Asahi makes massive vote of confidence in future of cask ale with £250m purchase of Fullers’ beer business

The Japanese beer giant Asahi has made a massive vote of confidence in the future of the real ale sector in the UK with its £250m purchase of Fullers’ beer business.

And if that’s not the angle you took away from the story, you’re not thinking this through properly.


The beer business earned Fullers £10.6 million before interest, tax, depreciation and amortisation in the 12 months to March last year. The net cash going into Fullers’ pockets after the deal with Asahi is completed is expected to be around £205 million. So the purchase price means, effectively, Fullers receives all the earnings it might have got from the beer business (assuming nothing had changed) for the next 19 years, until 2038, in one lovely big cheque, right here and now.

At the same time, Asahi has to cover its £250m payment for the business out of the profits it expects to make from it, and preferably in not too long a time: its current return on invested capital (ROIC) is apparently 7.34 per cent, which would pay off the purchase price for the Fullers beer business in just under 14 years. In other words it expects that business to be at least as profitable as it is now for at least the next decade, in order to cover the cost of buying it, given the returns it normally gets.

Nobody bungs a quarter billion big ones at a business unless they think that business has a future, and they’re going to get a decent return on their money. Fans of cask ale, and Fuller’s beers, should be cheering until the pint glasses rattle on the shelves at the confidence Asahi is showing in the sector.

Inevitably, of course, the usual army of whingers has come out and shown the usual failure to understand how business works, and what the strategies of the two companies involved in the deal are. Some seem to think Fullers should have turned the Japanese offer down: this would, of course, have been both stupid and illegal. It’s the job of a company’s board to maximise the returns for that company’s shareholders: if they are offered a risk-free way to bring in today all the earnings a part of the company might see for two decades, and they push it away, they would rightly be sued for not acting in shareholders’ best interests. In Fullers’ case, the division it is selling represents only 13 per cent of operating profits. It intends giving between £55 million and £69 million of the cash from Asahi to its shareholders straight away, and putting a bung into the company pension scheme as well, but that still leaves a substantial sum – over £120 million, certainly – to spend on new pubs and hotels, which bring in much more money than brewing does. The City is certainly clear on what a great move Fullers has made: the shares closed up 15.5 per cent, and Douglas Jack, a vastly experience City analyst, declared: “This transformative deal provides the foundation for many years of strong growth. We are moving our recommendation from ‘Add’ to ‘Buy’.”

Asahi clearly thinks there is profit to be had in the business of supplying beer to British pubs,. With Fullers’ emphasis, still, on cask beer brands it obviously believes buying the rights to brew cask beer is worth a substantial wodge of corporate cash and there is a hearty future ahead. Meanwhile, on the “oh no the accountants will ruin London Pride” front,  as part of the fall-out from the AB Inbev-SAB Miller merger, Asahi ended up with Pilsner Urquell and Meantime in London, among other Western beer brands. I’ve heard no moans from either of those two concerns about how the Japanese are treating them. If you pay a lot of money buying a product that sells on its premium image, you don’t mess about with that image.

The keyboard warriors who wave their anti-corporate credentials, declaring that now Fullers’ beers are going to be brewed by a multinational conglomerate they won’t be drinking them, are particularly nauseous: they’re typing their rants on a computer, or a phone, made by a multinational, using electricity from an energy supplier that is probably also a multinational. A fair few years back I was in the wood-panelled boardroom at the Griffin brewery, all heavy oak tables and oil paintings of bewhiskered Fullers, Smiths and Turners from Victorian times on the walls, and I asked Michael Turner, then the company’s managing director, later its chairman, if he didn’t occasionally feel oppressed with all these ancestors staring down at him. “Frankly,” he said, in his forceful Old Etonian accent, “I don’t give a fuck.” I would be confident that, whatever the whingers are saying, Fuller’s is currently not giving a fuck all the way to the bank.

Finally, let’s offer many congratulations to Twickenham Fine Ales, my local craft beer brewery, which finds itself, just 15 years after it started, now London’s oldest independent brewer. That won’t be something founder Steve Brown ever expected to happen.

Twickenham Fine Ales, now at 15 the oldest independent brewery in London

42 thoughts on “Asahi makes massive vote of confidence in future of cask ale with £250m purchase of Fullers’ beer business”

  1. Martin,
    I see your points and I am glad to have read them. I have this nagging, callow American, sort of question in my head though. Why aren’t domestic corporations seeing these opportunities as a place that they would like to invest? Are there no UK corporate conglomerates whose model this fits into well? I just don’t know the industry to know if that is why this sort of investment always tends to be foreign or if they just have the best resources and so win against the competition. (or whatever the answer is in your estimation) Secondly, I have the nagging question about why it matters that a historic company be owned by a ‘domestic’ corporation at all, but those implications probably require more self-reflection than anything else.

  2. Not disagreeing with anything you’re saying here, Martyn, but it doesn’t seem to me that the Board at Fullers drove a very hard bargain. The value of the land at Chiswick alone must be something like £250m. I know Emeny says that brewing will continue at the Griffin Brewery, but that could change a little way down the line.
    £250m is only twice what it cost SAB/Miller to buy Meantime, a brewery that was producing only roughly a third of Fullers’ production. And they are getting Dark Star, Cornish Orchards and Nectar as well. Maybe Fullers should have hired Nick Miller.

    1. I’m not aware that they’ve sold the brewery site as part of the deal: I’d certainly find it hard to believe that they bunged that in as part of the £250 million. There are single streets in that part of Chiswick worth more than that … And you’ree absolutely right about the price comparison with Meantime, but that was ludicrously over-inflated – not, I’m sure, that any of you complained …

      1. They’ve sold the brewery but it’s unclear if the freehold goes with it. Watch this space as some of the larger remaining independents find themselves under the same pressure as Fullers, with a valuable pub estate and a brewery-sized millstone around their necks.

        My fear is that the Fullers estate (worth around £550m) will become rather attractive to investment funds and the like, and a further sell off would also ‘be in the interests of the shareholders’.

  3. Brilliant article as always Martyn, really enjoyed the read.

    That was exactly my point on twitter, not many understood it but you nailed it. Fullers are now cash rich to buy property and add to their portfolio, only 14% of their profits came from selling beer, so essentially why give a Fuck? If they don’t I dont.

    Good man

  4. I always enjoy your alternative and refreshing opinions on things Martyn and this is most welcome given the doom and gloom surrounding the sale, however I think there is genuine reason for caution and disappointment.

    Firstly, what’s refreshing about you article is that it puts to bed this notion that has been floated by some Fullers employees on forums and social media that without this sale ‘Fullers was dying’ and could be gone ‘within 10 years’. Clearly bollocks and it’s really about the fact they got given a big chunk of money up front which as you say would cover them until the 2030s. No-one spends this amount on a dying business.

    Secondly, whilst there are always those hardcore craft beer warriors and traditionalists who will see any corporate takeover as evil, fans of British cask ale’s cynicism about takeovers is fairly well well founded given the amount of great beers, breweries and brands that have been flushed down the toilet of some corporate bean counter’s ‘consolidation plan’ in the last 25 years. We all know that all it takes is a change of leadership, a takeover of Asahi, for someone to decide Fullers no longer fits in the portfolio, or they see the immense value of the prime London real estate where the brewery is located and decide to sell the land and contract out the brands. All you are left with is it literally the name of a brand on paper. Everything else is gone. That’s a real risk when someone pumps £250 mil into your business. They need results quick and if they don’t get them to the level of expectation, well that land will do nicely.

    Thirdly, Fullers is not just about the beer. That might sound romantic and silly, but it’s not just my words, it’s theirs. They have carefully nurtured a brand, which drew in a large and loyal fanbase worldwide based largely on their history, tradition, location and independence. The value of that is immense. It’s why distillers spend millions concocting back stories and histories for their gins, Scotches and bourbons, to try to secure consumer confidence in their brand. It was a guarantee of quality, because an independent lives and dies on its product far more than a global conglomerate that so often uses marketing over any notion of quality. That feeling of entering a Fullers pub won’t ever be the same again for those loyal followers, because the doubts will be there. Have costs been cut on quality to help the bottom line, have things been scaled up so far for global distribution that the beer’s flavour has changed, will the brewery be sold off and that connection to place be lost?

    I hope you are right, but rather than providing certainty for the business I think most of us will feel cautious about a global conglomerate with macro level planning, managing a smaller business with a loyal customer base.

  5. The sense of the deal is one thing, I have no issues with that as some of my comments suggested.

    As to this being a vote of confidence by Asahi in cask ale, I am much less certain. Sales in that sector (generally) have fallen in recent years. It seems to me there is less incentive in the future for both parties to retain cask, why not sell handpulled filtered, even pasteurised beer?

    The value Asahi bought is really in the brand names, and I think it will want to “internationalise” Fuller beers, a la Peroni,

    Finally, I think ownership changes can impact a brewery in ways not always easy to measure. I don’t think Anchor is viewed the same way by many craft beer enthusiasts since Fritz Maytag sold it.

  6. Do we get an official seal or patch that identifies us as memebers of the Whingers Army?

    I really hope you’re right. The deal seems extremely favorable to Fuller’s and it would have been hard for anyone to walk away from—and I’m really glad Asahi was the suitor. But like Gary, I’m not sure I interpret the sale of a cask brewery to mean cask ale is in good shape—though you’re right that Asahi must believe so. I’m trying to absorb your cheery vibe.

    Anyone heard how John Keeling feels about this?

  7. I think we can be sure that a beer called London Pride will be on sale, and on sale around the world, for many years to come.

    As for whether it will be the same beer – let alone whether the entire Fuller’s range will continue to be produced, to the same recipes and the same standards that currently apply – I can’t see why we should be anything other than extremely pessimistic. I’ve tried Meantime bottled beer (the London Pale, at least) since the takeover; it was truly dreadful. (It may have been dreadful all along, of course, but I somehow don’t think so.)

    1. “I think we can be sure that a beer called London Pride will be on sale, and on sale around the world, for many years to come.”

      Have you tried “London Pride” in, let’s say, Milan recently?

  8. This is an entirely technically uninformed and romantic view point, but here goes.
    The Japanese do tend to take the long view with their assets and production quality.
    I suspect a purchase by AB-Inbev or some such company (if there are any left?) would have been worse.
    The Japanese are desperate for Foreign market share as every year they have less people at home to drink beer domestically.
    I am optimistic for the future of Fullers Beers.

    ….but I am glad I took a tour or Griffin Lane whilst I had the chance.

    1. Some stereotyping here BUT I still agree.

      I have seen excellent things with the investments Kirin have made in the Southern Hemisphere so fingers crossed Asahi will follow the same philosophy.

  9. A view from a brit in Germany:

    I fear this is a repeat of something I have seen in Britain fairly often since I have been in Germany. Here, there are a large number of companies owned by families that just keep investing and keep on growing and pushing out quality products.

    I contrast this with the UK where the crown jewels are repeatedly sold off in every sector. All too often decades, or even centuries of work to produce a company are sold off for quick gain and the original worth of the company gets watered down as production gets sent elsewhere. Perhaps a few people get rich quick and some shareholders pocket a bonus before quietly selling up and moving on.

    But it leaves solid British companies hollowed out and in the end, they join the ranks of Karrimor, Landrover et al as just meaningless brand names.

    And those who really suffer are the employees who no longer are integral parts of the business, but end up as overpaid drags to business which could be done somewhere else for next to nothing by paying the Chinese to do it and not worrying about health and safety and welfare.

    But as long as someone ends up able to splash the cash at Twickenham/Ascot etc. then its all ok….

  10. This may or may not be a good deal for Fuller’s but as a former teacher of business studies I despair at the persistent assumption that the sole objective of a public company is to maximise profits for its shareholders. With share ownership being an often brief and transitory state, there is an open invitation for carpet baggers and asset strippers to make a quick buck without regard for the other stake holders. Those stake holders are the employees, the community, the consumers, pensioners; society in general. It is about responsible capitalism. There have been too many cases where successful businesses rooted in their community have had to chase profits at all costs to deter takeovers. They don’t always succeed – Cadbury’s was a prime example.

    Asahi may be more sensitive and be responsive to all those who have a stake in Fuller’s (including it’s loyal customers) but it’s one hell of a risk and I, for one, am not going to hold my breath.

    1. I agree completely that companies have a duty to all their stakeholders, and I would argue that “stakeholder” is, in a sense, a synonym here of “risk-taker”, in that as an employee of a company you also take a risk with your association, a risk of being made redundant, of losing out in the potential opportunity costs of being employed somewhere else, and so on, while consumers, pensioners, the community all have their own risks associated with the relationship with the firm. But shareholders take the biggest risks, by investing capital, which they could lose completely – if you’re an employee, and the firm goes bust, you’ve lost your job but not your life, and you can still go off and earn somewhere else. For that reason the greatest rewards go to shjareholders, because they take the greatest risks, and when it comes to a choice between maximumising shareholder rewards and threatening other stakeholders/risk-takers rewards, those risking the most deserve the greatest consideration.

      1. “…. if you’re an employee, and the firm goes bust, you’ve lost your job but not your life, and you can still go off and earn somewhere else.”

        I’m not sure you lose your life if you have shares in a business that goes bump. The sanctity of the shareholder is a very Anglo-Saxon model of capitalism that is not shared by countries like France, Germany and Japan. It is no coincidence that the small banks of Germany survived the crash of 2008 whereas the UK model allowed speculators to strip the worth out of our building societies and destroy them. Also there is the example of BHS where I would suggest that the employees and the pensioners emerged from the experience more damaged than Philip Green (he even kept his knighthood!) The community of Bourneville has suffered while Kraft take value out of Cadbury’s. And we mustn’t forget the asset stripping that went on at Rover Cars. I hope Asahi is more responsible but the example of Young’s is a cautionary tale. At what point would it make sense to ‘rationalise’ and sell the brewery and build a new one on cheaper land distant from Fuller’s roots?

    2. Indeed, when did Milton Friedman’s opinion become unquestionable fact?

      (This article is one of many picking it apart: https://www.forbes.com/sites/stevedenning/2013/06/26/the-origin-of-the-worlds-dumbest-idea-milton-friedman/)

      Fuller, Smith & Turner were happy to push their “Family brewer” credentials right up until the point at which this sale was announced (the sign was conspicuously absent from their pub I passed on Friday lunchtime – maybe it was just a souvenir hunter), and in the past they’d pushed back against attempts by investment funds to force them to sell the Griffin Brewery land and move outside of London, emphasising that it was more than just an asset on the books.

      Perhaps this was a solution to save the brewery, against their own short term shareholders? Time will tell.

      1. If a business dosn’t put the people who risk their money in it at the centre of their concerns, who is going to be foolish enough to risk their money? And Fullers were seriohsly considering selling the brewery at the end of the 1960s to build a new one near Hathrow: only a property slump stopped them.

  11. Fuller’s were quick to take a dig at Young’s on Twitter when the latter became, essentially, a property manager, something along the lines that first and foremost they are a brewery.

    Let’s see what happens. I applaud the optimism of the article but find it hard not to feel a nagging twinge of regret at this news.

  12. Really enjoyed this post and many of the comments.

    After a busy couple of days, I finally looked through the Fuller’s release last night…

    What I’m interested in is how much of this price was the Griffin Brewery site and how much was for the beer business (I assume that part was quite small).

    It’s interesting that FST still own all the trademarks and grant perpetual and worldwide use of them. Is there ever a cause for revoking this? If so, I’m guessing the beer business price is even lower than what many people imagine.

    So, in effect, have they really just sold the land, some side businesses (Nectar a big part of that, of course), and a perpetual brew-under-licence agreement?

    Either way, as I’ve said elsewhere, in many respects it’s little more than a change of board. That’s simplistic, I know, and emotions play a big part in most successful businesses that are based around strong brands. But that’s what it is in the end. Some slightly different people, more well off than all the workers, will have their cars in the car park on board day. Let’s hope they make brilliant decisions.

    I’ve been very impressed with Kirin’s business in craft beer over the last decade or two and I would like to think Asahi will play in a similar way… investing and interested in trading profits rather than selling off assets. If I was to make a list of businesses I’d like to invest in my own brewing business, then Kirin and Duvel would be at the very top. Asahi I don’t know but I suspect they’d be not too far behind.

    Only time will tell. Either way it is certainly the end of a very important era.

  13. Very good read Martyn, nice to see someone seeing that it’s not so black and white.
    Being a fullers employee at the Griffin Brewery, I can say that it has been coming a while. Just nobody thought it would come this quickly! From what I was told by one of the Turner’s, Cornish and Nectar are the reason that Beerco were staying on a positive operating margin. The drop in the last 10 years has been drastic, 9.1%!
    I’d rather the sale now, with the amount of money guaranteeing decades of investment as opposed to in 10 years time Heineken, Coors or ABinBev for much less money and much less guaranteed.

    I believe it will end up just like Meantime, pump money into the brewing and help them expand, then just sit back and feel the results. Fullers struggled internationally due to a small marketing budget compared to regional breweries and the multi nationals in their respective markets. 80 different overseas markets!

    Yes, it is a sad day for beer and the heritage and history of Fuller’s. But come on, part of the sale will demand that Asahi keep hold of and protect the heritage.
    And yes, congratulations to Twickenham Fine Ales, my local too!

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