Select Committee on Scottish Affairs Minutes of Evidence

Examination of Witness (Questions 400 - 409)



  400. Do you think a reduction in duty would lead to a reduction in the amount of smuggling?
  (Mr Ross) It is back to the harmonisation of tax rates again. We could get closer to the French but it is a big gap. It is a difficult issue because I have to say that I can see the Chancellor's point of view as well. But the industry's view is indisputable that harmonisation of taxes would resolve the problem. But that puts a financial burden on the Government.


  401. You referred to globalisation and brand names across the world. I would like to ask you about exports. Like Eric Clarke, I think Belhaven has an excellent product—I maybe do not buy it as often as him but it is a good product. About 18 years ago I was in Sacramento in California and went into the pub for lunch and up on the gantry were rows and rows of Belhaven beer, which I was very surprised to see. How successful is your company at exporting and are there barriers to exporting your product that concern you?
  (Mr Ross) There are not many real barriers. How good are we? We are average.

  402. How much of your product is exported?
  (Mr Ross) Of total production about 10 per cent and the principal market is America. We also sell to about half a dozen European countries and bits and pieces in the Far East. The American market is the big one. There is no barrier other than consumer preference and America is very much for light, lager beers. They have been brought up to believe that the Budweisers and Millers, which are all light-coloured drinks, are the ones to drink. Ale is a much heavier drink. By the time you take the cost of the Atlantic into account, it is expensive as well so it becomes quite a niche brand. But there is no barrier and Scottish & Newcastle with Newcastle Brown Ale have shown how successful niche brand marketing can be. They have done a wonderful job with Newcastle Brown Ale over there and I still think that Belhaven Scottish ale with the right marketing plan could do better in the States than we are doing.

  403. Scottish & Newcastle have the resources to promote their product. A small company like yours with the limited budgets to which you earlier referred, it must be difficult. How can you hope to succeed in the States and is there any way in which the DTI, for example, could assist?
  (Mr Ross) There are always ways in which we can be assisted, I suppose, with financial support for marketing and so on. But at the end of the day, to be successful at beer selling anywhere in the world you have just got to hit the spot right. You have got to introduce a beer which is nicely packaged, well marketed and has the taste and flavour characteristics which will attract demand. That is what we have tried to do. How successful we are in doing it I do not know. It is an interesting debate because we have had a product called Belhaven Scottish Ale on sale in the States, which is probably the one you picked off the shelf 18 years ago. Belhaven Scottish Ale has been out there for a long time and we are having an internal debate with some of the guys that we should have brought Belhaven Best over to America and go with that. That might be the answer but we have got to keep probing for the right niche. America is a fantastic market and you only need to hit the spot right to get a huge amount of sales. I do not think small companies can hide behind resource as an excuse. The big guys have got all the work to do as well. They have got to find the right importer, distribution chains and get their marketing right. It is not any easier for them.

  404. Finally, and I asked Caledonian this last week. As a small independent company, how long is it before you get taken over?
  (Mr Ross) I suppose you would have to ask one of the fund managers whether or not they were happy with our performance. That is a difficult question to answer.

  405. Is that not also one of your weaknesses, that someone else can make the decision for you if you do not perform to their expectations?
  (Mr Ross) Well, that is life. If you float yourself on the London Stock Exchange you lay yourself wide open to that. The share price for Belhaven has not performed as well as the company because the stock market sentiment for the sector is poor and the small cap sector within the London Stock Exchange for "old economy" stocks such as ours is almost dead. So there are quite a few London City issues which are not in our favour. If somebody came along—Belhaven share prices have been at around 200p for four years, despite the fact that we have doubled our profits in four years. So if somebody comes along and offers the fund managers 300p, I dare say they would take it. But would it make a huge difference? I do not think so. Anybody who wants to buy Belhaven and pay that sort of money for it, there would be no point in closing it down. The jobs would be secure. We would go on producing beer in Scotland. I am quite sure we would go on with our distribution and retail activities, otherwise there would be no point in somebody buying us. So it is not a great fear.

  406. We have exhausted our questions. Are there any final remarks you would like to make to the Committee?
  (Mr Ross) Yes, there was one. Thank you again for inviting me down here on my own. I appreciate that.

  407. We try to accommodate all the witnesses in the best way possible.
  (Mr Ross) Just one point I would like to make on licensing law reform which is quite important. I believe that there is a need for a radical reform of licensing in Scotland, which is a Scottish Parliament issue. At the moment we have the bizarre position where planning usage for a premise and licensing usage can be quite separate; they can be quite contradictory. In particular, there is confusion over premises which have restaurant planning permissions and public house licences and there can be quite a kerfuffle as to how the place should be operated. I believe that we should do two things. We should introduce a separate licence for premises which would align with the planning usage, and then distinct from that, people who are qualified and have proven themselves with qualifications should be granted the right to hold a beer licence for any public house or any restaurant and therefore one simply keeps a register of registered licensed premises which would be renewed say every three or five years. "Approved" people, licensees, or one such approved person would need to be in charge of each approved house at any given point in time. But that separation and distinction would give us a much better system. If we introduced it and took the opportunity to improve the qualification of licensees and insist upon that, we would weed out some of the characters that come into the licence trade who are not so welcome. I believe—again harping back to the Pathfinder Group I sat on for the Scottish Parliament—we have got a great opportunity in Scotland to improve the status of hospitality almost along the Irish lines and invest much more into the status of that throughout by group training and by giving it a much higher level of importance as a country than up to now we have. I think some of the Scottish Tourist Board issues recently have been fascinating as to how they will take things forward. But I would hope that licensing can play a part in increasing and improving the attractiveness of Scotland as a country for visitors. A good start would be to get better qualification into the system at grass roots level. That is one point I wanted to make. The other point I wanted to make really, talking about issues, there is still the issue going through the DTI on the liquid pint, as to whether the frothy head of the beer should be counted as part of the total offering. I should like to say that that is an unnecessary imposition on our industry. The head has always been regarded by the consumer as part of the drink. We have a code which says in pouring you must get at least 95 per cent liquid and we must top up if requested. If the consumer gets 100 per cent liquid in his glass then when the head collapses, because the head contains some liquid, he is actually going to get more than 100 per cent. All that is going to happen for the consumer is that if he gets a bit more liquid, he will be charged more. So there is no value for money element in it. All the legislation will do is prove a huge imposition in cost terms to the beer industry. It will widen the existing differential between pub and supermarket prices and that will not be good news for any beer supplier.

  408. I thought that had been argued and resolved. I thought most glasses now had the line where the measure went up to and the head goes on top of that. Is that not the case?
  (Mr Ross) No. There is no legislation on the issue. There is a BLRA code that 95 per cent must be liquid at the point of dispense and that one must top up on request. But the line glasses have been tried. It is actually a very difficult thing to do without metered dispensers. I mean I still work a few shifts in bars just to keep my hand in. If you are asked to pour a pint, even if you are pouring a glass of wine up to a level, it is a very difficult thing to see eye to eye, especially when you are pouring glasses down here. The mechanics and the logistics are massive and the benefit to the consumer is zilch. If he gets an extra 5 per cent he will pay an extra 5 per cent.

  409. I apologise for coming back, but there is one point I omitted to clear up earlier in relation to retailer power. You were concerned about that. But neither the Whisky nor the Gin and Vodka Association made any significant complaints about it. Is there a difference in spirits in that respect in relation to supermarkets?
  (Mr Ross) I would have thought not.

  Chairman: Thank you, Mr Ross, on behalf of the Committee for a most interesting and entertaining session with us this morning and afternoon. Your evidence has been very useful to us and will be helpful to us when we come to prepare our report. Thank you very much for coming all the way down and appearing before us today.

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