Thursday, 23 July 2015

Acquisitions and Mergers

I learn today that Alltech have bought a Cumbrian Brewing company. Cumberland Breweries is situated in the north of our county in a place called Corby. They make Corby Ale, for instance, an inoffensive and popular beer. Some might say lacking character, but that is in the palate of the drinker I guess.

Dr Pearse Lyons, who ownes Alltech, is an interesting character. I've met him. Friendly, personable, and seemingly interested in knowing about people. He is also a Billionaire. One could argue that he deserves his success due to his obvious abilities. Never-the-less, I'm somewhat worried about his foray into the UK brewing industry.

Dr Lyons modus operandi so far in the Irish market is to attempt to be friends to all. I know there has been some skepticism to this during his Alltech events in Dublin. We've been to two such events, which have been quite different to each other. The third, it seems, was different again. Finding his feet in a market that is probably moving faster than the UK, and potentially has less established tradition allows him to fly high with the craft beer message.

Over here in the UK, with established organisations like CAMRA, SIBA and other such bodies, his approach is bound to have to be less conciliatory, and much more aggressive. I'm certainly concerned about his arrival in the UK, and can see that it might well spell the start of something new. How desirable that will be remains to be seen.

Personally, I'm not all that sure Cumberland Breweries make anything that I'd like to consider Craft Beer. Dr Lyons is purporting his craft brewery credentials. Off course, he might be planning on lifting the Cumberland Brewery image to that of craft. Equally, I'm unsure if this would be good or bad overall. Then again, perhaps he sees more of a future in the traditional side of the British beer industry.

I'll be watching developments of this move quite carefully. For sure I think it might well be the start of various alternative ownership models that will slowly percolate through the industry. What I am fairly sure about is that the industry cannot sustain the numbers of breweries that are now evident. I am convinced that breweries smaller than ours fail to have a chance of sustainable progression. This is simply due to the economics of supporting the owner and workforce and generating an autonomous entity that can be sold.

I do see a future of breweries either being merged, or bought out, and those that do not go through this change are likely to fade out of existence, unless they become big enough in their own right.

17 comments:

Curmudgeon said...

The only time I've come across Corby Ales is seeing their bottles on sale in Home Bargains at a quid a pop. Tried one, and it was crap. So they have a long way to go to achieve any kind of craft credibility.

A lot of the recently-established microbreweries are essentially one-man operations, often hobby businesses for people with a redundancy lump sum. There will be a natural attrition as the owners retire.

StringersBeer said...

Yeah, mudgie, that doesn't really describe the brewery (ies) in question though. Here's a laugh though. The beer? Dull to iffy, indisputably cheap.

Dave Bailey said...

Mudgie, you have to question what sort of beer you are getting if it is £1 a bottle....

Stringers, I'm sure you, a we have, come up against the fact that the likes of Cumberland Breweries sell their cask at rock bottom. It's a tough one to compete with if you are trying to make beer with more interest, more flavour and excitement as we are (you and me both) However I remain convinced that keeping to our own standards and even improving, rather than dumbing down to what I am starting to call "bad flat lager" is a far better strategy.

And then hopefully shouting about it in whatever innovative way we can, hopefully without pissing off our friends.

It might end up being my downfall, but if it ends up that way, at least I can be sure I failed trying to succeed in what I believe in.

Jeffrey Bell said...

"you have to question what sort of beer you are getting if it is £1 a bottle...."

Brewers in Franconia manage it. They brew beer on a small scale and sell it at competitive prices. Of course people buy it by the crate so they aren't just trying to flog solo bottles.

StringersBeer said...

Different tax regime there, Jeffrey. Makes a big difference. That and the price-fixing.

Jeffrey Bell said...

It's Bavarians you lot have to thank for your progressive beer duty leg-up - it originated there - and having been given the opportunity to do so it's not something all member states have implemented. So actually the tax regime's better in UK than in some other European countries.

Surely if someone offered you the chance to be the next Celis - sell out to a big fish, take the money and set up again, properly capitalised and having learned from any mistakes - you'd jump at the chance? Of course you would.

StringersBeer said...

@Jeffrey
1. You were talking about Germany.
2. Me? That could never happen. Dave? He's not daft. I suspect this has always been the plan. But buying a massive yacht, rather than another brewery.

Jeffrey Bell said...

Stringers, the way they implemented PBD in Germany helps true microbrewers less: I don't think their scheme isn't stepped, tapered or targeted - so everyone under the highest threshold permissible under european law gets the full 50%. So mid size ventures come out of it best due to have the beginnings of scale economies plus the duty rate cut.

We should do the same in the UK if we're going to have PBD - it would encourage expansion and consolidation on a small scale. As it is we have a silly amount of breweries and none of them want to expand. Indeed I bet loads manage to run on v low or no profit so don't pay any tax

Dave Bailey said...

Cricky, you lot have been busy. I've been trying to run a brewery whilst you lot have been discussing on here.

Jeffry,

Well, yes, by the crate, direct from the brewery, is a slightly different economy. It's not something we'd do right now. But if we could encourage folk to flock at certain times it could make sense. But on high street retail? What price is the brewery selling to the stores, what are the logistics cost? - Price at the brewery door is going to be less than 50% of that quid. There is precious little margin there.

Anyway, of course we'd all sell our empires for the right price. Who wouldn't? Why do you say it would never happen to you Stringers? Do have no exit strategy? It is perhaps something that baffles me, why you are happy to sit there cynical of people's attempt to build a genuinely valuable enterprise, rather than actually joining in and making one for yourself. You know we'd reciprocate should you actually decide that you should. And I know you could if you wanted.

Yacht? No, but a nice little apartment in Chamonix is a real goal. Kind of sorry I'm not there now really. Trouble is, have you seen the price of them? Probably be less expensive to buy a modest yacht. I'll probably settle for a new tent, new rope, and if there is a little left over, a new pair of boots, and a battered old van to get there.

Jeffrey Bell said...

Dav,

I don't think that's very fair: Stringers is building a genuinely valuable enterprise, he's just doing it his own way and has reasonable expectations as to what to expect.

Indeed Stringer's branding is fantastic. Moreover it's original, in that it doesn't look derivative of another, larger brewery. That in itself is something of real value.

I think it's less that he's cynical and more that he uses online communication to actually challenge ideas in a very competitive and uncertain business in a state of great change, rather than just look for self validation.

Dave Bailey said...

Jeffrey, in some way I'd say fair call, although it seems a bit strange to me that one MO of Stingers is to be cynical about his friends. Seeing as his argument is that he's just making banter to liven up this sort of forum, I feel no remorse in tackling it.

We're not that much different in size, nor outlook in real life. There are much bigger fish to fry, which we could attack as a united front.

I do agree about your branding point mind. As far as I know, all completely their own work too.

But you miss their main USP, which they fail to bring out properly. Someone, somewhere, someday will make a much better job of that one. It's in Stringers blood, I'd be right behind them if they decided to go for it.

Jeffrey Bell said...

Craft beer with blood in it? I suppose it was only a matter of time to be fair.

StringersBeer said...

Dave, I'm not knocking you (or anyone else) for building a "genuinely valuable enterprise" i.e. one that can be sold, cashing out yr sweat equity in a sensible exit. That's a good plan. When you sell up and buy the massive yacht, you'll have earned it. Of course, if the project is about the maker (part of a meaningful definition of "craft" if you ask me) how does that person leave without taking the real value with them? We're talking brand-building rather than "craft" here. Nothing wrong with that of course, but why pretend it's something that it's not? [Answers self: "Because it sells beer, stupid"]

Curmudgeon said...

Are you suggesting that a craft brewery ceases to be craft if ownership is transferred to someone other than the founder?

StringersBeer said...

Not necessarily Mudgie, no. But if it's sold to a corporate entity (say), yes, arguably.

Jeffrey Bell said...

What if the founder stays with the business, and not just on an earn-out? I'm thinking Alistair Hook of course

StringersBeer said...

Ah, la politique des Auteurs here. Or something.