Wednesday, 27 May 2020

Probably NOT the best beer deal in the world!

I am rather surprised that so few bloggers and beer writers picked up on last week’s story, concerning joint venture between Danish brewer Carlsberg and British brewer Marston’s. Under the deal, the Danish firm will own 60% of the new Carlsberg Marston’s Brewing Company with Marston’s holding 40%. The Burton-based brewer will also receive a cash payment of up to £273m.

This cash injection, whilst welcome, won’t go far towards easing Marston’s massive £1.39 billion debt; a burden they were planning to clear by selling off some of their less profitable pubs. Then, along came Corona-virus.

The merger casts doubt on the future of the other breweries and brands owned by Marston’s, in particular the Wychwood Brewery—home of Hobgoblin beers, plus well-regarded regional brands like Jennings and Ringwood. Veteran beer writer Roger Protz described the deal as “alarming,” adding he was worried about the fate of the Jennings Brewery in Cumberland, as well as the future of Draught Bass, which Marston’s contract brew, in Burton, on behalf of AB InBev. 

When approached, a spokesperson for Marston’s declined to be quoted, but denied there are any plans to close breweries. This is despite the two companies pointing to £24 million worth of savings said to come from streamlining brewery operations, logistics efficiencies and other reductions in overhead costs.

Marston’s’ pub business is not part of the deal, but written into the agreement is the guarantee of a supply arrangement for Carlsberg brands. This has prompted concern among many small brewers, that they will be squeezed out of the market.

The new business will offer a mix of Carlsberg’s mass-market lagers and Marston’s cask ale brands such as Hobgoblin and Pedigree, and will also be able to feed Carlsberg beers into Marston’s estate of around 1,400 UK pubs.

The Society of Independent Brewers (SIBA, warned the deal could make it harder for independent beer firms to get their beers into pubs. Their chief executive James Calder, said “This merger is the latest in a series of consolidating measures within the UK beer market, and has the potential to impact negatively on small independent brewers by further reducing the access to market they receive.”

Marston’s is the third national cask brewer to have been snapped up by a multinational corporation in barely a year—each time at a discount due to turmoil in the British economy. In January 2019, Asahi bought Fuller’s brewing business for £250 million, while Hong Kong property firm CKA paid £2.7 billion for Greene King’s brewing arm and pub estate last August.

The value of the pound has remained low since June 2016, when the U.K. foolishly voted itself out of the European Union, making these types of  transactions even more attractive to foreign investors. So much for taking back control! The fall in Marston’s share value, following the ongoing fallout from COVID-19, made this merger even more attractive from Carlsberg’s point of view, although they have since surged by 36%.  

Until this deal, Marston’s was the last remaining brewing group of any size, left in UK hands. Now, that honour has apparently passed to those Aberdeen-based upstarts,  Brewdog!


retiredmartin said...

Good read, Paul.

Breweries and brabds will close everywhere, the best we can hope is that the pubs are selling enough of it to keep beer quality as high as it had been before Lockdown.

I know I'm a beer philistine, but I never get this demand that pubs owned by breweries should be required to stock other breweries beers. Greene King pubs seem only to be applauded by local CAMRA when they ditch IPA and add guests.

Ian Worden said...

Marston is not quite in UK hands given that the two largest shareholders are American (hedge?) fund managers with roughly 5% of the company each.

The share price was up over 10% this morning so perhaps there are rumours of someone else looking at the company?

I've usually found Abbot to be a great beer but IPA a bit nondescript so someone's view of a pub might depend on which beer they choose. In Wetherspoon I tend to go for a guest but if none appeals then Abbot would be next choice.

Paul Bailey said...

Martin, CAMRA kicked off the whole guest-ale scenario as a means of increasing the distribution of beers from smaller independent breweries. The advent of micro-breweries seems to have muddied the waters and the whole thing has got completely out of hand.

Your assessment that CAMRA only applauds pubs from the likes of Greene King and Marston’s, when they offer guest ales, is regrettably correct. I have witnessed this at past branch GBG selection meetings, which is one of several reasons why I stopped attending them.

Ian, interesting to learn about Marston’s share price increase, along with the holdings by a couple of US hedge fund managers. As for GK beer, I also much prefer Abbot to IPA, but when it’s on form the brewery’s XX Mild takes some beating.

Bradshaw said...

Sigh. More tedious anti-Brexit whining.

Paul Bailey said...

Blimey Bradshaw, I thought you’d done us all a favour and disappeared up your own backside. What happened to your ghost, btw?

It’s good to see that Little England is alive and kicking, along with the ensuing bigotry and xenophobia. Can’t wait for blue pasports plus all those chlorine-washed chickens and all that hormone-injected beef, to start piling in!