Fuller’s sale: Sad? Yes. But not the end of their story.

Charles Dickens stated “It was the best of times, it was the worst of times” in his novel ‘A Tale of Two Cities’ he could have been describing the present state of brewing in the UK from a consumer perspective. In the same week we had the announcement that Fuller’s was selling its brewing business to Japan-based Asahi for £250 million and the news that 430 new breweries opened during the past year.

On the one hand we are in the glorious position of having the best of times in terms of beer choice. We have most diverse range of beers available at any point in my lifetime as craft brewers open up in every town and village across the land. But on the other hand it could be seen as the worst of times as the likes of Fuller’s are finding it tough to compete against the competition.

At one end the small brewers are nibbling away at Fuller’s lunch – helped by Small Brewers Relief they receive on beer duty – while at the other end the rest of the meal is being eaten by the massive macro brewers such as AB In-Bev, Heineken and Carlsberg who are benefiting from their economies of scale.

This situation has been hurting an array of mid-sized brewers in the UK including Shepherd Neame, Charles Wells, Moorhouses and Batemans to name just a few. The upshot is that some have scaled back their output to ease their duty burden while others have sold off their brewing elements and instead chosen to concentrate on running a pub estate.

So while the Fuller’s sale absolutely came out of the blue it should not be seen as a wholly surprising bit of news. The reality is that it has been in a tough spot for some years. It has been justifying the retention of the brewery to its investors for some time. The question of why keep the capital, and labour, intensive brewing business when the pubs (and increasingly hotels) are what drives the group’s profitability has been increasingly hard to answer. In the most recent results the pubs division accounted for 87% of operating profit.

The pubs and hotels also have the advantage of typically being appreciating assets while breweries are depreciating assets. The one (big) bit of value is the land that they stand on of course but let’s not go near that right now. The thought of Asahi building luxury flats on the prime bit of Thames-side real estate in Chiswick where Fuller’s brewery sits (and has done so since 1845) is beyond comprehension at this stage. We’ll get too sentimental if we go down that road.

The family’s undoubted attachment to the brewery has kept the investors at bay for some time and ensured Fuller’s has kept on churning out its prize winning cask ales. Unfortunately, this brings us onto another niggling issue at the company that has been troubling management – the continued decline in sales of cask beer. It cannot have been easy to keep up the argument about retaining the brewery when the core product it produces is on a downward trend. In the recent results the beer and cider volumes in totality remained level but the cask beer portion of this continues to fall.

Admittedly it is at the extremity of the Fuller’s pub estate but my local, The Great Northern Railway Tavern in North London, has 20-plus taps of which only four are cask and generally only two of these are Fuller’s beers. The company has a number of these more craft-led outlets within which it is experimenting with the mix of beers on offer.

What unites them is that the Fuller’s beer range does clearly play a role but each brew has to justify its place on the bar and it sits alongside a sizeable variety of other beers from all and sundry – including a growing number from the small craft brewers. Such a move is simply satisfying the ever changing demand from today’s consumers.

Yes, it is sad to see the sale of the brewery – and with it a bit of London’s rich brewing history – but against what is a very difficult backdrop Fuller’s has ultimately taken a tough rationale business decision. Now with its investors onside and approximately £120 million from the sale burning a hole in its pocket it can go on the hunt for further pubs that hopefully are just as classy as my local. “Death may beget life, but oppression can beget nothing other than itself,” noted Dickens.