Whitbread and S&N punch roughly equal weight in the UK beer market, with market shares of around 13 per cent apiece. Both, indeed, were for many years touted as merger partners for each other, with their complementary geographical spreads - Whitbread in the South and S&N in Scotland and northern England.
Both were therefore deemed candidates to buy Courage when the Australians decided to sell it last year. But while the Whitbread chief executive, Peter Jarvis, professes to be constantly on the lookout for takeover possibilities in the beer market, he took little persuading to leave the field clear for S&N. "We don't have anything in Scotland or the Midlands," he admitted, "and I'd like to fill those gaps. There will be more concentration of brewing in this country."
Nevertheless, although Whitbread still sits in the breweries section of share price tables, few investors realise how far it has completed the transition to a catering and leisure group. Only 5,000 of its staff brew while 50,000 cater. And brewing accounts for only a fifth of profits.
The Whitbread share price has reflected this uncertainty, compounded by the Government's wavering attitude to the beerage, the cross-Channel duty-free scam and yet another inquiry into the industry by the Office of Fair Trading. Mr Jarvis explained: "Our brewing business is a good business. It's got a good profit stream, and it's got a lot of cash flow. We need that to expand our retail operations."
Analysts have even whispered the heresy that after 250 years Whitbread should think about getting out of brewing and go the whole hog for eating- out.
Mr Jarvis scorns such suggestions. "Why divest yourself of a good business?" he asked. "Our brands have been very successful, and we are national brand leader in the take-home trade. It's got good prospects - it's just not as big as some of our competitors." Cynics point out that you don't have to brew beer to sell it.
But any talk of withdrawing ignores the place on the board of Sam Whitbread, 58, former chairman and a scion of the founding family. It would be a brutal board meeting that pulled out of brewing in his presence.
So it is off to Pizza Hut, TGI Friday's, Beefeater, Brewers Fayre and Wayside Inn for none-too-adventurous meals at none-too-expensive prices. More eatery names are likely to be added to the list before long, and these are supplemented by The Keg in North America and Churrasco in Germany.
Organic growth never attracts the headlines of a one-off deal, but Whitbread spent £300m on developing the business last year, and it plans an even bigger programme this year. That will add up to more than £600m, which is roughly what S&N is predicted to be paying for Courage. Whitbread will spend £85m on 50 new Brewers Fayre sites, it said last week.
The real transformation in Whitbread is a consequence of the fact that it has fallen into the hands of marketeers, in the shape of Mr Jarvis, an ex-Unilever employee, and the chairman, Sir Michael Angus, who used to head Unilever.
Their ethos pervades the group. Beer has not been neglected in this marketing sweep: sales of Boddingtons and Murphy's have been boosted by clever promotional campaigns. But it has not been the priority.
"Our expansion has been in retail," admitted Mr Jarvis, "where we feel we are as good as anyone. We have a reputation for brand marketing."
He realised that the nature of the pub would have to change as the number of thirsty blue-collar workers and young men declined. Ten-pints-a-night session drinking is becoming a thing of the past.
Instead, Brewers Fayre is being aimed at families, and Wayside Inns at the over-50s who want a quiet drink or a meal.
Whitbread has developed some promising niches - Pizza Hut, a Pepsico franchise, is the UK brand leader.
But the question is whether it can withstand the march of the bigger battalions, in catering or in brewing.
The shares will suffer from bouts of nerves as long as the company maintains its dual identity - but it is a solid profit generator, carrying a useful yield.
Boddingtons, Flowers, Heineken, Murphy's, Stella Artois and Whitbread beers; Brewers Fayre, Wayside Inn and Whitbread pubs; Beefeater, Churrasco, The Keg, Pizza Hut and TGI Friday's eateries; Thresher, Bottoms Up, Peter Dominic and Wine Rack off-licences; Country Club Hotel Group.
Share price 559p
Prospective yield 4.7%
Prospective price-earnings ratio 14.3
Dividend cover 1.9 1992/3 1993/4 1994/5*
Turnover £2.35bn £2.36bn £2.37bn
Pre-tax profit £177m £234m £257m
Net profit £107.1m £165.4m £184m
Earnings per share 22.73p 34.88p 38.5p
Dividend per share 17.75p 18.8p 20p (* forecast)Reuse content