Saturday, 31 October 2015

Where was a brewery’s money?

The Brewery Manual handily summarises the financial information of each brewery. I never thought I’d find this sort of thing interesting. But now I do. Sad, what I’ve become.

I realised the figures highlight a particular feature of the British brewing industry: tied houses. A brewery of any size had massive amounts of capital tied up in their pub estate. Much more than in the brewery premises themselves.

I’ve picked three breweries that were to form the core of two of the Big Six, Courage and Bass Charrington. At all three, the pub estate accounted for over 50% of their assets. Though at Barclay Perkins it’s not quite so easy to see because they’ve lumped together the breweries and pubs.

It made British breweries quite odd businesses, with profits that looked rather small compared to the amount of capital invested. When people from outside the brewing industry began to get involved in the business, they weren’t very happy with the return on investment. That in turn prompted a hardening of attitudes towards tenants as breweries tried to squeeze more profit out of their pubs. It destroyed the cosy relationship between brewer and tenant that had served both parties relatively well for decades.

Brewing had been a very insular business until the 1950’s, with few entering management from the outside. As the Big Six began to coalesce in the late 1950’s and early 1960’s, the new larger companies began to be managed corporate types, who saw tenants merely as a means to earning a profit, not human assets to be nurtured and treasured. The old paternalism went out of the window.

Here are some tables.

Courage assets in 1953
Freehold Breweries £420,348 3.13%
Fixtures and Fittings  £1,058,331 7.89%
Freehold and Leasehold Properties  £7,105,431 52.96%
Premium, Acquisition Sub-Shares   £1,378,633 10.28%
Investments  £1,444,325 10.76%
Stocks  £683,770 5.10%
Sundry Debtors & Loans   £746,633 5.56%
Cash at Bank and in hand  £515,561 3.84%
Deb Stock Sinking Fund (Sub)   £63,847 0.48%
total £13,416,879
profit £388,271 2.89%
Brewery Manual 1953-1954, page 111.

Charrington assets in 1953
Freehold and Leasehold Properties  £13,498,527 69.05%
Brewing & Bottling Plant & Rolling Stock   £1,536,736 7.86%
Casks  £30,000 0.15%
Loans on Mortgage   £92,735 0.47%
Trade Investments  £93,181 0.48%
Govt Securities  £662,801 3.39%
Other Investments  £46 0.00%
Book Debts and Rents receivable   £1,373,283 7.02%
Stock of Beer, etc  £1,726,936 8.83%
Cash   £536,052 2.74%
total £19,550,297
profit £742,246 3.80%
Brewery Manual 1953-1954, page 103.

Barclay Perkins assets in 1953
Properties and Equipment  £9,083,319 72.01%
Investments (Trade) £37,387 0.30%
Cash Invests. (Deb Trustees) £20,795 0.16%
Stocks on hand  £1,487,078 11.79%
Trade Debtors, etc, less Provisions £770,033 6.10%
Government Securities £608,779 4.83%
Cash at Bankers and in hand, ete, £521,339 4.13%
Tax Reserve Certificates £86,000 0.68%
total £12,614,730
profit £301,042 2.39%
Brewery Manual 1953-1954, page 73.

More financial stuff to come, I’m afraid.

1 comment:

marquis said...

The breweries mostly acquired their premises when land ,materials and labour were cheap. By the time I began drinking (the 60s) the breweries seem have been happy with the returns on these costs, long written off.In many cases pubs had been built for under £1000 and the breweries were making annual profits of many times this.One landlord in a Bateman's pub told me his rent was £60 a year.
Then the property market began to change and breweries realised that based on the revised value of their assets their returns were poor.That's when the bean counters got to work and we all know what happened since.
Another factor is that until a few years ago pub premises were valued on the basis of annual turnover ie as businesses rather than as bricks and mortar. To pay much more than one and a half times the annual turnover meant that the pub takings couldn't make much profit.We are seeing closure of many pubs at the moment , many of them because of impossible overheads and the premises were worth more as bricks and mortar than as pubs.