Memorandum from Mr Stuart Ross, Chief
Executive, The Belhaven Brewery Company Limited
Belhaven is Scotland's leading regional brewery.
Our financial data can be captured from our Annual Report (copy
enclosed[11]).
We employ approximately 650 people and we operate in the following
fields:
1. Brewing and packaging of beer. We have
brewing and packaging facilities in Dunbar which are small by
industry standards with brewing capacity about 100,000 barrels
per annum (total UK capacity is circa 40 million barrels per annum).
2. Drinks distribution. We have a drinks
distribution business which sells our own Belhaven brewed beers
as well as a wide range of national and international beer, cider
and soft drink products to approximately 1,200 licensed trade
customers in Scotland, including our own pubs. We sell mainly
to the independent sector in the on-trade and we also deal with
the take-home market (mainly the big five supermarkets). We export
our products with the principal sales volumes being achieved in
the USA.
Our highest sales volumes are achieved with
Belhaven Best, which pioneered the nitrokeg ale market in the
UK in the early nineties, and Tennent's Lager which we purchase
through a key supply agreement from Bass Plc. These products are
sold principally to the on-trade although Belhaven Best is represented
in the take-home trade.
Belhaven has a £30 million free trade loan
investment book. We offer a range of flexible financial packages
to independent publicans to help them acquire, expand and develop
their businesses and, in return, they give a commitment to Belhaven
to purchase supplies from us. Many of these contracts involve
exclusivity of supply for the aforesaid range of beer, cider and
soft drink products.
3. Pubs. Belhaven owns an estate of approximately
100 public houses in Scotland, of which around one third are managed
by our own staff and two thirds leased to third parties who are
tied to Belhaven for the supply of beers, ciders and soft drinks.
We do not impose any ties for either wines or spirits or AWP machines.
Belhaven is highly unusual within the Scottish
beer industry in that our business is centred almost entirely
north of the border and our profit is derived from trading north
of the border. Our prosperity is closely linked with the economic
health of Scotland and we are the only regional brewer north of
the border also involved in drinks distribution, pub retailing
and tenanted estate management.
Belhaven is a member of BLRAS. We have seen
the BLRAS submission to the inquiry and we would not propose to
duplicate the content of it.
The issues which concern Belhaven at present
include the following:
(i) The number of new licence grants. There
is no doubt that the Scottish market is saturated with far too
many retail businesses chasing a declining trade and we believe
that insufficient attention is being paid by Licensing Authorities
to over-provision issues. You don't have to be particularly clever
to realise that the value of existing licences is significantly
under threat if there is an avalanche of new licence grants and
that is precisely what has happened in the past few years, especially
in city centres.
(ii) The threat of the super pub. As the
government will be aware, the grocery corner shop has largely
disappeared following the march of the supermarkets. We are presently
witnessing a similar trend in the pub trade with the national
multiples investing significant sums in new retail developments
which are targeted to attract the clientele of the smaller independents.
These super pubs tend to be deep discounters and the smaller licensee
simply cannot compete. The saturation referred to above is hugely
exacerbated by this super pub trend.
(iii) Trade barriers. Most of the trade barriers
which we encounter are commercial. On the beer side, there is
heavy discounting by the national brewers to both the take-home
trade and the super pubs and other multiple operators. At our
scale of operation, we simply cannot compete on price and we must
therefore find niches in the market where price is not the priority
factor. As a consequence of the sharp increase in deep discounting
which has taken place recently, it is becoming increasingly hard
to identify niches which will be attractive to the consumer. The
stand-out factor has to be particularly creative as the consumer
is increasingly focused on price.
(iv) Excise Duty. We are very concerned at
the massive burden imposed on Belhaven by Customs and Excise through
the imposition of excise duty rates which are hugely ahead of
our European counterparts (see BLRAS paper). I would add the comment
that the handling of beer duty imposition and collection by Customs
and Excise has been, on many occasions, both vague and inconsistent
(especially since the start of end product duty). This comment
can be supported by Customs' recent unilateral declaration (at
very short notice) that the 1 per cent overfill tolerance on keg
and cask beers is to be withdrawn. Without the weight of BLRA
in the UK, many small companies would have suffered a significant
financial blow.
(v) Drink driving legislation. Any reduction
in the blood alcohol concentration level limit would have a significant
impact on Belhaven's business.
(vi) The Liquid Pint. The introduction of
the liquid pint would have a radically negative impact on our
own business.
We operate in an environment which is increasingly
dominated by the bigger players. On the beer side, Scottish &
Newcastle, Bass, Whitbread, Carlsberg Tetley and Guinness command
more than 90 per cent of the Scottish market. On the retail side,
there are many major players in retail licensed pubs who control
and command the best sites through their resources which are much
superior to those of the regional brewers and independents. Key
retail players in Scotland are Scottish & Newcastle, Bass,
Whitbread, Punch Taverns, JD Wetherspoon and there are many other
national multiple groups now looking to march into Scotland to
find new opportunities following the saturation of their markets
and potential markets south of the border.
These comments and issues should not be interpreted
as complaints or squeals from Belhaven. We do not expect or want
government regulation to resolve the competition issues which
we face. Although a small player in our chosen marketplace, we
have always realised that we have to stand on our own feet and
compete tangentially with the nationals (and internationals).
All we ask is that the government thoroughly reviews the plethora
of statutory provisions which they are presently contemplating.
For example, how can Customs and Excise reconcile their recent
withdrawal of the overfill tolerance with Weights and Measures
provisions?
On the subject of regulation, experience has
taught me that regulation by any government or authority tends
to create market distortions which are self-corrected through
commercial adjustments. In the process of the commercial adjustments
being made, the weaker players are weeded out.
May I conclude by stating quite clearly to you
that these are my personal thoughts and do not necessarily represent
the views of the Board of Belhaven Brewery Group plc of which
I am merely one member. There has been no meeting of the Belhaven
Board between 6 December 1999 and the present date which would
have given me the opportunity to sound out my colleagues.
Mr Stuart Ross,
Chief Executive,
The Belhaven Brewery Company Limited
January 2000
11 Not herewith printed. Back
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