The UK brewing industry is in for a shake-up should Stella Artois’s maker Interbrew succeed in its takeover bid for Whitbread’s and Bass’s brewing interests, based in Burton upon Trent, writes Mike Benner
Interbrew, the family-owned maker of Stella Artois, is set to become the biggest brewer in the UK. Its proposed acquisition of Bass’s and Whitbread’s brewing interests will give it 32% of the UK market, placing it second in world brewing, trailing only Anheuser-Busch, the US brewer of Budweiser.
This situation is a predictable outcome of the government’s 1990 “beer orders”, which forced national brewers such as Bass and Whitbread to sell or free-up huge chunks of their pub estates. The result was the separation of brewing and pub retailing, and diversification, as brewers became leisure corporations.
A declining beer market and the growing profitability of these other areas led to the closure of many breweries and the loss of many beer brands.
However, Interbrew’s acquisitions remain subject to regulatory approval (see South Staffordshire, p91).
Interbrew – the self-proclaimed “world’s local brewer” – claims to respect the UK’s brewing heritage and says that it will operate in localised markets, rather than treat the UK as a single territory.
Interbew unaffected by ‘beer orders’
Because it will not own UK pubs, Interbrew is not affected by the beer orders, so the government’s hands are tied in terms of stopping the takeovers. It is therefore likely that the takeover will proceed, subject to the company divesting a brand or two.
Whitbread Inns will no longer have to allow tenants to take guest beers from brewers of their choice. This could cause problems for smaller brewers, many of whom have grown on the back of this law.
Interbrew will inherit several large long-term supply deals from both Whitbread and Bass, so its lack of pubs will not leave it short of outlets. Its ability to discount its brands could lead to increases in market share, and possibly, a price war with Scottish Courage, the UK’s second-biggest brewer with 30% of the market.
The hidden effects of consolidation lie in distribution and wholesaling.
At present, market power lies with retailers. Large pub chains like Punch and Unique rely not only on rents but on their ability to buy cheap beer to sell on to their lessees profitably – so they demand high discounts from suppliers.
Deal threatens micro-brewers
Consolidation may also make it harder for smaller family- and micro-brewers to strike supply deals, threatening their already limited market access.
The proposal poses a threat to consumers – but also offers opportunities. CAMRA – the Campaign for Real Ale – is seeking assurances from Interbrew about its plans to ensure that brands like Draught Bass and Flowers Original receive proper attention, instead of investing mostly in European brands.
The takeover deal has the power to put life and diversity back into real ale. As Interbrew’s chief executive Hugo Powell says: “Beer is a local business. Therefore, our local strength, our local brands and our local people will be the key to success.”
Interbrew has maintained a large portfolio of local brands in Belgium. The same cannot be said of Bass or Whitbread, which have axed more than 15 local and regional beers over the past five years. A change of culture may just turn the UK industry round.
Mike Benner is head of campaigns and communications for the Campaign for Real Ale
