No Pain, No Gain: Too much froth and too few options in beer industry

Since I arrived in the City in the 1950s, beer has been an intoxicating investment. Takeovers have decimated the ranks of the beerage, causing dismay among real ale drinkers although shareholders have reaped rich rewards. But the happy-go-lucky days are over.

This year four pub-owning brewers and one that had given up producing but held on to its outlets have fallen to predators. Only six fully fledged brewers remain on the stock market. Further bids will occur although the decline in available targets means the chances of investors hitting the jackpot are slim.

It was all so different in my younger days. The old-fashioned beerage enjoyed a strong City following with analysts crawling over every aspect of what was a colourful industry. Back in the 1950s there were more than 100 quoted drink companies. In 1964 the Stock Exchange published a booklet recording share prices on the day capital gains tax was introduced. It listed more than 60 independent brewers, plus since departed cider makers, distillers and wine companies.

The brewing industry has been consumed by intense takeover activity for many years. It reached a rare old ferment in the decades following the Second World War, then subsided as targets became scarce.

This year has probably seen the last big corporate whirl. Scottish & Newcastle is the only survivor of the big six. Allied Domecq, taken over this year, had already given up beer for wines and spirits; Bass and Whitbread went down to foreign bids; parts of Watney Mann (indirectly) and Courage (directly) ended up with Scottish.

The other remaining players are Greene King and Wolverhampton & Dudley Breweries, both around the £1bn capitalisation mark, and family-controlled Fuller, Smith & Turner; Hardys & Hansons and Young & Co. Guinness is a segment of the Diageo spirits behemoth. Greene and Wolves each accounted for two of this year's victims with Fuller mopping up one.

Commercial and social changes and government interference have almost annihilated the old quoted beerage. A decline in beer consumption, the swing from ale to lager and the advent of garish high street bars have been important influences. Westminster's Beer Orders, which forced the major brewers to sell many of their pubs, and an uneven merger policy which, for example, blocked Bass from bidding for Allied and Courage, took an inevitable toll. It seems astonishing that the country's two biggest pub chains, Punch Taverns and Enterprise Inns, which have acquired former brewery-owned pubs, have assembled similarly sized estates for which Allied and Bass were penalised.

I long ago acquired a thirst for brewing shares and prospered from the takeover ferment. Indeed my first ever share was the now forgotten Massey's Burnley Brewery. I held three of this year's takeover crop, brewers George Gale & Co and Jennings Brothers and former brewer Burtonwood. My shareholdings in Gale, an unquoted company with a presence on two of the outer fringe share markets, and Jennings dated back to the 1970s. I was also a long-standing Allied shareholder.

The No Pain, No Gain portfolio has enjoyed the takeover action. It reaped rich rewards from the Allied and Burtonwood deals and from the takeover of cider maker Merrydown. Its only remaining drink constituent is Scottish, the nation's only player on the world stage. Scottish is by far Britain's biggest brewer but still lacks the global clout of, say, Anheuser-Busch of the US.

The portfolio is aimed at buy and hold investors. Sometimes, of course, a short-term involvement is unavoidable when an investment story changes quickly. I do not cater for day traders but for long-term players; Allied, Burtonwood and Merrydown were held for much of the portfolio's near seven-year life.

In view of past success I would like to strengthen the drinks link. But the options available are limited. I am uneasy about the heavy borrowings of Enterprise and Punch and although the five quoted brewers are well-run companies, their shares are fully valued on trading considerations.

However, I would not be surprised if the family-controlled groups are the subjects of bid attention. Burtonwood, Gale and another victim, TD Ridley, were family-dominated companies, unable to resist generous offers.

I am toying with the idea of adding the Pubs'n'Bars chain to the portfolio. It is a well-run but small business that could tempt an opportunistic bid. The other quoted pubs companies, Heavitree and Honeycombe, have little appeal.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
New Articles
Life and Style
Couples have been having sex less in 2014, according to a new survey
Arts and Entertainment
musicHow female vocalists are now writing their own hits
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior BA - Motor and Home Insurance

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Market Risk & Control Manager

    Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Day In a Page

    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam