Brewer Adnams determined to reach new markets
Dr Andy Wood OBE has been with Adnams the brewer for 20 years. He spent the last four of these at the helm of the company, where he has been driving diversification in a bid to strengthen the business.
He speaks passionately about his ability to leverage Adnams’s 142 years of experience in the sector to draw in new and previously unreachable customers in a turbulent market. For example, the roll-out of its 12 Cellar and Kitchen stores across the south east of England allows it to reach female customers, the chief executive tells me one busy lunchtime at its Southwold branch in Suffolk.
We’re sitting at a table placed in one half of a giant distilling copper, surrounded by chatting customers, who are mainly female and slurping coffee or tucking into sandwiches and cakes. He has managed to sandwich me in between two meetings on a day where his diary is filled with back-to-back appointments.
“We wanted to reach out into the other half of the population we weren’t touching with our beer,” he says. “58% of the customers spending in the Cellar and Kitchens are quite high spending females.” Wood looks satisfied by the fact that Adnams is raking in money from a client base the beer industry finds hard to reach.
But we’re not here to talk about retail outlets, especially since Adnams is more famous for the 25 beers it has under its belt. Brews past and present range from the speciality ‘Royal Wedding Ale’, made to celebrate the marriage of Prince William and the now HRH Duchess of Cambridge, to its ‘Southwold Bitter’, the staple of many faithful customers.
30M pints of beer (Return to top)
Adnams produces millions of pints of beer a year. “There are 288 pints in each barrel and we fill about 100,000 barrels, so that’s getting on for 30M pints a year,” Wood works out. Yet, 30M pints of beer is not enough for Adnams and Wood reveals there will be an investment of capital to the tune of around £1.5M to expand the capacity of the Sole Bay Brewery in Southwold, where the company has been headquartered since 1872.
“It’s about a UK manufacturer investing in a UK manufacturing plant. That’s more fermentation capacity and as the distillery and brewery business grows we will need to invest more in those too, but that’s not this year,” he says.
The outcome of the brewery investment will start to be seen later this year, explains Wood. Although there is no figure of by how much capacity at Sole Bay will increase, he says it is more about allowing the business to cope “with the growing trend towards canned and bottled beers, rather than increasing capacity”.
The current brewery was commissioned from the German company Huppmans, now part of the GEA Brewery Systems, and it was built to capture heat from one brew using a heat exchanger and using this for the following brew, he explains.
Investment (Return to top)
Wood highlights the importance Adnams places on investment and says in the last seven or eight years, around £20M has been pumped into fermentation, brewery, distillery equipment and distribution in order to keep the business fresh. “We’re going to continue to invest in the brewery, to continue the dynamism in the beer market. The business has reinvested and renewed its infrastructure over the last decade and we’re going to bring along some new projects this year.”
In total, the Adnams empire turns over about £60M and employs 400 staff across the business, Wood says quietly, so that the lunching ladies on the next table don't hear us. “We don’t just have these shops and the brewery. We’ve got pubs and hotels and we have a big free-trade business that delivers to more than 2,000 customers throughout East Anglia, from our distribution site just outside of the town here.”
Southwold-brewed ales make their way into the likes of Tesco, Waitrose, Morrisons, Sainsbury and other major retailers, explains Wood. “The wholesale section of the business represents between 12–15% of our business and, in monetary terms, that’s about £5–6M.”
But beer, shops and hotels are still not the full picture for Adnams, he laughs. “I’m responsible for running all aspects of the company, which is a mid-sized company and has a diverse portfolio.
New distilling business (Return to top)
“We also have a distillery, which we’re treating like a new business,” Wood says. “It’s just three years old and it’s already fantastic in that we’ve been able to stretch the ground into the adjacent market.”
Just short of a “modest” £1M was invested in the distillery, which was opened in November 2010, he says. It is based in the old Adnams brewery copper house, which has been refurbished and is home to Adnams’s handmade copper distilling equipment, made by the family company Carl of Germany.
“We’re the first brewery in the UK to brew beer and distil spirits on the same premises,” Wood says. Gin, vodka and now whisky are distilled by Adnams and when its first whiskies went on sale at the end of last year, more than 500 bottles were sold within the first 90 minutes, he adds.
He already sees the distillery as a success story, although its age is only a fraction of the brewing business. “It’s an area of latent potential for us and there's clear headroom for growth.”
Adnams’s gin won the Best Gin in the World award at the International Wine and Spirit Competition in 2013, which Wood says is a real achievement and encouraging.
Although there seems to be a lot of good news in the business at the moment, Wood cringes when asked if he’s comfortable with things and says he’s not resting on his laurels. “We would never be complacent about where we stand in the market. We are confident in our brand strength and in the quality of our products,” he says. “But comfortable is too strong a word.”
Tough competition (Return to top)
Challenges come in the form of competition from the hundreds of microbreweries and international companies such as Heineken and Carlsberg, says Wood.
“From a manufacturing point of view, the business is in pretty good shape and is ahead of the competition,” he says. “That gives us tremendous flexibility to stay ahead, allowing us to ensure our brand remains in a good state.”
Wood adds: “You can see where we’ve been investing in our core business, as well as looking at the potential of growing other interesting things in adjacent markets.”
But what does Wood's future at Adnams look like? He’s been with the company since 1994, joined the Board in 2000 and became chief executive in 2010. “I want to see more innovation at Adnams and I hope the shareholders and my Board colleagues want me to be chief executive for a little while longer,” he confesses.
Longer term, he says he can see himself using his knowledge in academia, perhaps writing another book, following his success in co-authoring the book Creating a Lean and Green Business System, with the lean manufacturing experts from consultancy SA Partners.
Meanwhile, Wood is positive about the future of the brewing industry. “It will continue to find an equilibrium between customers that want to drink at home and those who want to drink in the pub,” he says.
“The volume of new entries into the brewing market hasn’t reached its pinnacle yet and we will see customers becoming more discerning about the alcohol they consume,” he says.
Demand for higher quality beers is already showing through the uptick in microbreweries, Wood says. It is this interest in consumer spend on premium products that will continue to drive the brewing sector forwards, he predicts.
Watch our exclusive video in which Wood discusses how Adnams has diversified into distilling and why it has already been a success.
