Friday, 25 January 2008

S&N succumbs to a giant takeover

Where will the axe fall as S&N
succumbs to a giant takeover?

Scottish & Newcastle, the only remaining British-owned national brewer, has fallen to a takeover bid worth £7.8bn from a consortium of Carlsberg and Heineken. What is the future for the S&N breweries in Britain? The Danes and the Dutch said at the outset of their bid that they would breakup S&N's British operation, so the future is bleak for breweries in Gateshead, Manchester, Reading and Tadcaster. The fact that Carlsberg, which has long experience of the British beer market, has opted to run S&N's French Kronenbourg operation, does not augur well for the British breweries. They will be run by Heineken, which has never brewed in Britain. Its beer was brewed under contract by Whitbread and now all Heineken sold in Britain is imported from the Netherlands.
Surely not all the lager brands owned by S&N -- including Foster's, Kronenbourg and McEwan's -- can survive at a time when sales of premium lagers are in decline. Of particular interest will be the fate of the Tetley brewery in Leeds. Tetley will now join a group that includes John Smith's, which means Heineken will control the two leading British keg beer brands. As Tetley has to leave its Leeds city centre site it could mean either the end of the brands or the ignominy of being brewed at John Smith's in Tadcaster.
But the takeover was never really about the British market. S&N has been a major player in the rapidly expanding Russian and Baltic States markets. In a consortium with Carlsberg, it owns Baltic Beverages Holding (BBH), which produces the top-selling Baltika beers. Heineken has been slow to move into Russia, which is why it has been keen to force through the takeover in order to outst S&N from BBH.
The takeover is a victory for global brewing, with scant regard for the interests of consumers, who are likely to see a sharp fall in the number of beer brands brewed by S&N in Britain.
Of immediate concern will the future of two independents with strong links to S&N. Theakston's in Yorkshire was owned by S&N for many years but was sold back to the Theakston family in 2003. It has flourished since then but, due to lack of capacity, the brewery's main brand, Theakston Best Bitter, is brewed under licence at John Smith's plant in Tadcaster. If Heineken consolidates ale brewing and even moves Tetley brands to Tadcaster, Theakston may have to look for a new home.
In Scotland, while the Caledonian Brewing Company owns such brands as Deuchars IPA and Caledonian 80 Shilling, the buildings and plant in Slateford Road, Edinburgh, are owned by S&N. Heineken might be keen to cash in on the potential of a site on the road to Edinburgh airport. Caledonian also owns the Harviestoun brewery near Dollar and may need to expand that site if Slateford Road falls to property developers.

6 Comments:

Blogger Zak said...

Historically, it would be a shame if Tetley's abandoned Leeds, but I wonder if there would be any difference in the product itself? I can't imagine Heineken being enthusiastic about keeping Tetley's and Smith's as seperate brands - John Tetley's Smooth? Tetkey-Smith's anyone?

25 January 2008 at 14:37  
Anonymous Anonymous said...

I was under the impression that Tetleys was brewed by Carlsberg, hence their old name Carlsberg Tetley, and would continue to be brewed by Carlsberg UK. Only the beers and breweries in the UK owned by S&N would transfer to Heineken. So I would assume that Heineken would not have control of both John Smiths and Tetleys and whether Tetleys is brewed in Leeds would still be up to Carlsberg UK.

25 January 2008 at 16:00  
Blogger Boak said...

I'm among those who really can't get too upset about it. It's the logical conclusion for a company that has set out to grow by acquisition, rather than organic growth through the production of decent products.

I find it strange that a couple of bloggers have mentioned the lack of experience of Heineken in "brewing in Britain" as a factor to be worried about - they're pretty good at brewing bland keg beers elsewhere in the world.

It's possibly sad for historical reasons, and I feel sorry for the remaining workers at the breweries. And having seen the domination of Heineken in Spain and France, I do think it's unhealthy to have too much of the market concentrated in one producer.

But as long as good regional brewers such as Fullers and St Austell are expanding (and not just by acquisition), I can't see this news as anything to cry about.

26 January 2008 at 15:01  
Anonymous Anonymous said...

You have a few things mixed up there, Roger. The whole driving force of the deal was Carlsberg's will or necessity to get full control of BBH. Due to the shotgun clause that is in BBH's statutes they would have to get full control of S&N, which was beyond their financial grasp. So Heineken came into the picture helping to split the company. The split is mostly according to competition laws, so in the countries where Carlsberg has a big share, S&N's business goes to Heineken and vice-versa for countries, like France, where Heineken has a big market share. Carlsberg and Heineken will have no connection after the split is consumated, and Tetley's will still be Carlsberg's and all of S&N UK will be Heineken's, so no possibility of ale consolidation and no foreseeable danger to Theakston's. As to Heineken changing much in the UK, I don't think they will be stupid and waste the massive brand equities that S&N built in the UK over the years and start closing breweries left and right and replacing brands with Heineken (in the near future, anyway).

26 January 2008 at 15:09  
Anonymous Paul Garrard said...

I can't get too emotional about this either. As long as there is enough good real ale around, and a large number of smaller breweries still brewing it then one less big brewer isn't worth crying over.

27 January 2008 at 20:32  
Blogger Roger Protz said...

Cask Tetley's Bitter is a superb beer. From my long experience, beers never taste the same when they are moved. Young's Bitter as brewed at Charles Wells is a good beer but not quite the same as the original -- being fermented in conicals at Bedford won't help.
Many, many moons ago, one of my favourite beers was Wethered's Bitter. When dear old Whitbread closed the brewery, the beer was briefly brewed by McMullen. "Macs" is my local brewery and I love their beers but their version of Wethered's didn't taste anything like the original, even using the same yeast strain.
Anonymous is correct: Heineken will own the S&N breweries and brands and Carlsberg will have no role. See my update on the blog.

2 February 2008 at 11:49  

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