Many brewers ended up in financial trouble, and many had to reduce their capital because they lacked sufficient assets to cover them. Why? Because of a fall in the value of their tied houses. The fall in value and the fact that brewers had tied estates in the first place were both linked to government legislation
"MEUX'S BREWERY COMPANY.The 1904 Licensing Act gave magistrates extensive powers to refuse the renewal of pub licences, which led to a fall in their value. Most breweries had huge amounts of capital tied up in their tied estates. A big drop in pub values could make their balance sheets look very sick, as in the case of Meux.
The first balance-sheet issued Meux's Brewery Company, to December 31st, 1905, and the directors' report, issued last night, is a formidable document. The directors therein regret, for the shareholders' sake, that it shows the a very large deficiency of £805,856 on capital account, a deficiency for which the present Board, who were appointed on April 11th, 1905, are in no way responsible. And at the close of the annual general meeting on the 30th inst., the resolution for the cutting down of the share capital - quoted in the aforesaid column — will be submitted. Moreover, at the annual meeting the demands made by Lady Meux and Lord Ailesbury for the appointment of a Committee of Investigation will be brought under consideration.
The report goes very fully into past history of the company, and the vicissitudes which have culminated in the aforesaid large deficiency. For instance, at the last general meeting, on March 16, 1905, among other causes which have led to the serious position of the capital account, were the following, as enumerated by the chairman: (1) The purchase by the company of licensed houses at enormously inflated prices; (2) the advance by the company of large sums of money on securities which have proved to be inadequate; (3) the policy of the company in purchasing at very high prices houses unprofitable and therefore unsuitable for brewery or not nearly so profitable as other descriptions of licensed properties which it had been the settled policy of the Board in the past never to buy; (4) the omission in the accounts to sufficiently provide for depreciation on leasehold properties and for the bad debts on loans, and an audit by a non-professional man; (5) the great decrease in recent years in the beer trade of the companies houses. To which may now be added : (6) The capital expenditure of large sums in re re-building, or partly rebuilding licensed properties, which expenditure has yielded no adequate return; (7) the depreciation in licensed property generally caused by the operation of the Licensing Act, 1904.
Among other reasons or causes of the decline in the trade and profits, the chairman considered, at the time he investigated the matter at the beginning of last year, were the effects of the South African War. It is also added that the reason No. 3 has been remedied by the present Board. The Chairman also mentioned cheap locomotion to and from the suburbs, many of the houses owned by the company being in the central Metropolitan area."
The Chairman further pointed out, at the last annual and subsequent meetings, that when the properties were revalued there was sure to be a large deficiency, and that until this deficiency - now ascertained - was dealt with no dividend could paid on the Preference Shares. This has received the long and earnest consideration of the present Board, who accordingly submit the scheme of capital reduction mentioned in the above-quoted resolution.
The writing down of the share capital thus proposed, deducted from the total deficiency named, would leave a balance of £10,866 "which must be written off out of future profits."
It should be noted that - as stated in our Money and Trade column - all the Ordinary shares were allotted to the vendors of the concern.
The directors consider that the profits of the current year will be materially helped by the low price which has prevailed for hops: "the directors taking advantage of this to buy largely for future consumption, and also by more economical and judicious buying of materials generally."
Manchester Courier and Lancashire General Advertiser - Thursday 22 March 1906, page 4.
But the only reason brewers owned so many pubs was because of previous Licensing Acts which had made it virtually impossible to get a new licence. With a finite number of outlets available, breweries rushed to tie them up. Often, as in the case of Meux, paying far too much for marginal pubs.
I knew this already. What struck me more were some of the other reasons for Meux's troubles. Because while this sort of restructuring happened at many breweries, it mostly happened four or five years later, after the effect of the 1910 Licensing Act, which massively bumped up the licenses for brewers and pubs, kicked in. Clearly more had been going on at Meux.
This is my favourite: "an audit by a non-professional man".
One of the reasons I love Edwardian pubs is the quality of the materials. They couldn't have been built cheaply. I'd never imagined that brewers perhaps couldn't really afford such classy pubs.
Cheap locomotion. Letting the rabble move around too easily. Having lived in a part of Thornton Heath built around 1900 around a train station, I understand what he means. Enormous suburbs were built in South London around this time, with railway lines as key catalysts. If all your pubs were in central London, you'd be watching your customers slowly drain away.
Onwards with Meux's Stout. They'd kicked off as a Porter brewer on the junction of Tottenham Court Road and Oxford Street. You'd expect their Stout to be good then, wouldn't you?
|Meux Stout quality 1922 - 1925|
|Whitbread Gravity book held at the London Metropolitan Archives, document number LMA/4453/D/02/001|
It's slightly above average strength. And of the stronger 9d/8d type. Looking back at the table, two of the beers look like they're the cheaper type of 8d/7d Stout. The two under 1050. Both were good so probably not laced with slops or watered. Were some landlords passing off Meux's weaker Stout as the strong one?
Six of eleven with positive scores isn't great. Neither is the average score of 0.18. Some really good, some really terrible. It had to be landlords buggering the beer up.
1920's time-vacationers should ask around about which Meux landlords look after their beer properly. The reward could be a knockout pint of Meux Stout.