Adnams to diversify as beer consumption drops

PUBLISHED: 08:00 31 March 2011

Adnams brewery saw a drop in turnover over the last year

Adnams brewery saw a drop in turnover over the last year

Archant Norfolk Photographic © 2010

Suffolk brewery Adnams is preparing for a tough year ahead as a hike in VAT, rising alcohol duty and looming public sector job cuts contribute to a drop in beer consumption.

To weather the downturn the company aims to continue branching out into hotel management, launch new products from its distillery and open five new retail stores.

“I think we’re expecting it to be quite a difficult climate,” said chairman Jonathan Adnams OBE.

“We’re not out of this recession by a long way.

“Beer is our core business, but at the moment, in the last five years, it has been in the decline.

“The prognosis for beer drinking in the UK doesn’t look sunny.

“Looking 20 years out, maybe that will reverse. Who knows?”

But he stressed that diversification was not a “flight from beer”.

The Suffolk-based brewer managed to keep operating profit on an even keel last year, although it saw a 10pc drop in pre-tax profits from 2009.

Turnover also fell slightly from £51.3m in 2009 to £50.9m during 2010, which Mr Adnams put down to poor weather in December that kept people indoors and out of the pubs.

“We thought we were running for the line with a fair wind on our tails, and out of the blue came the worst weather in 40 years,” he said.

Operating profits were largely stable at £3.1m, down from £3.2m in 2009.

Pre-tax profits slipped from £3.1m in 2009 to £2.8m last year, a 10pc drop.

The business estimates the amount of beer drunk in pubs had fallen by 30pc over last five years, causing it to look elsewhere for growth.

Adnams has ten retail stores across East Anglia, but high central overheads forced it to consider closing the majority or opening more.

It has opted to open five more shops over the next two year, all in East Anglia and London where the brand carries the most weight.

“We now feel the time is right to start and add to the ten stores,” said Mr Adnams.

“We think we’ve got good growth to come. The concept has got legs.”

The ten shops alone saw sales of more than £22.5m last year.

The range of new products will back up this growth, such as gin and vodka from its new distillery.

Stocks of Adnams whisky are already produced and maturing in casks for a launch in November 2013.

The business has also decided to focus on running its two Southwold Hotels, the Swan and Crown, as well as providing a management service for other properties, with current contracts including Fritton House and The Victoria in Holkham.

“We’ve run hotels for well over 100 years here in Southwold,” said Mr Adnams.

“Managing other people’s hotels is relatively new. We’re having a few tentative conversations with other people.”

It is also shedding less profitable pubs such as the Horse and Dray in Norwich, the Butcher’s Arms in Knodishall and the Oddfellows in Gorleston, leaving 70 in its portfolio.

“We think of ourselves now as a leisure company,” said Mr Adnams.

“We source wines from great vineyards and bring them back to England, we run pubs and we run hotels.

“We’re also doing a small amount of food products as well.”

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