Greene King: How a regional brewer became a national pub chain
16:29 19 November 2014
Greene King last week announced a £773.6million deal to acquire the Spirit Pub Company which, subject to approval, will increase the size of the Bury St Edmunds-based company’s pub estate to more than 3,000.
Business editor Duncan Brodie looks back at how, in less than 20 years, the company has developed from a regional brewer into one of the UK’s biggest pub operators, and established itself as Suffolk’s biggest plc.
As familiar to generations of customers from its inclusion in successive versions of the company’s logo, Greene King dates its year of formation as 1799, when Benjamin Greene established a brewing business in Bury St Edmunds.
However, it quickly came to incorporate an older brewing heritage in the town, as in 1806 Benjamin Greene entered into a partnership with William Buck, a yarn-maker, to acquire the Wright’s brewing business in Westgate which had already been operating for a century.
In 1836, Benjamin Greene handed the day-to-day running of his business to his son, Edward, who oversaw a major expansion over the following decades, doubling the company’s workforce to 50 by 1870. Meanwhile, in 1868, Frederick King acquired the Maulkin’s Maltings in Bury with a view to becoming a brewer and renamed the complex as the St Edmunds Brewery.
After nearly 20 years of competition between the two firms, Frederick King agreed to an amalgamation which saw the creation in 1887 of Greene, King & Sons, a regional business with 148 pubs.
Further expansion followed in 1931 when Greene King acquired the Rayments Brewery at Furneux Pelham, in Hertfordshire, adding a further 28 pubs. Brewing continued at the Rayments site until 1987.
In 1938, Greene King opened a new brew house in Bury to meet increasing demand and it is this building, including contemporary elements of Art Deco design, which remains the basis of the brewing business in the town today.
The post war period saw the construction of a new maltings, a new barley store and, in 1949, a new bottling store, in response to an increase in the consumption of bottled beer.
The following decades witnessed significant consolidation in the brewing industry with many regional brewers, and their beers, disappearing as a result of mergers and acquisitions but Greene King continued to follow an independent course, investing in developments such as metal casks, beer cans and computerisation.
However, it also engaged in the consolidation process in a small way itself, with the acquisition in 1961 of Wells & Winch in Biggleswade, where brewing also continued, until 1997.
Throughout the 1970s and 80s, and into the final decade of the 20th Century, Greene King remained very much a regional brewer, in an industry increasingly dominated by national and international players.
Its transformation into a major national pub operator can be identified as having begun in earnest in 1996 when it acquired the Magic Pub Company. A more serious statement of intent followed in 1999 when Greene King purchased the southern estate of Marston’s, involving the addition of 165 more pubs, and – having failed in a previous attempt – succeeded with a takeover bid for Morland, including 422 pubs as well as beer brands including Old Speckled Hen and Ruddles.
The subsequent closure of the Morland brewery, at Abingdon in Oxfordshire, with production being switched to Bury, saw Greene King come in for some criticism from the Campaign for Real Ale (CAMRA), and this pattern was repeated with the acquisitions of Essex-based Ridley’s in 2005 and Hardys & Hansons, from Nottinghamshire, the following year.
However, Old Speckled Hen has achieved a stronger position in the market under Greene King’s ownership than it ever enjoyed before, now ranking as the UK’s leading premium bottled beer, complementing Greene King IPA which is the country’s top-selling cask ale.
As the new millennium began, Greene King continued its expansion with the acquisitions of Old English Inns, a chain of 132 pubs, in 2001 and the Laurel Pub Company, adding a further 432 sites, in 2004. Besides Ridley’s – whose board made the initial approach to Greene King – 2005 also saw the acquisition of the Scottish-based Belhaven company, whose brewing operation at Dunbar has been retained.
In 2007, Greene King acquired the 35-site chain of Loch Fyne Restaurants. Although, at first glance, this appeared something of a departure from more conventional consolidation within the drinks sector, the deal was part of a strategy which recognised the growing importance of an attractive food offer, and this has proved the basis of Greene King’s continued growth in profits over recent years, despite the impact of the recession and the continuing squeeze on disposable incomes.
Other recent acquisitions have included a £32.6million deal for New Century Inns in 2008, 11 high-quality managed pubs purchased from Punch Taverns in 2009 and a trio of deals in 2011, involving Cloverleaf, RealPubs and the Capital Pub Company, together worth £205m.
However, the Spirit Pub Company deal, involving a cash and shares offer valued at £773.6m based on Greene King’s share price they day before it was announced, is by a wide margin the company’s biggest acquisition yet.
It will see the Greene King pub estate grow from around 1,900 sites to about 3,100, with the enlarged business generating annual revenues of around £2.1billion and earnings before interest and tax of about £490m.
The two companies currently employ around 40,500 people between them, although there is no word yet on how many jobs may go as a result of the merger, which is expected to achieve savings of £30m a year from reduced central costs and efficiencies in areas such as procurement and distribution.
Spirit represents a good fit with Greene King’s food-led strategy, as it includes the Chef & Brewer, Fayre & Square and Flaming Grill pub restaurant brands as well as the drinks-led Taylor Walker and John Barras chains. In addition, its estate has a bias towards the lucrative London and South East regions, in which Greene King will now have more than 1,000 outlets.
However, with Greene King already owning food-led pub brands such as Hungry Horse, Old English Inns and Eating Inn, as well as the Loch Fyne restaurant chain, it remains to be seen whether there will be any rationalisation within the brands portfolio.
Greene King chief executive Rooney Anand said: “The proposed acquisition represents a key step towards our objective of building the best pubs and beer business in the UK. This exciting combination of the Spirit business with Greene King accelerates our momentum and is in line with our stated strategy of further improving the quality of our pub estate and increasing exposure to the growing eating-out sector.”
Although the size of Greene King’s total estate will still be well short of those owed by the UK’s biggest pub companies, Enterprise Inns and Punch Taverns, which own around 5,500 and 4,300 pubs respectively, it will be significantly larger than many other leading pub companies such as Mitchells & Butlers (which has around 1,700 pubs), Admiral Taverns (1,100) and JD Wetherspoon (900).
Among the country’s combined pub and brewing businesses, Greene King will extend its lead over its nearest equivalent, Marston’s, which has about 1,700 pubs, and Star Pubs & Bars, owned by Dutch brewing giant Heineken, which has around, 1,300 outlets.
Although pubs now account for the lion’s share of Greene King’s profits, its brewing business remains a significant element of the company, with a new 30 barrel microbrewery having been launched last year to produce small batches of craft beers alongside its main brewing operation in Bury, where the group head office also continues to be based.
What Benjamin Greene and Frederick King would have made of it all one can only imagine.