Tuesday 20 August 2019

Greene King Takeover

https://d2q79iu7y748jz.cloudfront.net/s/_squarelogo/036833a63395c517e650aaba9dd88400I've been busy with the Great British Beer Festival and with editing (writing) my local CAMRA Magazine, so haven't had time to blog, but I couldn't help but quickly jot down one or two thoughts about Greene King being taken over by Hong Kong conglomerate CK Asset Holdings for £4.6 billion, including its debt. The Hong Kong company is offering 850 pence per share, a 51% premium to Greene King's closing stock price on Friday.

So there bare facts are that a successful business has bid a premium for another successful business. You know what? That happens all the time. Most businesses don't grow organically, or rather they do, but only to the point that become interesting or successful enough to either take someone else over, or be taken over. It is very much a dog eats dog situation. And a normal one, though in this case exacerbated by the weak pound which makes British owned asets relatively cheap.

There has been a muted reaction to this in the Twittersphere and elsewhere on social media. Roger Protz has been the foremost tweeter with this:
In response, Martyn Cornell hits the nail on the head:

So there we have it. As Greene King carries little emotional attachment in the mind of most beer drinkers, it was always unlikely that its takeover would have beer fans rushing to man the barricades. That's just how it is, but wait.  Greene King is a big part of the British brewing industry. It owns a large number of pubs - over 2,700 - and these are spread all over the country. Heck we even have plenty of them here in Greater Manchester where, one must admit, they aren't exactly the most popular beerwise.  Their type of beer is not always particularly suitable to local tastes. (See also post below.)

Concerns are, as always in these circumstances, around what the new owner intends to do with its new acquisition. Pubs, by their nature, can be turned into easily realisable cash, by selling them for different use, or for the land they occupy. That though is an ongoing issue as social habits change and custom becomes less, though there are signs that this is bottoming out to some extent.

According to their statements, "CKA's strategy is to look for businesses with stable and resilient characteristics and strong cash flow generating capabilities," said George Colin Magnus, chairman designate of the CKA unit in charge of the acquisition. "The UK pub and brewing sector shares these characteristics."

So, on the face of it, they want the business to continue to generate cash. They have given an assurance along the lines of business as usual (see here for more).  Can we trust this? Doubtful, but the selling off of assets would, where seen as appropriate, have likely happened under current GK management anyway. It is an uncomfortable fact that many pubs are worth far more to the owners as anything but pubs.

So where does that leave us? A largely unloved vertically integrated pub and brewing business has been taken over by someone else who wants to make money out of it. Yes assets will be sold to pay for the purchase. Will vertical integration continue? Tricky one, but the takeover recommendation gives a strong indication that the brewing side will continue.

Nonetheless we will have to wait and see how this one plays out.

Seems CKA already own a number of freehold pubs which are leased to Greene King

The fact that Greene King owns the freehold or long leases on 81% of its pubs, certainly shows the PubCo model with its huge debt, to be a millstone round the neck of the pub industry.  

As this is a cash offer, we can assume that CKA have reserves that need to be wisely used.

Saturday 3 August 2019

Good or Shite?

Back in the old days of Usenet and rec.food.drink.beer (a discussion group on all things beery, mostly involving Americans, but a healthy smattering of Brits and others) the merits of beer were, tongue in cheek, boiled down to is "Is good or is it shite?" That sort of still works today if you put aside all caveats, qualifications and ifs and buts.

A few short weeks ago I had the pleasure of presenting our Club of the Year Award to Dobcross Band and Social Club.  We enjoyed a most convivial afternoon there. Beers on sale were Lees Bitter, Bradfield Farmer's Blonde and Morland Original Bitter. All were in splendid form.  Now Morland used to brew in Abingdon in Oxfordshire and were famous for Old Speckled Hen and Hen's Tooth, now of course brewed by Greene King who took them over in 1999 and closed them in 2000.  I hadn't seen Morland Original Bitter in this neck of the woods - or in fact, anywhere else - and it seems possible that the beer has been recently resurrected by GK. If you know more, do tell me.

Of course I commented on this on Twitter with a rather provocative comment, just to see if I could raise a Pavlovian reaction to this Greene King brewed beer:
Now it seems that GK are not exactly loved on Twitter. Is this fair?  I rather like their beers when they are served in the peak of condition. With the demise of Tetley Bitter, I rather miss the lactic finish that beer had and the nearest thing to it is GKIPA though admittedly I rarely see it up here. That beer is often despised by what I decribed as the "Beer Bubble" but actually by many more sensible people too.  This new version of Morland Original Bitter wasn't a million miles from its orginal taste, described in the 2000 Good Beer Guide as "Copper coloured with plenty of bittering hops and hints of fruit. Subtle aroma and a short, dry, bitter finish."  OK it didn't have a subtle aroma, but rather, the lactic tang of GKIPA. Nonetheless, I liked it. It was well made, very well kept and at a sensible 4% abv, suitable to be rattled down by the pint. Most certainly not shite.

I wonder too if Greene King, now that they have outlets all over the UK, including many in the North, are looking for something that can be readily drunk in those parts of the country where their core beers aren't well received?  I know of one local licensee in my neck of the woods, a former Spirit Group pub with "reserved rights" to guest beers, had a strict admonishment from the Area Manager asking why sales of Greene King are so poor.  He was able to answer honestly, that it was because nobody liked them.  Oh and the result of my provocation?  Well I didn't get a lot to be honest, but I liked the one that simply said "I like my beer bubble where Greene King beers are shite"

So do GK get a fair crack of the whip beerwise?   Let me know what you think.  

If you want to see some of the orginal good or shite debate here is some of the original argument back in the dog days of the group in 2001. One or two well known names there too. 

 Sparkling the Morland beer didn't do it any harm either.  Yet another case to be made for God's chosen method of dispense.

Friday 2 August 2019

A Slightly Tense Calm

There exists a hard core of early morning imbibers.  I suppose there always has been, but before the licensing laws were changed many years ago, by and large they had to do their supping at home under the baleful and disapproving eye of her indoors, as she bustled about getting the nippers their toast and sugar puffs. Hardly conducive to beery conviviality one might imagine.  Mind you, I have read reports of publicans being fined in the old days for admitting customers before the prescribed time and being spotted by an eagle eyed constable, though transgressions - at least most of those recorded - were mainly between lunchtime and evening sessions  - or after time had been called at night.  Far easier to keep customers in if you are doing "staybehinds" after sessions, than attract them when you are setting up for the day and having them under your feet. Breakfast time illicit on premises drinking, was even then I think, a little unusual and most likely discouraged.

But nowadays you don't have to worry about that sort of thing. Should you require liquid refreshment, it can be legally obtained at almost any time of the day and you can do it in licensed premises, away from disapproving eyes and subsequent frank exchanges of views.  We live in glorious and enlightened times. 

This freedom to open and serve the amber nectar early has a main proponent. Enter J D Wetherspoon*. Many readers will know from personal experience, or anecdote, that Wetherspoons, especially those in small towns have developed a hard core of regular early morning topers.   These are usually a small dedicated band of the retired, the early risers, the ne'er do wells, the elderly, the unemployed and unemployable, the hardened (but not yet hopeless) drinkers and those just seeking the company of like minded fellows.

I watched some in their native environment the other day. My car was in for some work and I fancied a coffee. The shutters of JDW roll back at 8 am and a trickle of people slip in.  They cannot drink alcohol at 8, but there are preparations to be made. Most just grab a table, open their newspapers and settle down. The odd one buys a coffee, but this is an exception. Most if they drink anything, just have water which is freely available. Staff are used to this and make no move towards the bar, but get on with their own cups of tea and a bit of snap, or whatever prep they have to do.  Greetings, often just nods,  are exchanged, but mostly silence reigns.  Some set out their favourite tables with their preferred chairs. Furniture is shuffled round and carefully placed in pre-chosen spots. As more drift in, the proceedings, on this occasion, are interrupted by a practise fire evacuation. Thirteen of us - a motley crew - stand on the pavement for five minutes, then shuffle back in. Most return to stare into space from their perches, now fully kitted out and organised to satisfaction.

By 8.50 there is a palpable sense of expectation in the air.  Eyes flick towards the bar.  A few more arrive. Minutes tick away and suddenly there are people coming back to their tables with pints of beer and lager.  One dedicated soul has two, which he arranges carefully in front of him, rims almost touching. Overall pints are evenly split between lager and John Smith's Smooth. 

By ten past nine, when I leave there is a noticeable air of contentment and the genesis of a conversational buzz. 

* Other early morning drinking establishments are available
If I have breakfast there, which I do from time to time, by half past ten the place will be going like a fair.  It is usually very jolly indeed.

Some spend quite a few hours there, but by four even the most hardcore will be gone, many resting for a repeat performance the next day.  This is an interesting sub culture of pub goers. Good luck to them I say.