Sunday, 30 March 2008

Denver brewing centre

Make your mind up, Coors
-- do you like museums?

The giant American brewer Coors, owner of the former Bass breweries in Burton-on-Trent, plans to axe its visitor centre and brewing museum in the town on the grounds of cost (see previous blog and main website) -- but runs a highly successful brewing museum in Denver, Colorado. A report in the Rocky Mountain News reveals that Coors, based in Golden in Colorado, is updating the brewing museum to use state-of-the-art technology in order to attract even more visitors to the facility.
It seems clear that Coors is more committed to a museum in its home state than to the former Bass Museum it inherited in Burton. The Bass Museum attracted a quarter of a million visitors a year but numbers have fallen to a fraction of that figure as the visitor centre gets little support or promotion.
Coors says it costs £1 million a year to run the visitor centre in Burton. That's small change for a company the size of Coors -- but it's struggling in Britain, along with rivals Carlsberg. InBev and Scottish & Newcastle, as a result of the global brewers' "deep discount" policy with supermarkets. Discounts are so severe that the global brewers make at most 1p in profit from each bottle or can.
A report in the trade paper Morning Advertiser, 27 March, shows to what extent the supermarkets have the brewers by the throat. The paper reports that the multiple retailers will continue to offer cut-price promotions for alcohol in spite of the steep rise in duty imposed in the March Budget.
The paper adds: "One off-licence chain, Bargain Booze, has even written to brewers asking them to absorb the extra costs or face being de-listed from its 600 shops. A letter seen by The Observer said: 'We will have to review the position of any brands where the retail ticket is increased in our business...We reget to say that we cannot absorb the increases in costs that the Budget would seem to demand."
Bargain Booze ask suppliers to help by "absorbing these increases within your own company."
The global brewers should learn the lessons of recent history. In the early 1990s the large regional brewer Charles Wells in Bedford took a decision to phase out production of own-label beer for suupermarkets. Profits on own-label were so low that the company faced severe financial difficulties. Instead Wells built up its own portfolio of brands, including ales and lagers. It has merged with Young's of London to form Wells & Young's. Its Bombardier premium ale is now one of the most successful cask and packaged brands in the country and the company has overtaken Greene King in volume terms.
If the global brewers stood up to the supermarkets and got realistic prices for their beers they wouldn't face financial meltdown -- and Coors could afford to support the Burton visitor centre.


Blogger Tabellion said...

It is to be hoped the closure of places like Worton Grange will help cut the over-capacity in the British brewing industry that encourages big brewers to produce beer at marginal cost that they then sell to the supermarkets to fuel the cut-price beer market.

What is really required, however, os a change in the law to ban below-cost beer sales. The government won't do iy for fear of breaking EU competition laws, but we alrady have restrictions on the retailing of alcohol, because it's recognised that alcohol is not the same as other retail goods - it seems to me to be entirely valid to argue that normal price competition laws should not be applied to alcohol either, because of the effects on society of cheap alcohol sales.

30 March 2008 at 16:58  
Blogger Zak Avery said...

As a retailer, it infuriates me when other retailers (large or small) refuse to pass price increases on to the consumer. Nobody is asking a retailer to absorb price increases, and consumers understand that a price increase after the budget is going into the government's pocket, not the retailer's. As you rightly say, Roger, beer should be sold at a price that reflects its cost of production - something the on-trade has done for years.

Unless brewers and retailers get their act together, I can see the off-licence side of the industry running into trouble soon. State-run System Bolaget, anyone?

31 March 2008 at 09:30  
Blogger Stonch said...

Tabellion's comment reminds me that when you look at the body of European case law, so many of the key decisions regarding competition and free movement of goods are concerned with the sale of booze!

1 April 2008 at 00:51  

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