Tuesday, 22 November 2016

At the Margins

No, I haven't stopped blogging. It just seems like it. It is over three weeks since I did, but largely this is because CAMRA life has intervened in the shape of Rochdale Beer Festival - very successful thanks for asking - where I managed the bar and the beer - and of course looming on the horizon and giving off as much black smoke as a Russian aircraft carrier, is Manchester Beer and Cider Festival which for me, as Deputy Organiser, means lots of work, lots of prep and lots of coats to hold as differences of opinion rear their heads. Yes, your hero Tandleman is a peacemaker.  Oh and if I didn't have enough to do, I have just sent off our local CAMRA Magazine to the publisher and am awaiting the proof. It has been busy, busy, busy.

So what has caught my eye in between all this stuff? Well an article in the Daily Telegraph that's what.  Seems our chums in Fullers have been selling less beer and making more money. That's a good trick on one hand, though clearly not on the beer selling other. So how has this neat little manoeuvre been achieved?  Well it seems craft beer is the answer. Despite the total beer and cider sales falling by a rather alarming 4 percent, it seems that sales of craft beer have risen considerably and Fullers Beer Company has grown profit by no less than 8 percent against a background of a switch to higher end drinks. Also hidden in the midst of all of this is the observation that profits in tenanted pubs fell while those in managed pubs rose. This reflects a trend of breweries and indeed Pub Companies with tenanted or mixed tied estates switching their focus in bigger houses to management. This is just one more move away from the traditional model of pubs and beer that pertained for so many years and is significant.

So back to craft beer.  It isn't necessarily volumes of sales that are the salvation of Fullers profits, but a most basic of trading concepts.  It is all about margin. You can sell craft beer, especially in house produced craft beer such as Frontier for a bigger price.  Who'd have thunk that? If you actually produce that beer yourself and convince your customers of its worth, you can charge more for it without it actually costing you that much more to make. Once it is more widely understood that not only is craft beer attracting the more price insensitive customer, but you can make big money from it then you can actually see where the likes of ABInBev are going with their current policy of buying up craft breweries. Pennies are dropping all over the place.   Many of the smaller regionals are already going that way - think of Adnams as a good example and maybe even the likes of JW Lees will be selling beer in fancy 330ml cans to join the gaderene rush before too long?  How meaningful - if it ever was meaningful - is the term "craft" now?

And what about the purveyors of murk - sorry cutting edge breweries in their cold railway arches? Back to the niche I'm afraid.   That's their place in global brewing as the big boys circle. The times are changing.

I'll be writing about Manchester Beer and Cider Festival before too long. I'm going to tell you about the grub. You'll like it

When I get back from Frankfurt that is. Apfelwein anyone?


Curmudgeon said...

Get as much of your sales as possible back in-house - a lesson that some of the integrated family brewers seem to have forgotten.

Not, of course, the one in Tadcaster :-)

Cooking Lager said...

You have hit upon the magic formula to keep pubs going, fella.

As more people abandon pubs, charge the nut cases that still use them more. Charge the odd balls that fetishize them even more.

retiredmartin said...

Good to have you back. One observation as someone who spent £4 on one of Adnams craft keg beers in our Punch local last week. You can't drink them as fast as a less chilled real ale. My good wife would normally have drunk two pint of Broadside in the time she took to drink one Mosaic, for which she's now developed a preference. Real ale being served too warm again, of course.

Barm said...

You would have thought this insight would be so obvious that it wouldn’t need saying, but evidently it does. Of course brewers want to be making the stuff that sells for £5 or £7 a pint, not the stuff that sells for £2.60. Wouldn’t anyone?

Stono said...

but the thing I took away from their results statement, in fact I was so intruiged to see if my impression was right, I created a word cloud from the Chief Execs statement,and one of the words that sticks out very obviously in it, is food. not beer, craft or otherwise,but food.

and take the Sail Loft their new pub at Greenwich, off the pubs own website intro,

"The Sail Loft serves up fresh food and fabulous drinks with a side order of stunning views. Drink or dine at the water’s edge courtesy of our beautiful outdoor terrace, or enjoy the panoramic cityscape from our first-floor dining area."

food not drink.

worth thinking about.

Stonch said...

Agree with Stono.

Fullers continue to improve their wine offer in their managed houses, and they're promoting it more with prominent lists. I expect that'll be part of the profit rise. I really don't think the type of beer people are drinking is going to be the biggest factor in these financial results.

When I'm out I drink wine as often as I drink beer and have noticed the lists in Fullers managed houses has improved recently. They bought and renovated the Sutton Arms on Carthusian St recently. I dropped in and ended up spending a very pleasant hour with two glasses of Kiwi Pinot Noir at £10 a glass. That'll have been 70%GP or more, and a lovely cash margin. Instead I could have had two pints of an expensive craft beer, I suppose, but they'd have made less profit out of that.

Cooking Lager said...

Yeh I thonk Stono has it. It's food more than beer and not really a sign that craft is adding value to a vertical business model, but is adding value to a beer brand.

Northern Family brewers are doing the same. If you look at Robinsons which arguably start off on a lower national brand recognition level to Fullers they have in recent years been turning their better pubs in better areas into smart dining restaurant type pubs where more people are eating dinner and drinking wine. Closing low end wet led pubs as they don't want to compete with value pubs offering £2 pints.

On beer they have been branding their brewery output and putting PBA in shops. Moving away from commodity local bitter & mild to a range of branded beers. The trooper brand is genuine premium brand recognised by none geek drinkers. I gather beer volume is on a long term trend of down and profits are on a trend of up.

Effectively what this changes is the vertical integrated model to 2 separate businesses of pubs and brewery.

Tandleman said...

Agree with that too, but I was highlighting what Fullers highlighted. Obviously it isn't just a single thing, but the Beer Company can make less beer and make more money though "craft".

The overall company makes its money from rent and food etc.

Anonymous said...

Needless snipe at newer breweries at the end there. I'd say grow up but you're probably far nearer the grave than me.

Tandleman said...

Not if I catch up with you.

Tandleman said...

Not if I catch up with you.