Inside Track by John Harrington
Fuller’s chairman Michael Turner echoed the words of another famous west London institution, the returning Chelsea manager Jose Mourinho, when he spoke of the company’s decision to enter the cider market. “We’ve been looking at a couple of businesses but haven’t found anything that really fits,” Turner told M&C Report. “A passionate brewer and a passionate cider maker - we think it’s the right marriage.”
Just as Chelsea FC hope the return of the “special one” will result in a return to a golden era, the Chiswick brewer’s £3.8m acquisition of Cornish Orchards is indicative of recent moves by brewers to tap into the cider gold rush.
Turner sees Cornish Orchards as a logical acquisition, describing it as “completely complementary” to the Fuller’s business. The aim is to have a premium cider brand to add to its own products for the take-home market, he explains, and offer a premium cider option for its pubs. He believes the additional investment from Fuller’s would help to develop Cornish Orchards and its brands without losing the appeal and “feel” of the business; there are no plans to put the Fuller’s label on the products, for example.
Although, as Turner said, Fuller’s was looking at a number of different options for acquisitions, the fact the company went for a cider maker speaks volumes about the opportunities available in the category for the country’s brewing fraternity.
All of the big four national brewers now have cider brands in their portfolios, and all supported by major investments. While Strongbow and Bulmers have long been in Heineken UK’s stable, AB InBev’s venture into the genre came in 2011 via a brand extension with the launch of Stella Artois Cidre, now among its growth brands in the UK.
Carlsberg and Molson Coors have since followed suit with (respectively) Somersby and, in another brand extension, Carling British Cider.
Few major brewers can ignore the cider boom. Recent figures from Mintel show that 60% of adult drinkers now drink cider, up from 47% just one year ago. The sector is set to grow by £1bn over the next five years and the opportunities are huge, especially considering the gap in the market created by the difficulties experienced by one-time “halo” brand Magners. (UK volumes of Magners, which is widely credited for reviving the entire category in the last decade, fell 13.9% in the year to 28 February.)
Fuller’s isn’t the only regional brewer/pub operator to make recent moves into cider. St Austell, based in cider’s southwest heartland, entered the sector last summer with the launch of Copper Press. Others have launched own-brand ciders produced by dedicated cider makers. Dorest-based Hall & Woodhouse and, on a smaller scale, Surrey’s Hogs Back, have both launched ciders made by Thatcher’s of Somerset.
But by acquiring an existing, established cider producer outright, Fuller’s has gone one step further. As well as demonstrating the strength of the cider category, the move is the latest example of a well-funded, expansive regional brewer/pub operator entering new territory as more traditional acquisition targets, such as ideal-fit pubs or like-minded brewers, begin to dry up.
SA Brain’s acquisition of coffee chain Coffee#1 in 2011 is another example. So is Adnams’ move into distilling as well as drinks retailing through its Cellar & Kitchen shops, and Charles Wells’ continued expansion of the John Bull Pub Company in France. Marstons’ rollout of its new-build pub restaurants could also be added to the list (although, with an estate that stretches from southern England to Scotland, that company could scarcely be called a regional or even ‘super-regional’ player any more).
The trend also explains Fuller’s first venture into airports, with plans to open a pub airside at Heathrow Terminal 2 next summer. Fuller’s sees transport hubs as one strand of its expansion strategy. Turner told M&C Report: “If there were plenty of wonderful pubs [on the market] we might stick to those.”
So will we see other brewer/pub operators follow Fullers’ lead in snapping up a cider maker? As Turner suggested, there are certainly many synergies between historic regional brewers and cider makers, with an emphasis on provenance and craft. There are plenty of practical synergies too around distribution, marketing and employee skills.
Fullers’ rivals will be looking carefully at the company’s latest acquisition as they also examine new frontiers to grow their businesses. Whether it happens through acquisition, or other by means, don’t expect the cider rush to stop here.
The future of the cider industry will be under the spotlight during a one-day conference, the Cider Trends Summit, on Monday 14 October in Bristol. For details of the summit, which is hosted by M&C Report’s sister title Publican’s Morning Advertiser, please click here.
Grand plans
Grand Union has entered a new era with news that Luke Johnson has taken a 50% stake in the London-based bar operator, signaling a return to expansion with plans to grow to at least 20 sites in the short to medium term.
After spending much of 2012 in discussion with private equity groups, Grand Union, which was founded in 2006 by Adam Marshall and Adam Saword, completed its restructuring earlier this year with the sale of its Islington site, leaving it with seven “highly profitable” venues turning over at least £1m each.
The leasehold tenure of the estate has not been a deterrent for Johnson, who argued at the Association of Licensed Multiple Retailers Spring Conference in April that, against perceived wisdom in some quarters, freeholds can be “value destructive” because of their high prices.
The London focus was obviously a big attraction, as was the ‘weather resistant’ nature of the business; Marshall has told M&C Report in the past that some Grand Union sites perform stronger in good weather, and others trade better when conditions are poor.
Grand Union becomes Johnson’s second investment in the pub sector in recent years after he took a substantial minority stake in Draft House, the Charlie McVeigh-led concept, in 2011. Johnson may look at possible synergies between the two companies. The canny sector investor now has stakes in two up and coming pub businesses, which will undoubtedly come under the microscope of trade players in the years to come.
