W&DB rises as UK beer hits tough times

- Last updated on GMT

Related tags: Goldman sachs, Beer

Acquisitions have helped Wolverhampton and Dudley Breweries to a
solid sales rise in the UK, the country recently named as one of
the world's toughest beer markets by Goldman Sachs, reports
Chris Mercer.

Wolverhampton and Dudley (W&DB) increased sales in its beer brands by 5.5 per cent to £59.9m for its first half 2005, despite UK beer volumes dropping five per cent during the same period.

The UK brewer said it benefited from new distribution agreements with other pub companies and an agreement allowing it to begin brewing Draught Bass at the Marston's brewery.

A near 14 per cent rise in premium ale volumes, with Marston Pedigree up 12.6 per cent, also spearheaded W&DB's success as standard ales, including the Banks' and Mansfield brands, stayed near enough flat.

And W&DB's good performance came in the same month as a financial report from Goldman Sachs declared: "In terms of volume growth the UK is one of the least attractive of the major beer markets."

The report highlights the UK as the slowest growing of the world's major beer profit pools, with volumes predicted to remain flat at best until 2010.

At the same time, total UK beer consumption has fallen victim to the growing popularity of wine and spirits, dropping from just below 10 pints per week in 2000 to a little more than six in 2003.

W&DB has managed to fend off the decline by positioning itself to produce two of the top premium ale brands in the country as well as become the UK's largest cask beer brewer. Ale has also managed to retain a higher retail price than lager in the tough off-trade sector.

Despite this, W&DB failed to avoid a hit on its operating margin during the first half and this fell 0.6 per cent to 15.4 per cent.

The brewer has roled out new marketing campaigns to bolster both its Marston's Pedigree and Banks' brands to cope with this pressure, whilst also opening a new £2m brewery at the Marston's brewery site in April.

W&BD also plans to use further industry consolidation as a way of insulating against rising cost pressures. The firm recently signed a deal to buy Cumbrian brewer Jennings for £45.8m giving it strong local brands such as Cocker Hoop and Cumberland Ale.

Britain's Campaign for Real Ale group has campaigned for Jennings shareholders to reject the deal in a forthcoming vote, yet the brewer's directors have given their blessing. "The deal will protect and develop Jennings' heritage within a far larger and stronger groupm"​ said Jennings chairman John Rudgard.

The UK beer market is one of the least consolidated in the world, with the top three players only controlling a little more than 60 per cent of the market in 2003. As a result, Goldman Sachs said that a was hampering margin returns.

Related topics: Beer, Wine, Spirits, Cider

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