Carlsberg woos Guinness

Carlsberg, the Danish brewer, is expected to offer Guinness the opportunity to buy its Carlsberg Tetley business as a means of preserving its brewing operation in the UK.

Carlsberg is prepared to withdraw from brewing in the UK in the wake of the Government's decision to block the acquisition by Bass of a controlling interest in Carlsberg Tetley.

Guinness was offered the chance to buy Allied Domecq's 50 per cent stake in Carlsberg Tetley two years ago, before it was offered to Bass, but showed no interest at that time.

Carlsberg does not believe that a stand-alone Carlsberg Tetley business is viable. Nor is it consistent with its international strategy to develop joint-venture operations. Carlsberg rejected the chance to buy Allied Domecq's 50 per cent stake.

Without a new joint-venture partner, the prospects for Carlsberg Tetley's five breweries look bleak. Already a sweeping review of its operations has been instigated and some closures are regarded as inevitable with the breweries at Alloa and Wrexham at most immediate risk.

However, Carlsberg's threat to withdraw from brewing in the UK and serve the market from elsewhere would result in even more job losses than are currently anticipated.

With Bass blocked as a buyer by the Government, Scottish & Newcastle facing similar competition obstacles and Whitbread ruled out because of the clash between its Heineken brand and the rival Carlsberg lager, only Guinness fits the Danish brewer's view of an appropriate join-venture partner.

Carlsberg told the Monopolies and Mergers Commission that in its experience long-term survivors at a national brewing level would be big brand owners who could support their trade marks through successful products, extensive distribution and high levels of marketing support.

Guinness fits the bill and it may be prepared to take more of an interest in Carlsberg Tetley than it did two years ago.

Guinness is the only independent brewer without a pub estate of any size in Britain. Carlsberg Tetley would give Guinness powerful bitter and lager brands to support its pre-eminence in stout in the UK.

An investment by Guinness would also demonstrate that the proposed merger with Grand Metropolitan to create GMG Brands was not exclusively about the spirits business.

In its own submission to the MMC, Guinness was one of the few brewers not to oppose the Bass acquisition of Carlsberg Tetley.

Both Scottish & Newcastle and Whitbread argued that the acquisition by Bass would operate against the public interest.