Cains Beer Company’s plunge into administration foreshadows greater woes for brewers, warned unions and financial experts.
“In terms of whether we can expect to see more of this in the sector, yes we can,” said Duncan Swift, head of food and agribusiness recovery group. “The trade saw volumes fall 10% in the quarter to June 30 and that’s fed straight back into the production area. Middle of the road independent brewers are going to get squeezed.” He warned of an “acceleration of financial difficulties hitting the sector”
Franny Joyce, regional officer for Unite, a union which is striving to safeguard jobs at Liverpool-based Cains, said: “I don’t think we’ve even scraped the surface yet. I think things are going to get very difficult.”
Shore Capital analyst Andy Blain said Cains’ deals with Asda and Morrison to supply them with own-label beer would partly have been a desperate attempt to offset volume declines in pubs. “But this would have been very low margin - there’s a danger if you rely on supermarket own-label beer for volumes.”
Falling volumes in the pub trade have been attributed to the impact of the smoking ban, which came into effect in July 2007, and rising beer prices to increased duty. In addition, low prices of alcoholic drinks in supermarkets are believed to be encouraging consumers to drink at home, rather than in pubs. Soft drinks manufacturers were holding up well in the on-trade, said Swift, but cider makers were also being hit hard.
Upwards of 50 contacts have inquired about bidding for Cains, with Wolverhampton-based Marston’s being the favourite buyer. Marston’s has openly declared its intention to “develop a portfolio of well-established, premium beer brands”. However, it is unclear if it would be able to commit to a deal following its recent acquisition of Ryland Thompson, the trading arm of which is Refresh UK. Refresh UK owns Wychwood Brewery and is active in the organic ales market.
Swift said buying Cains would make sense for some. “If a major brewer wants to establish a solid presence in the north west, this is a good way of doing it.”