View from City Road: Christmas is early for Devenish shareholders

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Pub retailing has become rather like a chess game where the players, having developed their opening moves during the implementation of the Beer Orders, are now making gambits of acquiring the opposition's pieces.

Greenalls' bid for Devenish shows that the independent pub groups are determined not to let the big pub- owning brewers dictate the play.

Greenalls is growing to such a size that it will have brewers at its beck and call. Devenish's beer supply agreement with Whitbread is unlikely to run the full course in its present form. How long before Greenalls and Whitbread delicately discuss the merits of selling beer brands across a larger group?

The power play does not stop at beer, which has slipped down the list of management priorities in a rapidly changing industry. The hard core of beer drinkers has been steadily eroded, tracking the demise of heavy industry. Only 10 years ago, for instance, the best part of a million males replaced lost body fluids after shifts in steel foundries, coal mines and elsewhere by swallowing 40 per cent of brewing output nationally.

Meanwhile, pub goers have been lured away from their locals by rival attractions in the leisure industry such as bowling. The effects of recession have been exacerbated by annual rounds of excessive price increases caused by short-sighted duty rises by the Government and sheer greed by the brewers.

Food sales have provided a useful backstop for pubs during the recession, and further enhance the rationale of Greenalls' decision to buy Devenish. Greenalls buys around pounds 20m of food a year and Devenish some pounds 8m.

Apart from using additional buying muscle, it is not entirely clear how Greenalls can increase profits in the Devenish pub estate, which has been extensively refurbished and repositioned to great effect since Boddington failed to take over the company two years ago.

Before the deal can start to enhance Greenalls' earnings per share, the company has to remove at least pounds 5m of costs from an already lean business. Another drawback is that more than 60 per cent of Devenish's pubs are at the mercy of weather forecasts and the unpredictability of the holiday market in the South-west.

Greenalls' earnings per share have stood still over the last three years and show no sign of moving up at least until the end of 1994. Meanwhile, it must feel like Christmas for Devenish shareholders.