THE MONDAY INTERVIEW SIR PAUL NICHOLSON
Monday 03 April 1995
As chairman of Vaux, the Sunderland-based brewer, he spends more time today negotiating the hurdles erected in perpetuity by governments and Whitehall mandarins since the Second World War.
In particular, they include the extremely controversial Beer Orders, which led to the big brewers selling 11,000 pubs, and the more recent inquiry into beer supply prices launched by the Office of Fair Trading. And, of course, the penal increases in excise duty and VAT on beer have provided enough grist to keep the brewing industry's political mill at full production for many years to come.
Aside from these problems, the condition of the industrial trading ground for brewers can best be described as soft to heavy going. Drinkers are downing considerably less beer than they used to, and brewers are being kicked in the ribs by the rapidly growing trade in personal imports on the Calais booze run.
Generally, Sir Paul says, "the biggest issue is an industry with over- capacity. There are probably too many breweries at the moment, and there are probably too many pubs.
"That is a fundamental problem, which has arisen largely because the tax regime is tough. And consumption from imports overseas, particularly France, is now more than a million pints a day and rising. But I don't want to pretend that that is the sole cause of the problems."
So just what are the solutions, and can the brewing industry realistically look forward to better times?
"I think that all brewing companies are having to adapt to what activities they undertake. Pub-owners are very much concentrating on food and on providing what people want, which is a package that possibly does not include as much beer as it used to.
"From the brewing point of view, one has got to try to find new markets, given the overall decline, and with the pressure on prices one has to sharpen up on marketing and try and find products and brands that meet public needs," says Sir Paul with the slow delivery, rounded vowels and authoritative conviction that come with his grounding at Harrow public school, Cambridge University and a National Service spell in the Coldstream Guards and six years in the Northumberland Hussars.
However, it would be churlish to make superficial judgements about his obvious establishment credentials, which were topped up in 1993 when he was enlisted into the "beerage" with a knighthood for services to industry. He has a sharp mind and, as one close friend said, he will readily be "a thorn in the establishment's flesh if he sees complacency or stupidity creeping in".
Sir Paul refrains from being led down the path of deep technical analysis of the brewing industry, preferring instead to debate issues without losing sight of where the real business is done - on the shop floor in the brewery and out in the pubs.
"I think the brewing market has two distinct halves to it. It has the lager half, which is roughly 50 per cent of the trade, where it seems that big international brands are the answer. I mean it's a fight between the few home-grown brands and the imported. Budweiser is the great brand at the moment.
"The second half, of course, is the ales, where there is a tremendous variety available. There are hardly any national brands. Big brewers have very big brands, but they have many more regional franchises."
That is all well and good, but there clearly are other reasons behind the changes being forced by the industry, and by consumers themselves.
Has the price of a pint been increased to a level beyond the reach of most working people's pockets? And if this is the case, then how much notice should we take when the brewers preach from the rooftops that consumers are choosing to switch to higher-priced, or so-called premium beers?
"I fully take the point that it [a pint] is expensive, although our figures show that minutes of work needed to pay for a pint are still tending to go down. I don't know whether they've done that in the last two to three years, but they certainly have over a long period.
"I mean one has statistics showing that earnings are rising. But the Government doesn't really now publish tax figures and therefore I would say earnings are very flat by the time you take into account the extra tax that's coming in. It is one of the factors and one of the problems we have in competing for the customers' leisure spend against the temptations of drinking at home, buying it off the back of a van on a housing estate."
Tax was a repetitive issue during the conversation with Sir Paul and, no pun intended, he was quite bitter about the way governments have continued to hit drinkers' pockets with increases in excise duty.
"There are a number of things I would like the Government to do. If we believed in the single market we must move towards approximation of taxes.
"In the pre-election Budget of 1959 the Chancellor reduced beer duty by 28 per cent, and he got his money back in about two or three years from increased consumption. We think that duty has been going up so steeply that it could afford to be reduced by 50 per cent, but I think 28 per cent would be a good starter.
"We ought to be moving towards approximation if we are going to stay in Europe. I would like to see the Government bring down prices, and I think then it would be a challenge to the industry that they might consider what they do."
The industry applies pressure on the Government through the Brewers and Licensed Retailers Association, the trade body at which Sir Paul recently took over the two-year tenure of the chair.
Some privately express doubt about the wisdom of the industry shielding behind the association's umbrella, particularly in the light of accusations from outsiders that it is nothing more than a cosy cartel.
"If you consider all the areas of licensing, taxation and alcohol restrictions we are a very regulated industry. And therefore we must have a sort of body that can speak for us on dealing with major issues. Obviously, the biggest issue is taxation, and the second-biggest is potential trading restrictions on the way we do business with our tenants. Then there is lobbying for changes in licensing laws," says Sir Paul.
"You really must have a powerful trade association to fight these battles. We changed. As you know, we used to be known as the Brewers' Society, but when a number of our members went out of brewing we had a look at what we were doing, and found we had something to offer the licensed retail chains with a great deal of commonality.
"The association is very strict, and, quite rightly, there is no question of any competitive matters being discussed. Well, I know some people have thought that it's a nice little cartel but I can assure you that it is very far from being a cartel."
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