So the sharks have started moving closer to Scottish & Newcastle. This is the latest in a series of foregone conclusions in the British brewing scene since a Conservative government decided it would be a jolly idea to partially sever the tie between brewers and pub ownership with the Beer Orders of 1989.
The result, which had been predicted as far back as 1950, by a right-wing economist called Arthur Seldon, writing in The Economist. was that the big brewers – Bass (including Tennents of Scotland), Whitbread, Allied (Ind Coope, Ansells and Tetley’s), Courage, Grand Met (Watneys), Whitbread and S&N, quickly abandoned pub ownership almost entirely.
Then, because brewing in the UK isn’t that profitable, the big brewers abandoned brewing, so that by 2001 only Scottish & Newcastle was left of the Big Seven brewers of 1989 – the rest merged with others or transformed into something else, such as distillers or hotel companies.
S&N, which swallowed the brewing interests of Courage and Watney, rose from being the smallest of the Big Seven to being the largest UK brewer, while the rest of the industry was brought by Interbrew of Belgium (Whitbread and part of Bass), Coors of the United States (the rest of Bass) and Carlsberg of Denmark (Allied).
Unfortunately for S&N, it never dominated its home market the way Heineken, Anheuser-Busch, Carlsberg or SAB of South Africa did theirs, and it has never been able to find the transformational deal that would turn it into a true and invulnerable giant. It bought Kronenbourg off Danone in 2000, and became the biggest brewer in France; it bought Hartwall of Finland in 2002 and gained a half-share, with Carlsberg, in BBH, owner of the biggest brewing concern in Russia (to Carlsberg’s great annoyance). But what it really needed to do was acquire a truly global coverage, the way Interbrew did by merging with Ambev of Brazil, or SAB did by merging with Miller of the United States.
Now Carlsberg, always the most likely bidder for S&N (the Danes really want control of the rest of BBH, and are hacked off they don’t have it) has put together a deal that looks to satisfy competition problems. It couldn’t bid for S&N on its own, because the UK’s competition authorities wouldn’t allow it to own both S&N’s and Carlsberg’s shares of the UK beer market, which total over 40 per cent. But by tying up with Heineken of the Netherlands, if the partners win S&N, Heineken can have the UK, where its share is minimal, plus much of the rest of Europe, and Carlsberg gets all of BBH, plus areas of S&N’s empire where Heineken is already strong, such as France and Greece.
However, now Carlsberg and Heineken have revealed they are after S&N, others are likely to decide they need to intervene. Anheuser-Busch, which owns the big Mortlake brewery by the Thames near Richmond (and is thus the biggest brewer in London – not many people know that) may feel that with a stagnant US beer market, this is the time it really got international – especially with the carrot of 50 per cant of Russia’s biggest brewer as an attraction.
Ditto SABMiller, listed on the London stock exchange but with a tiny presence in Europe (Peroni and Pilsner Urquell, basically), which is already having to merge its American brewing interests with Coors because of the difficulties it faces in the US trying to make a profit. Even Guinness owner Diageo may have a go, though I doubt that, personally – it made a hash of brewery ownership in Spain when it tried diversification there.
Meanwhile newspapers reporting on current developments are saying: “Scottish & Newcastle, founded in 1749 …” Here at the Centre for Scotching Myths about Brewing, we are already sending out memos pointing out that while S&N likes to claim 1749 as its foundation date, this is merely the year William Younger, aged 16, moved from the family home in Linton, Peeblesshire to Leith, Edinburgh’s port.
In fact there seems to be no documentary evidence at all that William, who died in 1770 ever brewed commercially anywhere. It was his widow, Grizel, who ran her second husband Alexander Anderson’s brewery in Leith after Anderson died in 1781. William and Grizel’s eldest son Archibald, who was apprenticed to Anderson’s brewery, had left Leith in 1778 to start his own brewery in the precincts of the Abbey of Holyrood House in Edinburgh, and it is that operation which was the origins of the Scottish side of S&N.