Fuller, Smith & Turner said that it would focus on its hotels division after selling its beer business to Asahi for GBP250m.
Fuller’s said that it was committed to “running a stylish, high quality estate” and would expand through organic growth and acquisitions.
Simon Emeny, Fuller’s CEO, said: “This deal secures the future of both parts of our business including protecting the heritage of the Griffin Brewery in Chiswick, which was particularly important to the Fuller’s board. Brewing has formed an integral part of our history and brand identity, however the core of Fuller’s and the driver of our future growth is now our premium pubs and hotels business.
“Asahi, as a company recognised for brewing excellence, is an appropriate custodian of our rich brewing history and the Griffin Brewery, and will ensure the Fuller’s Beer Business brands will reach an even wider global audience.”
The company said that the sale would allow Fuller’s management “to focus solely on the core of the business and it will provide significant capital to accelerate investment in the premium pubs and hotels business both organically and through future acquisitions”. The group plans to look to the south of England for its expansion.
The business being sold comprises the entirety of Fuller’s beer, cider and soft drinks brewing and production, wine wholesaling, as well as its distribution and includes the Griffin Brewery, Cornish Orchards, Dark Star Brewing and Nectar Imports.
Asahi will be able to licence the Fuller’s name and logo in relation to the drinks business and will supply Fuller’s pubs and hotels.
In explaining the rationale behind the deal, the company said that, in the 52 weeks to 31 March, its pubs and hotels business accounted for 75% of external revenues and 87% of operating profit (excluding unallocated costs) and had grown at 6% p.a.
The company also announced its trading update for the 42 weeks to 19 January 2019, which saw sales up by 4.7% for its managed pubs and hotels.
The announcement was made as Marston’s reported that it would be scaling back its new-build investment, but reassured that new-build pubs and accommodation delivered “strong returns”. The group has 1,551 hotel bedrooms across its accommodation portfolio.
Ralph Findlay, CEO, said: “We operate in increasingly uncertain times from a political and macro-economic perspective and, as such, we remain cautious about the potential consumer outlook until there is more clarity.”
In Christie & Co’s Business Outlook 2018, Neil Morgan, managing director, pubs & restaurants, said: “Aside from the negative impact of some cost inflation, the devaluation of the pound following the referendum on EU membership has driven an increase in tourists visiting the UK and boosted the popularity of staycations. As such, pubs with letting rooms have increasingly proven themselves as capable of successfully competing with both budget accommodation providers and the boutique market.”
Graeme Smith, managing director – regional community leader, AlixPartners, told Hotel Analyst: “It’s a trend which is going to continue and grow and grow. What the pub groups have realised is that they generally have a lot of underutilised space – staff accommodation where the landlords used to live. But now they have more professional managers as tenants or manage themselves and the landlord living above the pub is something which doesn’t exist so much any more.
“Pubs are generally quite well located, many of them used to be coaching inns. It’s difficult to build new hotels in the centre of cities. There is also the fact that Monday, Tuesday and Wednesday are the busiest days for hotels, but the quietest nights for pubs – so it’s a nice mix for them. It makes a tonne of sense.”
HA Perspective [by Katherine Doggrell]: There were many shocked faces the morning Fuller’s decided to sell its brewing businesses, not least wondering what this meant for the 7am London Pride which was traditionally served to journalists and analysts at its results presentation. Fuller’s sought to reassure with comments about Asahi being devoted to the quality of the brands and viewing the Griffin Brewery as “an integral part of Fuller’s Beer Business” with the intention of continuing to brew on site. For those of us who remember the sale of Young’s Wandsworth brewery to a property agent, we wonder how long before the Griffin, in a prime Chiswick location, goes the same way.
While hanging onto the past is what got us unto Brexit in no small way and is therefore to be avoided, what is at stake here is not whether Asahi can continue to brew Pride to the quality we have all become used to at 7am, but what happens when you put the most valuable part of your brand in the hands of someone else.
Fuller’s operates its hotels at the top end of the pubs-with-rooms market and has 199 pubs and hotels – they are much closer to boutique hotels. And in brands such as The Stable, its pizza restaurant, it has huge expansion potential which doesn’t draw on the heritage of Fuller’s at all. But should there be any taint around the core brewing brand, the rest will follow.
Additional comment [by Andrew Sangster]: As a former assistant editor of the Campaign for Real Ale’s newspaper, I was sad to hear the news of this transaction.
The beer branding experts will tell you that what matters with consumers is provenance: handing over your brewery to a global purveyor of fizzy lager is not the best way to ensure that such provenance is maintained.
Asahi, Japan’s biggest brewer, now owns Grolsch, Peroni and the London-based craft producer Meantime. It also owns a range of East European beers including Pilsner Urquell. It might be a while before you have to ask for a pint of Tokyo Pride rather than the current London Pride but the history of beer conglomerates has been all about consolidation rather than preservation of unique heritage and character.
But then, how important is beer provenance to pub operators? Most people do not go to a pub because of the beer. Location and price are nearly always more important factors.
The danger though is that Fuller’s has jumped in precisely the wrong direction as the experience economy gains hold. Customers want something authentic, something unique.
Centuries of heritage and a position as the only major brewer in London that was still family-owned was about as authentic and unique as it gets. This has now been dashed.
Fuller’s will never have the means to be truly competitive as a major accommodation brand or even as a national restaurant brand. It did have the means to offer something truly unique in terms of food, drink and accommodation. It can still do something special with food and accommodation but its beer offer is now very much me-too.