion bid for S & N and immediately the company's share price dropped.

Having successfully fought off the Australian's hostile bid chief executive Alick Rankin then acquired a 65% stake in Dutch leisure park group Centre Parks that fitted well with its Pontins interest. S & N needed to grow bigger to remain independent. In 1990 S & N disposed of its Thistle Hotel group and some 300 pubs to reduce the group total. Profits rose 33%. In 1991 S & N linked up with Coors, America's third biggest brewer, to produce 'Extra Gold' lager in Britain. It already made 'Beck's' lager under license alongside its own McEwan's and Kestrel lagers. Profits remained buoyant in the ensuing economic depression.

In September 1993 S & N purchased Grand Met's 1,656 Chef & Brewer estate in a part cash, part debentures deal of £708 million. Three quarters of S & N existing estate were in Scotland and the North of England. In 1995 S & N went ahead with the purchase of Courage, which was not opposed by the Monopolies & Mergers Commission. The £425 million deal was dependent on S & N selling just 115 of its 2,739 pubs and that Courage released its exclusive supply agreement with 1,000 of its Inntrepreneur Estate outlets. However it was expected that out of 9,000 jobs, 2,300 would be lost.

The job cuts resulted from S & N's decision to close two beer productions, one at Nottingham, and the other at Halifax; also closed were 13 of the 41 distribution depots. Future production would be concentrated at S & N's seven other breweries, which were located in Edinburgh, Newcastle, Tadcaster and Masham in North Yorkshire, Manchester, Bristol and Reading. The closed Halifax brewery, acquired through the Courage takeover, had been built in 1938 by Samuel Webster & Sons.

By December 1999 S & N put 700 of its pubs up for sale as the group had to sell the outlets to comply with the Beer Orders, following its £1.1 billion purchase of Greenalls in September. By March 2000 S & N began concentrating more on its beer production, its core brands being Courage, John Smith's and Newcastle Brown. It then acquired Danone's interest in the French Kronenbourg larger in a three-year deal. With this they obtained a 24% holding in Italy's Birra Peroni. At the same time there was a planned disposal of its Centre Parks and Pontins holiday business. By August 2000 S & N moved on to buy a 49% stake in Portugal's second biggest brewer Central di Carvjas that made the brand Segres.

In January 2001 S & N announced it planned to dispose of some 920 managed pubs, of which at least 180 would be pub leases. S & N then had a pub estate of 2,400, but it coincided with Whitbread selling its tied estate. S & N planned to concentrate on the quality end of its pub estate, quitting the themed restaurants and the two and three star hotels to focus on Chef & Brewer and budget hotels.

While S & N's rivals Bass and Whitbread were pulling out of brewing altogether S & N continued to expand with acquisitions and tie-ups with other brewers. In September 2001 S & N formed an alliance with America's Miller brewing to move in to Europe. S & N already distributed Miller Pilsner in Britain and Miller Genuine draft in Britain and Ireland. S & N then commanded about a quarter of the British beer market.

S & N’s expansion in February 2002 gained it the family controlled Finnish drinks group Hartwell for an agreed £1.2 billion cash and shares purchase. This brought a 50% stake in Russia's biggest beer business BBH co-owned with Carlsberg. This gave S & N two of the four best selling beers in Europe and three of the top ten. It still retained nearly 1,500 pubs. By June 2002, 1,000 of these would be sold to raise £1.5 billion. These included 11 of its 41 Old Orleans chains of pub restaurants, premises in London's Covent Garden and Quincy's pub in Leeds. The money raised was needed for acquisitions, although S & N carried debts of £3.15 billion against a market value of £46 billion. Along with this S & N set about changing its distribution system by replacing 40 depots with three newly built regional depots.

By April 2003, as the pubs were sold off S & N acquired HP Bulmer the cider maker for £278 million. The pubs being sold were 'Chef & Brewer', 'John Barras', 'T & J Barnard', 'Pint & Parrot' and Premier Lodge. S & N at this time also revealed it had a pension fund deficit of £470 million. Through 2003 several bidders for the pub estate lined up for the race to gain it. These included Laurel Pub Co, Mitchells & Butler (demerged from Bass), Pubmaster, Enterprise Inns, Unique and Punch Taverns. The successful bidder was eventually Spirit Group headed by Chief Executive Karen Jones; she'd previously built up the Café Rouge restaurant chain that was sold off by Whitbread (later 220 of the pubs were sold on to a property tycoon).

Having disposed of its pub estate, the company had some difficulties as rumours surfaced in January 2004 that S & N would be on the receiving end of a hostile bid. Even so S & N had plans to expand its beer markets in India and China. As a response though to cut costs it was possible at least one of S & N's UK breweries would be closed; this was likely to be either the Edinburgh or Newcastle plants. Each had a workforce of 200 and were symbolic of the company's identity. The volume of beer they produced was half that of either the John Smith plant at Tadcaster or the Royal Brewery in Manchester. The largest brewery of the group was the former Courage plant at Reading.18

With the purchase of Northern Clubs Federation Brewery for £7.2 million in April 2004 S & N closed its Newcastle plant and moved brewing operations across the Tyne to Gateshead. The changes in S & N core business activities was brought about in a relatively short space of time, once Sir Alick Rankin had been replaced by the Australian Tony Froggatt early in 2003 and S & N has become Britain's premier independent brewer.



The company's origins begin in August 1720 with the birth of Samuel Whitbread at Cardington near Bedford. In 1734 Samuel arrived in London to study ‘the great mystery of brewing’. Two years later he began his apprenticeship at Wightman's Gilport Street Brewery in Clerkenwell. After six years he set up his own operation at the Goat Brewhouse on the corner of Old Street and Whitecross Street. In 1750 he moved the business to nearby Chiswell Street, which became the site of the world's first purpose built mass production brewery. It became famous for its Porter (so named for its popularity with workers in London's markets). Following Samuel's death in 1796 the brewery went into decline that was reversed in 1812 by amalgamation with John Martineau's Lambeth Brewery.19

In the 1980s Whitbread was expanding its beers and spirits as well as its restaurant chains. In August 1987 Whitbread spent £6.3 million on 'Keg', Canada's largest steak and seafood chain with 75 restaurants. The following month they made a bid for the Beefeater gin group James Burrough for £174.5 million. In November 1987 it was announced that brewery profits were boosted by Whitbread's 'Heineken' and 'Stella Artois'. Chairman Sam Whitbread said profits had risen from £79.8 million to £93.3 million in the half-year to August.20

Whitbread was the third largest of the Big Six brewers. In to 1988 it continued with expansion plans. It put in to operation a plan to revamp a number of pubs and create trendy café style premises with Continental names like Café Noir, Berliners and Beethoven's. It boosted its off-license chain to 1,000 with the purchase of Gough Brothers for £10 million. Expansion of the hotel chain was planned which then consisted of 35 coaching inns, 3 Beefeater travel inns and 6 Country Club Hotels. It had a pub estate of 6,500 properties. By May 1989 with 600 restaurants in six counties, the Beefeater and Pizza Hut being UK market leaders. This brought interest from Lord Young and the Monopolies Commission.

In October 1989 the group's Long John and Beefeater brands, along with its UK distribution business, were put up for sale. Whitbread had decided that its spirits business was too small to compete with international giants such as Seagrams, IDV and Hiram Walker. However, it went on to buy Manchester's Boddingtons brewing interests for £51 million. The Beefeater Gin and Long John Whiskey were sold in December 1989 to Allied Lyons for £545 million, which helped ease company debts. Yet in November 1991 the recession caused debts to catch up with Whitbread as profits fell for the first time in 16 years.

In September 1992 the company introduced its Whitbread Pub Partnership with many of the features of a franchise for 2,300 properties. The pubs were let on 20-year leases to ambitious individuals and were designed for long-term security. However, the leases could be sold after three years realizing full market value to the business so that publicans weren't locked in to a lease. Whitbread also had 275 Beefeater restaurants, 285 Pizza Hut and 11 TGI Friday's American bistros.

In June 1993 Whitbread bought a 14% share of Michael Cannoni Inn Leisure. The following year it sold off it's holding of Morland shares and Greene King shares, though it retained smaller stakes in companies like the cider maker Bulmer, the family run Breakspear brewer, and Hampshire-based brewer Gales. However, by 1997 Whitbread had decided to quit brewing altogether. The brewing business had become dependant on licenses rather than brands. Whitbread had missed out on buying Courage, which had been snapped up by S & N. The new managing director, David Thomas, had decided the firm should concentrate on its leisure business such as David Lloyd, the Café Rouge restaurant chain and Pizza Hut franchises. By April 1998 the Castle Eden and Cheltenham breweries were up for sale with plans to stop production at both sites in October. Castle Eden, in Sedgefield, produced mainly cask ale brands such as Best Scotch and Fuggle's Imperial. The production of its brands would be switched to the Manchester brewery where Boddingtons was made. The group's other breweries would take Cheltenham's output of Flowers and IPA beers.

During 1999 Whitbread became embroiled in the Allied Domecq pub sale. A cash and shares deal had been put together to purchase Allied's pub estate. It would have given Whitbread 100% control of the Thresher/Victoria wine business. It soon became a bidding war as Punch Taverns entered the fray. The deal was then referred to the Monopolies Commission by Trade Secretary Stephen Byers. Following on in July Whitbread withdrew its bid. Whitbread then started a restructuring process to streamline its activities. All the restaurants, Beefeater, Brewer's Fayre, Pizza Hut, Café Rouge and TGI Fridays were brought together under director Bill Sharm. A new pubs and bars division was created for the 2,900 outlets, which included Hogshead, Case and Dome as well as unbranded pubs. In November 1999 Whitbread purchased the hotel and pub company Swallow Group for £578 million to add to its 35-strong Marriott Hotel chain.

By January 2000 Whitbread announced it was quitting its 250-year old headquarters in Chiswell Street to move to a new City office building. The brewing business would be retained even though it only accounted for 9% of sales, along with the banqueting and conference facilities. The rest would be converted to luxury apartments run by Marriott Hotels. However by April chief executive David Thomas decided to call time on the company's brewing arm. This did not lift fortunes at Whitbread and in October it was decided to sell the remaining 3,000 pubs. By now there was no longer a Whitbread family member at the top, although the family remained a large shareholder. It was the closing of a chapter on an illustrious business. The brewery at Chiswell Street, London had had steam engines installed by James Smeats. In 1758 Samuel Whitbread had overtaken Ben Truman as the biggest brewer in the booming London market. He went on the become MP for his home town of Bedford, making him a pioneer in another sense forging uneasy links between brewing and politics. His son Samuel II was not the brightest; the company had then a state-of-theart brewery and 650 pubs. The business would have disintegrated but for the 'clerk' Robert Sangster. In 1948 Colonel Bill Whitbread realised the beer business was changing. He took large minority stakes in companies such as Flowers and Morlands, promising to protect their independence. However, by the 1960s Whitbread had joined the takeover game, and by 1971 it was one of the 'Big Six', which controlled 80% of all beer sales in Britain.21

Later in 2000, Whitbread also decided to sell its 140 Café Rouge French style café chain, to revamp the 258 Beefeater restaurants, and to expand the Costa Café chain. Interest had been shown in the pubs, but it was then planned to float the pub group as a separate company. By January 2001 Whitbread felt the knockon effect of the Bass Brewers sale to Interbrew. Whitbread's breweries had produced such brands as Heineken, Stella and Boddingtons, which went to Interbrew. Had Stephen Byers not vetoed this deal Whitbread would have received an extra £50 million on top of the £400 million in purchase of its breweries as Interbrew could have made savings on its Bass purchase.

Whitbread continued to have a troubled year as it tried to dispose of its pubs. The company faced a revolt by the tenants who believed they should have been given the right to buy their premises. In March a deal was almost complete with finance house Morgan Grenfell Private Equity to buy the 3,000 pubs for £1,625 billion. Tenants of 1,700 properties though planned to take action. The boss of Punch Taverns, Hugh Osmond, which owned 5,150 pubs, was also seen as likely to mount a challenge. Osmond's one-time partner Luke Johnston had been recruited by Morgan Grenfell to head the group, Laurel Pubs Co. However, at the Whitbread AGM on 21 April 2001 chief executive David Thomas won shareholder support. A fortnight later he stated that the company, following the disposal of its pubs and beer interests, would go forward in three parts.22

  1. restaurants which have the brands Costa, Beefeater and Pizza Hut
  2. hotels, chiefly Marriott and Travel Inn; and
  3. sports in the form of David Lloyd Leisure Clubs

Profits looked good for a while from the hotels and leisure clubs. The restaurants were less successful; Whitbread decided to sell off 34 Brewer's Fayre. That was followed by the 72- wine bar chain Café Rouge as it had failed to meet its financial targets.

Hotels were later affected post September 11th as people cut back on traveling. In 1996 Whitbread had paid £133 million for the 100-strong Pelican restaurants. They were then sold at a loss to ECI for £25 million. However they went on to hold talks with Compass the caterer for its sale of the Travel Lodge Hotel chain and Little Chef restaurants, for around £750 million. The transition from brewer and pub owner in to new hospitality activities of hotels, restaurants and the David Lloyd Leisure Clubs had been profitable for Whitbread.


The ‘Big Six’ Today

Of the 'Big Six' today only Scottish & Newcastle is a business that continues to brew beer; with globalization it has expanded in to Russia and Asia. The rest, apart from Whitbread, have completely changed identity and all have moved out of brewing. Courage though from being gobbled up by Hanson has been absorbed by S & N. Yet it did comply with legislation and sold its pubs. Allied, Grand Met and Whitbread each separately sold their breweries, then their pub estates. Whitbread's became Laurel Pubs. Grand Met, now Diageo, still retains ownership of the Dublin-based brewery Guinness. Bass sold its brewing interests to Belgium Interbrew. It retained its pub estate and split itself after going through a brief phase of being known as 'Six Continents', in to InterContinental Hotels and Mitchells & Butler.

With Bass and Whitbread's brewing interests going to Interbrew, the Belgian firm became the world's second largest brewer. Prior to 2000 it had been a private company with a profile lower than that of its brands, Stella Artois and Labett, however it did date back to the 14th century. Indian born Hugo Powell was appointed its chief executive and in December 2000 took a huge gamble in floating Interbrew on the London Stock Market while the takeover of Bass was still being investigated. In January 2001 the Belgium government came to Interbrew's defence and accused Stephen Byers of foul play. It was stated then, that ‘over-regulation has been a big feature of the British beer industry’.23 However, in May 2001 the Government's decision was overturned in the High Court, although it meant that Interbrew needed to sell the Carling brand. This was eventually sold to America's third largest brewer, Coors, for £1.2 billion. In March 2004 Interbrew became a global leader in brewing when it merged with AmBev, Brazil's largest brewer to create InBev.

With the Government revoking the Beer Orders24 in 2002 it has not stopped interfering with the Beer Industry. Large pub companies have now replaced the tied estates of the former 'Big Six' brewers. Has it created more choice for the consumer? The matter is debatable. The pub companies have done little to protect pub heritage. During the 1990s the old familiar traditional pub names started to be lost, replaced with such names as ‘One Eyed Rat’, ‘Slug & Lettuce’ and ‘Slurping Toad’, all very much elements of a less attractive urban environment. The effect of Government's latest changes to licensing regulation has yet to be felt. Has it all been an ill-wind of change? Maybe more time to reflect on it is needed. Evolution, after all, is a process that is unceasing.




Many thanks to Ray Anderson for passing on this correction to pub numbers in the Beer Orders (23 Aug. 2005)


Daily Mail 19 Feb 1994

3 (9 Feb 2005)


Daily Express 4 May 1999

5 (4 Feb. 2005)


Sunday Express 9 Dec 1990


Sunday Times 4 Aug 1996


Daily Express 26 Aug 1996

9 (4 Feb 2005)


Daily Telegraph Weekend 5 Feb 2005


Daily Express 16 Oct 1993

12 (11 Mar 2005)


The Times 25 Feb 1988


Sunday Times 20 Nov 1994


Sunday Times 20 Feb 2000


Emma Dandy Sunday Express 18 July 2000

17 (4 Feb 2005)


Ben Lawrence, Mail on Sunday 15 Feb 2004

19 (8 Feb 2005)


Daily Express 19 Nov 1987


Daily Express 20 Oct 2000


Daily Mail 3 May 2001


Sunday Times 7 Jan 2001

24 (23 Mar 2005)

Illustrations from the collection of Ian Peaty

The famous ‘Bow bell’ public house in the east end of London,
close by the Bow Brewery, c. 1925
The famous ‘Bow bell’ public house in the east end of London, close by the Bow Brewery, c. 1925

Smith, Garrett’s Bow Brewery, London. A coloured lithograph sent to all customers in 1922.
Acquired by Taylor Walker in 1927 and then closed.
Smith, Garrett’s Bow Brewery, London. A coloured lithograph sent to all customers in 1922. Acquired by Taylor Walker in 1927 and then closed.


Copyright © 2005 the Brewery History Society