Wednesday, 26 May 2010

Dying Brands up for Sale



It seems that AB InBev are putting the brands Bass, Boddingtons and Flowers up for sale. The Morning Advertiser has the story here. While no-one in their right minds gives a monkey's chuff for any of them, discredited and unloved as they have become, there is a potential fall out for the regional brewers that brew them for AB InBev. Hydes of Manchester who brew cask Boddingtons, could be a potential victim of this aspect, though that is speculative at the moment.

The problem may be in finding a buyer despite the rumoured low price of £10 - 15 million, especially as the sale of Bass will exclude both the trademark and international rights, including lucrative exports to America, where the beer is still very popular.

Somehow I doubt that anyone will want to cough up for them. They are unloved and almost forgotten and I doubt if they can be revived. Their heritage and history have been destroyed long ago.

29 comments:

Cooking Lager said...

Ooo the value of a brand, and ought it be part of book value. I remember that from university. I remember the value of a brand could be calculated by a formula including the price premium a brand could command, the annual turnover, and the difference between brand turnover and the nearest generic commodity. Someone actually wrote a formula and put it in into a book that I had to read in order to get a certificate. All bollocks really, as the brand is nothing more or less than goodwill. What a buyer will pay over book value, for the business

Selling a brand separate from the business, does a brand have value? Is it related to the recipe and consistency of the original product? I couldn’t place a value on any of these brands but take your word that they are discredited in the eyes of pong drinkers. You know more about the pong than me, and I suspect most.

You can say it is a pity when brands decline, but all brands go through stages, and once they have been cash cowed, there is nowhere to go.

Why attempt to reinvigorate a brand, and deal with all the baggage, when a more cost effective solution for a beer would be to create a new brand?

The dead brand I would buy, if it was for sale for £1, would be double diamond or red barrel. I’d ask Woolpack Dave to contract brew an example using the recipe. Only to wind you lot up.

The Beer Nut said...

Is the contract money for brewing these really worth that much?

Tandleman said...

Hard to say BN, but when you get to know these smaller brewers, you realise that keeping the mash tuns going is a major concern. In the Hydes case it may well be around 20 - 30,000 barrels (a guess). A fair bit either way.

Ed said...

Have double diamond and red barrel ever died completely? I saw a bottle of red barrel that had been exported to the states a couple of years ago.

Tandleman said...

I am certain that Double Diamond still exists as a export brand. Dunno about Red Barrel though I'd be surprised if it does.

Cooking Lager said...

I doubt a brewery like Hydes, with a tied estate, has built its viability on contract brewing other brands. This element will be additional revenue to use spare capacity and is always subject to review and tender.

As one contract comes to an end, they will be able to tender for new contracts. There might even be one with the new brand owner.

If the brands are as discredited as you say, then discontinuing the brand would benefit customers.

The pubco's buying AB brands will still require an ale brand, and would benefit from retailing a brand with greater value.

Tandleman said...

"I doubt a brewery like Hydes, with a tied estate, has built its viability on contract brewing other brands."

I doubt it too and didn't say it was. It is still a worthwhile contract though and there isn't enough to go round presently.

And if the brand continues, there is no reason to think it'd move anyway. It's just a side effect and causes uncertainty.

Curmudgeon said...

Actually I believe Hydes are fairly dependent on contract brewing, and I understand it makes up at least half of their brewery throughput. They don't have a very big tied estate and haven't been as active as the likes of Robinsons and Lees in extending it, so must have seen a big fall in volumes of their own brands in recent years.

I had a very enjoyable pint of Bass recently and if confronted with a bar featuring the usual suspects of London Pride, Bombardier, Old Speckled Hen etc it's often the beer I would choose.

Cooking Lager said...

If that is their chosen business model, Mudge, you would expect there Sales Team to be reviewing the contract already, and spotting whether AB have a get out clause prior to expiry, whether the contract would have to therefore move with the brand, or whether AB would have to buy the contract out to close it.

You'd also expect an organised sales team to be out there winning contracts. Change happens, it's only a disaster if you chose it to be.

Martyn Cornell said...

If the contract brewing is helping to cover your fixed costs, you don't need to be making any actual profit on them at all, because the existence of the contract brews means your own brands carry less of a costs burden. If the contract disappears, suddenly those fixed costs fall on a reduced throughput, which could be very painful. Might not be so bad for Marston's, which brews Bass, and could even be glad to see the brand disappear, but Hall & Woodhouse, which brews Flower's, I believe, might not be happy either. But the brands presumably have some value, or they wouldn't still be appearing on bartops …

Barm said...

Here's something tangentially related that I've never understood. I read somewhere that Marston's won't ferment Bass in their Burton unions for fear of infecting the wood with Bass yeast. But didn't a lot of those same unions come from Bass in the first place when they stopped using them?

Barm said...

Intersting comment over on the MA report too, pointing out that Whitbread paid £50m just for Boddington's 20 years ago. Shows how much InBev have run the brands into the ground if Bass is only worth £15m now.

Cooking Lager said...

@Martyn. Would a brewery apportion its costs like that Martyn? I can see how a brewery plant making one product would assign its fixed and variable cost to work out a unit cost of production. When noticing it was operating under capacity, it might then seek to find an additional market where it sold above variable cost but below a price taking an apportionment of fixed cost. By doing so it would maximise overall profitability as capacity was reached.
However if a brewery is making 2 products with the same plant and switching production it would apportion fixed cost to the 2 operations on a ratio basis, on at least one set of its management accounts. Any other method would not allow the management accounts to reflect the cost spread. It could very well generate a further set of accounts that apportioned the fixed cost to the core business, the main product, to ensure overall viability if capacity was not reached.
A regional brewer with tied estate would surely see contract brewing as a sideline to reach capacity, apportioning its fixed cost to its core business?

@Barm If a brand is acquired it will fit into 2 of the 4 sections of a growth share matrix.

http://en.wikipedia.org/wiki/Growth-share_matrix

Either Star or Cash Cow. You only really invest in a star, and milk a cash cow.

It's not bad business to buy a cash cow, milk it, then flog it. The quid isn't in maintaining brand value, it's in the milking.

Coxy said...

Bass is the oldest trade mark in the world registered in 1876, and the beer was brewed from 1777, it was doing millions of barrels a year whilst still owned by Bass, so its a bit of a shame its sudden downfall.

Barm said...

Cookie, it depends whether one wants to have a viable long-term business, or prefers just to hype up the figures until the next quarter's bonus is due and then piss off somewhere else.

Paul Garrard said...

I could see that the Bass brand could be quite lucrative in the right hands. I've had many enjoyable pints of the stuff over the years.

Tandleman said...

There is a degree of optimism that I just don't share. In the UK, Bass is dead as a dodo and will likely stay that way.

Coxy - It's downfall has been slow,steady and inexorable, not sudden. It needn't have been so.

Coxy said...

fairly sudden, if you compare the last 240 years to the period of time its taken to dive ( mainly after Bass sold its pubs due to the monopolies commission not allowing them to expand anymore)

Mark, Real-Ale-Reviews.com said...

My first pint of Flowers was whilst walking the Pennine Way with my Dad, and I'm off on the second leg of that trip today. I sure hope I come across some Flowers again, there's something eminently refreshing about seeing it in a pub in the middle of nowhere after walking for 15 miles.

Tandleman said...

Ha. If I'd walked 15 miles (no way José) and the pub had only Flowers on, I'd be suicidal. Still to each his own.

Andrew said...

So here's an idea. Carlsberg buys Bass and brews Tetley and Bass at Leeds. Saving both brands and gaining another international export brand they can use in the States where they have tanked with Carlsberg since the early seventies.
And Bass and Carlsberg go way back...

The Beer Nut said...

They couldn't export it to the States as the international distribution rights aren't for sale.

I'm still trying to figure out what is for sale.

Barm said...

I have too. You don't get the trademark (how can you market something without owning the trademark? bizarre), you don't get international rights, you don't get a brewery.

Effectively, it's a brew under licence deal. You get the right to brew a brown liquid called Bass and sell it, and whatever supply contracts are in place, which may or may not be renewed.

The Beer Nut said...

Marketing things without owning the trademark happens a lot. For instance, Diageo do all the marketing (and brewing) of Bud and Carlsberg here. But it is, as you say, a contract arrangement -- not a sale.

Tyson said...

Bass without the lucrative trademark and American rights really is a worthless brand. To me, it's practically one of the brnads that should go for £1, like many before it. However, no doubt they will get a little more than a £1 for it, although with all the big boys ruling themselves out, I doubt it will be £10M.

Boddingtons is still a lucrative brand, mainly due to its smoothflow and club presence. It's no secret that Hydes rely heavily on contract brewing, but with their recent heavy losses, it's very unlikely they could afford it.

Hall & Woodhouse are a reasonable size, but how much is the Flowers brand really worth? Again it's mainly a club drink. The best case senario for it seems that, if the price is right, someone buys it and continues to allow Badger to brew it.


I suppose that it comes down to: does anyone really care anymore about these brands?

Barm said...

I get it now. They just want to keep ownership of the trademark, and farm out all the risk (of actually running a business brewing and selling beer) to some mug.

Tandleman said...

That's it!

Barm said...

The only people for whom buying Bass would make any sense would be Molson Coors. They could run a series of cheesey adverts on the theme "Bass is coming home" and it would be a lot better in the brand portfolio than bleeding Stones Bitter.

Northern Snippet said...

Personally,I hope no one buys the Bass brand.We stock this beer for a regular who comes in every day and has drank it all his life.Its hideously expensive compared to other ales which I buy and which in my opinion are far superior.
It has a heinous smell.