The brewing industry is on course for a big shake-up with Scottish & Newcastle yesterday confirming that it was negotiating to buy all, or part, of Courage. At the same time, Whitbread provided a taster for the radical changes ahead in the pub market by announcing the planned opening of 50 "super-sized" Brewers Fayre outlets.
S&N declined to comment further, although sources said that there were still many loose ends to tie up before a deal could be struck. Several involve complications over ownership and production of beer brands, such as Courage's current agreement to brew Budweiser in Britain for Anheuser Busch, the US-based and largest brewer in the world.
A complete takeover of Courage could cost upwards of £500m, and would make S&N the biggest operator in the domestic market. Courage is second- largest with a 19 per cent market share and S&N is fifth with about 12 per cent.
Industry analysts said S&N was unlikely to be allowed to buy all of Courage because the joint market shares exceeded the monopoly benchmark of 25 per cent. They believe S&N will acquire most of Courage's breweries, some of its beer brands, but not its 50 per share in Inntrepreneur, the 4,350- strong chain of pubs owned jointly with Grand Metropolitan.
Talks between S&N and Foster's, the Australian owner of Courage, have been taking place for at least 18 months. A big hurdle in S&N's long takeover path was cleared earlier this month when Whitbread, the fourth-biggest UK brewer, dropped a separate bid for Courage.
Few in the brewing industry believe that the purchase of a large part of Courage by S&N would be bad news for other brewers. The industry is lumbering along with a large overcapacity problem, and at the same time beer consumption continues to decline.
Britain's brewers can now produce an extra pint for every four they can sell. Consumption has dropped to levels last seen in the 1960s, and continues to fall as a consequence of the decline in heavy industry, rising beer prices, and changing lifestyles. The industry has also been hit by the surge in personal imports of cheap beer from France, last estimated at 1 million pints a day and rising.
All the big brewers have cut back on capacity by closing at least two breweries each in recent years. However, there are no signs that any of the big five brewers will break ranks and unilaterally take further capacity out of the system. The over-capacity problem also continues to be exacerbated as the regional and other smaller brewers catch up with advances in technology.
Amid this, the beerage is adapting to rapidly changing consumer needs. The traditional male haunt of the boozer is steadily being replaced by pubs, driven by food sales and targeted increasingly at the family. A multitude of leisure concepts is also being rolled out. Typically, they comprise pubs with adjoining bowling alleys and small, low- tariff hotel facilities.
All of this is putting pressure on the small independent publicans, who are finding it increasingly difficult to compete with the financial muscle of brewing groups and big pub chains. Too many pubs are chasing too little business. One in seven of the UK's 70,000 pubs will close in the next few years.
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