Takeover bid for London’s biggest brewer

It’s a little-known fact that the biggest brewer in London is Anheuser-Busch. Far more people have seen the brewery than know it’s run by A-B: it’s right by the finishing line on the Thames at Mortlake for the annual Oxford versus Cambridge University Boat Race, one of the televised highlights of the British sporting year.

A-B acquired a lease on the brewery in 1995, four years after its previous owner, Grand Metropolitan, had sold off all its brewing assets after the government’s Beer Orders of 1989 saw all Britain’s then big brewers begin to split brewing from pub owning.

The site already brewed, under licence, all the Budweiser sold in the UK, where the beer is one of the leading premium bottled/canned lagers, with something like three per cent of the UK beer market, and Anheuser-Busch obviously decided it was worth running its own production facility. While the other Grand Met breweries went to Courage, therefore, which was then bought by Scottish & Newcastle in 1995, Mortlake flew the A-B flag, albeit leased from S&N.

Grand Met had inherited the Mortlake brewery when it took over Watney Mann in 1972, and Watney’s had acquired it more than 80 years earlier, in 1888. The brewery is sometimes said to descend from the monastery brewhouse at the Mortlake Manor House, owned by the Archbishops of Canterbury, and to date back to the 15th century. However commercial brewing on the site does not appear to have started until some time after the Manor House was pulled down in the 18th century.

The brewery that Watney’s acquired had developed out of two separate small breweries both mentioned in 1765. These were amalgamated in 1811, and after several owners had come and gone the business was being run in the mid-1850s by Charles John Phillips and James Wigan.

Under Phillips and Wigan the brewery prospered, gaining a high reputation for its bitter ales, and it was extended and rebuilt in the late 1860s: a roundel with the initials “P” and “W” can still be seen on the high brick wall that faces Mortlake High Street. Wigan left the partnership in 1877, and the Phillips family continued to run the brewery until Charles John Phillips retired in 1889.

In a complicated deal the brewery was then acquired by Watney’s, of the Stag Brewery, Pimlico, in the heart of Westminster, which had just bought another brewery, More & Co of Old Street, in the City of London. Watney’s apparently wanted to continue the name of More’s, and did this by renaming the Mortlake brewery Phillips, More & Co, with Charles Phillips’s two sons, Charles junior and Herbert, as two of the directors.

After Watney’s merged with and closed two rival London porter brewers, Reid’s and Combe’s in 1898, the Mortlake brewery was enlarged, though during the First World War it was closed temporarily as beer production was cut back nationally under Government orders.

In 1959 Watney’s original Stag brewery, which stood between Victoria Station and Buckingham Palace, was closed, demolished and redeveloped. The Mortlake brewery was renamed the Stag Brewery, and continued to be the main production site for Watney’s pale ales and bitters. At one point in the 1960s there were more than 1,400 employees based at the site: today new technology means that under Anheuser-Busch there are just 200 or so.

Now Anheuser-Busch is being chased by InBev, the Belgian-Brazilian giant that is the biggest brewer in the world by volume, which has made a hostile takeover offer. Naturally, the beer blogosphere, being mostly American, has been obsessed by what, in the United States, is seen as the threat to A-B’s original base in St Louis, Missouri. But what does it mean for Britain?

InBev runs three breweries in this country: the former Tennent’s operation in Wellpark, Glasgow; Magor, in South Wales, opened by Whitbread in 1979, hard by the M4; and Salmesbury in Lancashire, opened by Whitbread in 1972. None, you will notice, is in the South East of England. However, there are two problems with InBev acquiring the Stag brewery at Mortlake. The first is that the actual owner, after the dismemberment of Britain’s only surviving brewing giant, S&N, by two of its European rivals, is now Heineken, which might prefer to rip its own eyeballs out rather than help InBev in any way.

The second is that adding Budweiser’s share of the UK beer market to InBev’s current 16.9 per cent, in particular giving it the two top premium lager brands in the country, Stella and Bud, would certainly bring calls for a reference to the Office of Fair Trading (though since InBev has dropped from a 19.3 per cent share of the UK market five years ago I suspect the OFT won’t be bovvered much).

If InBev took over A-B it could solve a problem for Heineken across the Irish Sea, where it is becoming the owner of both stout breweries in Cork, Murphy’s and S&N’s Beamish & Crawford. The Irish Competition Authority is currently considering whether to allow this, as it would create a pub duopoly in the country that would put Heineken on 50.6 per cent of the market and Diageo/Guinness on 42 per cent, and would probably see either the Beamish or Murphy’s brand disappear, removing a little more choice from the already appallingly served Irish market.

Budweiser is huge in Ireland, the country’s biggest take-home lager brand, and is currently brewed under licence there by Guinness. If Heineken is told it has to sell one of Beamish or Murphy’s, it would probably keep Beamish (the better-selling of the two) and could flog Murphy’s brewery to InBev, which would then have somewhere to brew Bud in Ireland itself.

More importantly, however (if you’re not Irish), as Roger Protz has pointed out, if InBev acquired A-B, this removes a big threat from the “real” Budweiser, the Czech brewery Budvar. A-B would love to buy Budvar, and end their decades-long battle over the right to the Budweiser name. InBev already owns so much of the Czech brewing industry, it wouldn’t be allowed to buy Budvar as well.

So – InBev v A-B – are we bovvered? Sorry, St Louis: not much.

0 thoughts on “Takeover bid for London’s biggest brewer

  1. Just to clarify, those numbers which put Heineken (including B&C) on 50.6% and Diageo on 42% refer to on-trade lager only — if the S&N deal goes through, Heineken in Cork would find itself churning out kegs of Heineken, Amstel, Coors Light, Miller, Fosters and Carling.

    In beer generally, Diageo still have around 50% of the whole market, thanks mainly to Uncle Arthur. Even with Beamish on board, Heineken would still be far behind on about 32%.

  2. Very good article (naff ref. to Donna Noble’s shameful past life notwithstanding), thanks Martyn.

    It’s funny that Budweiser has a ~3% market share in the UK. I can’t think of a single pub I drink in that sells it. I only ever see it in supermarkets. It really is one of those beers that you only ever see in ropey boozers and bars – a bit like John Smith’s and other keg bitters.

  3. I have a feeling Watney’s Red Barrel is made under licence still by someone … possibly in Canada? But you wouldn’t want to drink it, it’s muck …

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