Monday, 12 October 2015

Why Flowers faltered

One thing struck when looking at the expansion of J.W. Green / Flowers Breweries. It came to a grinding halt in 1954. Why was that?

For a while they looked like becoming a national brewery, but then stopped expanding and looked to Whitbread for protection. With the inevitable result of being gobbled up by the London brewer. This sudden change of tack is understandable if you look closely at what was going on inside the company.

Luckily a former employee of J.W. Green and Flowers, Ivar O'Brien, wrote an article that gives an insight into what was going on in the company in the 1950’s.

But we need to start with why J. W. Green began to expand in the first place. Managing director Bernard Dixon – formerly head brewer – was the driving force. The Green family were still well represented on the board (six of nine directors) but none of them took an active role in running the brewery. That was left to Dixon, a man with both drive and vision. He saw where the brewing industry was heading:

“In 1948 J. W. Green had started on the brewery acquisition trail, it being B.D.'s [Bernard Dixon] farsighted belief that within 20 years there would be only a dozen or so brewers left and he wanted us to be one of them.”
Brewery History Number 70, December 1992, page 31.

Dixon foresaw not just the changes in the structure of the industry, but also the beers that would be brewed:

“One of B.D.'s predictions, which had astonished most people, was that lager beers would come to head sales by taking over from conventional top-fermented ales. Neither I nor most others could visualise this but it turned out that he was quite right, although the culmination did not take place until after he had left the brewing trade. Thus in the mid-fifties, besides extending and modernising the brewery and bottling hall at Luton, we were also building a lager brewery and a by-products plant which turned spent grains, hops and yeast into cattle food. Then we had also to install plant for the conditioning and racking of keg beer. Beyond this we had a model brewery which could make experimental brews of only five barrels at a time. Altogether a considerable strain on the company's finances.”
Brewery History Number 70, December 1992, page 32.

Here’s one of the problems: investments in the brewery and money spent on acquisitions had used up all Flowers money. Lager breweries don’t come cheap. And although building one made sense in the long term, it was an investment that wasn’t likely to pay off for years. A five-barrel pilot brewery sounds so modern. Just think: they could knock out some “craft” beer for the geeks.

And some of the pubs that had acquired were more of a liability than an asset. It happened to more than one brewery that, through obsessing about how many tied pubs they controlled, they ended up with many useless ones.

“In this instance all but a few pubs in the Cambridge area were small and many were extremely dilapidated and run down by there being far too many of them for the trade available. For example, in the village of Orwell/Wimpole there were no less than six decrepit pubs when one would have been quite enough for the 200 or so villagers' modest needs. I do not know what price had been paid but almost anything would have been too much and the renovation, even with many eventual closures, of these houses (149 at the outset) was to prove a heavy drain on Green's finances for some years.”
Brewery History Number 70, December 1992, page 32.

Things came to a head in 1959, when the board grew impatient of Dixon and showed him the door:

“Unfortunately this chain of apparently successful expansion was now to fall apart. Due to very heavy capital expenditure on the breweries, buying sites for pubs on new housing estates and building them and, I suppose, the inadequate returns from some of our acquisitions, we suffered from recurrent cash-flow problems which took the form of periodic stops on almost all maintenance expenditure. Finally the day came when the Board, pushed by some financial institutions, turned on B.D. and he was fired at a Board meeting. The decision was so unanimous that even certain of his own proteges who had been promoted to the Board by B.D. turned against him. The full truth was never disclosed but the result was that B.D. was never again seen at Luton and went into premature retirement. Within a short time it became apparent that the steam had gone out of Flowers' management, the remaining directors being mostly charming country gentlemen totally lacking in B.D.'s drive. (I cannot really add "his foresight" as if he had had sufficient financial acumen these problems would never have arisen.)”
Brewery History Number 71, March 1993, page 15.

With Dixon gone and other big brewers circling, Flowers turned to Whitbread for protection. In 1962 this became a complete takeover by Whitbread.

Why did Flowers rush for greatness fail? By overextending financially and losing dynamic leadership.

1 comment:

Martyn Cornell said...

That 149-pub brewery was Phillips of Royston, which had one pub selling two barrels A YEAR.