Thursday 7 March 2019

Brewery profits

Alan McLeod (of a Good Beer Blog) emailed me at the weekend. Would I like to contribute to #MoneyMakerMarch? The concept didn't seem that clear to me. Something about breweries making bucketloads of cash. After an email exchange the concept was no clearer. But I'm not going to let a little detail like lack of comprehension stop me.

WW I was a weird time for brewers. I initially assumed that must have been really bad for them. What with the slashing of pub opening times, restrictions on the amount they could brew, restrictions on the strength they could brew at and controls on the price of beer. Surely this must have impacted their profits severely? Not at all, as it turns out. The war was the financial saviour of many breweries.

The decade before WW I had been a difficult one. The Liberal government had used increased licence duties for pubs and breweries to partially finance social programmes, such as an old age pension.

The increased licence fees suppressed pub prices, which left many breweries overcapitalised as the value of their assets shrank dramatically. Several brewery companies revalued their shares at 10% of their original value.

Massively increased licence fees for breweries, who were charged according to the size of their output, decreased margins at a time when it was difficult to raise the price of beer. Few breweries were doing well in 1914. But the war helped turn that around.

Whitbread is a good example. Despite doing relatively well compared to many of their peers, they weren’t exactly raking money in.

Whitbread Brewery profits and dividends 1912 - 1925
Year net profit brought in carried forward dividend Ordinary shares barrels brewed net profit per barrel
1912 £17,491 £15,828 £12,054 0.5% 988,981 £0.02
1913 £125,792 £12,054 £46,653 1% 901,807 £0.14
1914 £51,256 £46,653 £46,419 0.5% 900,636 £0.06
1915 £72,997 £46,420 £53,649 2% 762,438 £0.10
1916 £45,078 £53,649 £79,379 2% 777,127 £0.06
1917 £198,349 £79,379 £92,404 7% 578,502 £0.34
1918 £204,806 £92,404 £123,057 7% 413,112 £0.50
1919 £232,866 £123,057 £165,136 7% 565,624 £0.41
1920 £242,432 £160,138 £213,124 10%
1921 £209,520 £213,125 £257,639 7% 675,647 £0.31
1922 £226,270 £257,639 £289,580 10% 576,118 £0.39
1923 £222,749 £289,580 £319,531 10% 505,097 £0.44
1924 £217,277 £319,532 £342,489 10% 551,616 £0.39
1925 £246,499 £342,489 £394,076 10% 527,977 £0.47
Yorkshire Post and Leeds Intelligencer - Monday 05 August 1912, page 10.
Manchester Courier and Lancashire General Advertiser - Friday 01 August 1913, page 5.
Manchester Courier and Lancashire General Advertiser - Friday 31 July 1914, page 4.
Dundee Courier - Friday 06 August 1915, page 2.
Birmingham Daily Post - Friday 04 August 1916, page 7.
Birmingham Daily Post - Saturday 04 August 1917, page 6.
Yorkshire Post and Leeds Intelligencer - Tuesday 06 August 1918, page 7.
Yorkshire Post and Leeds Intelligencer - Monday 11 August 1919, page 11.
Yorkshire Post and Leeds Intelligencer - Saturday 07 August 1920, page 17.
Yorkshire Post and Leeds Intelligencer - Saturday 06 August 1921, page 15.
Yorkshire Post and Leeds Intelligencer - Saturday 05 August 1922, page 15.
Yorkshire Post and Leeds Intelligencer - Saturday 04 August 1923, page 15.
Yorkshire Post and Leeds Intelligencer - Thursday 07 August 1924, page 13.
Yorkshire Post and Leeds Intelligencer - Friday 07 August 1925, page 15.

In 1912, Whitbread made a mere £17,491 net profit. Given that they brewed just shy of a million barrels that year, it works out to a feeble 4.5d per barrel. Ironically, when their output shrank considerably in 1917, their profits increased considerably from under £50,000 to around £200,000. The profit per barrel shot up even more, to 82d per barrel. Whitbread brewed only around half of their 1914 output in 1917 and 1918, but made for times as much net profit.

At the same time, the dividend paid out on Ordinary shares increased from 2% to 7%. Clearly Whitbread was doing well. It’s ironic that, exactly when restrictions on brewing started to be ever more severe, breweries started making much more money.

The profits brewers were making led to them being denounced as profiteers in some quarters, notably temperance campaigners.

Most of the text in the post is extracted from Armistice!, my definitive book on brewing in the UK during WW I.  Buy this wonderful book.


James said...

Ron, do you know if "barrels brewed" represents actual barrels brewed, or rather some kind of standard-strength barrel? The reason I ask is that it's hard to make sense of these numbers unless it's the latter, although perhaps I'm missing some other factor that explains the increased profits.

Ron Pattinson said...


that's bulk barrels, i.e. 36 imperial gallons of beer of any gravity.

James said...

I suppose as gravities plummeted the cost of ingredients would have gone down, but it's still hard to understand how a brewery could become so profitable while its volume went down by so much. I would have thought the fixed costs would have loomed large as the volume produced was cut by more than half. Perhaps the brewery was able to offload some of its physical capital for war production?

James said...

It just occurred to me that inflation could have accounted for some of the increase in nominal profits, but just looking at the numbers it doesn't seem possible that it could have accounted for very much of it.

Ron Pattinson said...


they were just making far more money per barrel. Beer had been very price senssitive. The price of a barrel of X Ale had been the same since the 1870s. With the increased war taxation breweries were able to break free of the old price structure. They also reduced costs by cutting boil times and so using less coal.

Also, it was only retail prices that were controlled, not wholesale prices.