'Millennials drinking less' - Changing tastes and heatwave hit ale sales but boost lager
PUBLISHED: 13:02 02 April 2019 | UPDATED: 15:31 02 April 2019
Cask ale sales fell last year with drinkers opting for lager during the summer heatwave, while changing tastes also impacted sales at a Suffolk brewery and pubs group.
Southwold-based Adnams’ cask ale, its biggest beer category, saw volumes fall by 9%, while premium lager sales saw a “strong increase”, its annual report reveals.
Chairman Jonathan Adnams described 2018 as a year of “considerable change” for the firm, which employs 560 staff (420FTE), with the first full year of trading for one of its flagships, the Swan Hotel at Southwold, following a major refurbishment, and investment in a cutting-edge de-alcoholisation plant, heralding the launch of its Ghost Ship 0.5% product.
Operating profit fell by 26% to £1.6m before some one-off operating costs involving pensions and property rules which took that figure to -£1.8m.
However, while company’s operating profits have fallen since a high of £3.8m in 2014, peaking at £4m in 2015, this was against a backdrop of major investments in plant and IT. At the same time, sales have risen from £66m in 2014 to £79m last year.
Chief executive Andy Wood said he was “disappointed” not to have been able to move the financial dial further forward, but said there were various one-off factors at play.
The business had a weaker first half in 2018, as the Beast from the East took its toll, combined with higher costs due to the outsourcing of its kegging operations while brewery investments were made, and they were also hit by a CO2 shortage. The second half was much stronger as the kegging line came online and the brewery and its robots became operational.
“Underneath that, this is the end of a long period of investment and renewal for Adnams,” he said.
He pointed out that overall, beer volumes grew by 2.2% with the take home and exports markets seeing rises.
“We have had a couple of tougher years than we would have liked,” he admitted. But these had been necessary in order to make the investments needed to secure the business’s future and keep up with social trends.
“Clearly, millennials are drinking less,” he said. But Ghost Ship 0.5% had been a ‘roaring success’, he said.
Meanwhile the cask market overall was down 9%, and while Adnams does make its own lager, this was up against some global giants.
“We are not immune from the market place,” he said. “There’s a shift away from cask ale into other products. There are a lot of new entrants into the cask ale markets. Our story really has been investment in the future.”
This had involved “a bit of short-term pain” but would be worth it in the future, he said.
Some notable events during the year included moving the Five Bells at Wrentham and the Cross Keys at Aldeburgh into its managed estate, enabling skills and staff to be shared.
Cost pressures in the property businesses had been “a tough challenge”, including increases in the Living Wage, which, along with the apprenticeship levy represented “considerable cost pressure”.
Its tenanted and leased estate was reduced by five pubs in 2018, partly as a result of the Wrentham pub being brought under its management. A lease expired at its London pub, Bridge House, which it decided not to renew, while three pubs were sold – The Bricklayer’s Arms at Colchester, the Lord Nelson in Ipswich and the King’s Head at Laxfield, with the latter being bought by the local community, a move which the pubs group said was “particularly gratifying”.
“We are pleased to note that all these properties continue to trade as pubs,” said Adnams.
The company, which has just gone live with its new IT system, could now move on into the future with no significant investments on the horizon, said Mr Wood.
However, Brexit could affect customer sentiment, he warned.
“We have to recognise there’s considerable political and social uncertainty out there at the moment. What happens when the UK ultimately leaves the European Union feels like it’s in the lap of the gods. I’m feeling like most business people that we need some certainty very, very soon,” he said. “It’s difficult navigating through this at the moment.”
However, Adnams was predominately a UK business, so while exports were doing well he was not unduly worried, he said.