Thursday, 27 November 2008

Brewers profits 1914 - 1919

Remember I mentioned costs yesterday? It prompted me to take a closer look at Whitbread's production costs during WW I.

But that doesn't mean it'll just be numbers today. I've got some newspaper articles for you, too. What a treat.

There was a widespread belief that certain members of society were making an unfair profit from the war. Publicans and brewers were amongst the groups upon whom suspicion fell. This article sums up the fears of many consumers.


Weekly Dispatch, August 26th 1917

Before the war, when Governments began to squeeze the brewing industry, brewers and publicans acclaimed alike from the housetops that "good beer is good food." Some asserted that beer was liquid bread.

Since the war began the output of this "liquid bread" has been decreased at the instance of the Government by two-thirds, and the hours during which it can be sold have been decreased by the same proportions.

The less the brewers brew, the more money they make out of the beer drinker. The brewery tap always taps the pockets of the beer drinker in steadily increasing volume.

You never hear a word of complaint from the brewers because their trade has been cut down by two-thirds. You never hear a growl from the publican because he can only sell beer for five and a half hours instead of eighteen and a half as he did before the war. Both are making bigger profits than they ever have before; both hold monopolies of trading rights, and both have had concessions made to them by the State which grants them their monopolies.

Two big breweries have between them made a profit's on the year's trading of nearly £1,000,000, and all the smaller breweries have done proportionately well. One has actually doubled its dividend within the last seven years. Brewery shares are booming and speculators are making a big profit in the sale of shares, bought by people who see that, unhindered in their vast profiteering monopoly, the brewers' profits next year will be bigger than ever.

The brewer has already more than doubled his price per barrel to the publican. The publican, not to be outdone, has followed his example, and with a bit more. Before the war he paid about 40s. a barrel for mild ale, and was content to make a profit of 8s. to 10s. a barrel. To-day he pays £5 a barrel, and makes a profit of £3 8s. a barrel.

The Bitter Ale upon which he made a profit 36s. a barrel before the war now yields him a profit of from £6 15s. to £9 a barrel.

Some simple people thought that the introduction of Government ale, which needs 9lb. of malt of malt instead of 33lb. , to make a thirty-six-gallon barrel of beer, would save the beer drinker from this plundering which is so rampant in the beer trade. Not at all.

Government ale costs the publican 76s. a barrel, and he is selling it at a profit £4 12s. a barrel.

When this ale was introduced it was stated that the full price would not be more than fivepence a pint. The publican knew better. Within a few days they began to squeeze another twopence a pint out of the beer drinker, knowing that he would pay - and grumble.

He is grumbling. Some of the unrest among the hard manual workers is due to this shameful beer profiteering. But he grumbles in the mild ale bar, and bitterly laments the exactions in the saloon bar.

There is one way in which beer profiteering could be ended. Let the government take the brewers at their word and adopt the view which they largely advertised earlier this year, that beer is food. Very well, then, Lord Rhondda has declared that 25 per cent is a fair maximum profit on food sales. He has power to examine the books of food retailers. Let him look into the books of the brewer and of the publican, and he will straightway see a clear case for reducing the present price of beer to the consumer by more than 50 per cent. and still leave the publicans more than 25 per cent profit.

Was it the public's suspicion justified? It just so happens that it's possible to check quite easily. Whitbread included costings on their brewing logs. Let's take a look.

Just before the was broke out, in August 1914, the wholesale price of a barrel of Whitbread Porter was 29 shillings. The materials and duty cost 16.74 shillings, giving Whitbread a margin of 12.26 shillings, or 42%. By the middle of 1917, The wholesale price had increased to 100 shillings, but the cost had only gone up to 39.83 shillings. Which meant that the brewery's margin had increased fivefold, to just over 60 shillings a barrel, 60% of the selling price.

Whitbread's margin remained around 60% until the end of the war, when it dropped back to about the pre-war level of 40%.

Of course, these figures don't include labour or fuel costs, both of which increased significantly during the war. Nor does it take into account the smaller quantity of beer which Whitbread were compelled to brew due to government regulations. But Whitbread certainly made considerably more profit from each barrel of beer they sold in 1917 and 1918 than they had in 1914.

Unease about beer prices was big news in 1917, when restrictions really began to bite:

Prices That Will Mean Ruin to Many Licensees.

Weekly Dispatch, April 1st 1917

Beer at a shilling a pint!
Those who smiled incredulously at the prophecies of a few weeks ago concerning the price of the national beverage will have a rude awakening to-morrow, for although no concerted has yet been taken by the London Licensed victuallers, the higher prices charged by brewers after April 1 will leave them no option but to put the increased cost on the consumer.

The circular sent out to publicans by one of the largest brewing houses announces that after April 1 prices would be as follow:

Porter______100s. per barrel
X Ale (Mild)__100s. per barrel

Stout_______140s. per barrel

Bitter_______120s. per barrel

Burton______150s. per barrel

The circular added further that the minimum retail price for porter and mild ale would be 8d. per pint.

"This means that in order to make a living the licensee must charge a shilling a pint for stout, bitter, and Burton." said a well-known representative of the Trade to a representative of The Weekly Dispatch yesterday, "and the problem is more complex than it seems. In many districts the putting up of prices will cause such a slump in consumption that keeping the doors open will scarcely be worth the while. Thus if the luckless publican puts up prices he won't sell enough to make a living. If he doesn't he will be selling to the public at a heavy loss. Either way, it means ruin for thousands."

"I don't know if there is any truth in the statement that the Government contemplate taking over the drink traffic, but the present great increase in prices would help such a step considerably, as it will mean that the fate of thousands of the smaller houses is sealed and therefore no question of compensation could arise."

As stated above, no standard prices have yet been set for London, nor will they be until after a meeting of licensed victuallers to be held during the week. But already prices are soaring, and in many West End establishments 9d. is being charged for Bass and Guinness, while in sympathy whisky has advanced to a shilling a quartern. Proprietary brands which could formerly be bought at 4s. 6d. a bottle now command 7s. 6d., and even at the latter figure hotel proprietors are not eager to sell.

The 100 shillings wholesale price for Porter in 1917 tallies with Whitbread's records. If, as stated in the article, it retailed for 8d a pint, then the retail price of a barrel was 192 shillings. Which seems a pretty fair return for the publican. Especially seeing as the reduced pub opening hours considerably reduced a landlord's working day.

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