Brewer Adnams has been making beer for 139 years but this is no old-fashioned company – it's a pioneer of investment in new technology and energy efficiency. No wonder readers of The Good Pub Guide voted it brewery of the year in 2011
The past few years have been tough for the beer and pub industry. The smoking ban, followed by the worst recession since
the 1930s, huge rises in beer tax, duty increases far above inflation and the VAT rise to 20 per cent in January have all hit the sector hard. UK alcohol consumption is around 11 per cent lower than in 2004 and 25 pubs close every week, according to the British Beer and Pub Association.
It all sounds rather depressing but Andy Wood, chief executive of Adnams, a regional brewer and pub owner, is more upbeat. He believes talk of the demise of the British pub is premature. "Great pubs in great locations run by great people will continue to do terrific business," he says.
Started as a family business in 1872 by brothers George and Ernest Adnams, the company has been brewing in Southwold on the Suffolk coast for more than 100 years. It was joined by the Loftus family in 1902. Members of each family remain on the board, with Jonathan Adnams as chairman and Simon Loftus as non-executive director. Adnams produces a range of cask and bottled beers available in pubs and supermarkets nationwide. It is one of a group of brewers and pub owners that has continued to make a profit during the recession.
But it hasn't been easy. Wood says the industry is being transformed due to social changes, rising numbers of small brewers entering the market and the economic climate. "It makes the sector an exciting place to be but it also presents challenges. Year on year, our core product, cask ale, has declined as a market. There's no doubt consumers are less confident and more careful with their spending," he says.
The good news is pub closures are beginning to flatten, says Wood, and total on-trade licences now remain relatively static as new establishments open. He believes the future of the industry is around its ability to deal with the inevitable and relentless change in the sector. He has noticed a trend for a new style of pub for a different type of consumer.
"A few years ago pubs were male-dominated establishments where men went to replenish fluids after a hard day's work and discuss the football results. New places that are opening are often heavily food-led and require a different range of products because the customers tend to be a 'foodie' type of clientele," he says.
Adnams has been designing products to serve this new style of pub. Over the past decade it has invested £10m on new facilities. A state-of-the-art brewery has enabled the firm to create new and interesting beers. "The new brewery has enabled us to respond to the vibrancy and change that microbrewers have introduced into our market," says Wood. "Three years ago around four per cent of our beer volumes came from new product development. Today it's around 22 per cent. You could say that's a weakness but actually it's a sign that we're prepared to move with market trends."
New products
Last year, Adnams moved into distilling. It built
a micro-distillery within its new brewery and
started selling gin and vodka at the end of 2010. In November 2013, its first whisky will be on sale, too. The company's spirits have recently gone on sale
in Waitrose and Harvey Nichols and have already won several awards.
Adnams is also taking advantage of the trend for increasing volumes of beer being sold for home consumption as people shift from drinking in pubs to drinking at home. In 2005, it decided to build on
the success of its shop in Southwold, Cellar & Kitchen (selling beer, wine and kitchenware). It started opening stores in market towns throughout East Anglia but paused during the deepest part of the recession in 2008-2009. Adnams now has 11 stores having just restarted the plan, opening two shops in London's Spitalfields and Bloomsbury.
Although Wood says there's a long way to go he's encouraged by how the business is doing. He's also pleased that 58 per cent of customers are women after brand-tracking research showed, not surprisingly, that Adnams is an overtly masculine brand. "We were keen to appeal to the 50 per cent of the population we weren't talking to – females."
The retail and distilling businesses are opportunities that Wood feels fortunate the brand has been able to target. "They still involve the production and sale of alcohol and that's where we have great competence. They were natural progressions for us as the markets in which we operate are changing," he says.
Eco friendly
As well as allowing Adnams to create new products and move into fresh markets, its investment in the modern brewery has made the company one of the UK's most energy-efficient breweries. While there was a capital cost to the build, its water and energy consumption is much lower and the raw materials yield much higher.
When faced with the decision to build a new distribution centre, Adnams decided to commission an energy-efficient building. Its "living" roof is made of a blanket of sedum plants to create natural insulation. The walls are made from lime and locally grown hemp instead of concrete, saving 600 tonnes of CO2 from being emitted. Solar panels provide 80 per cent of the hot water needed for operations while rainwater is harvested for vehicle washing and toilet flushing. The new building saves the company £49,000 a year using 58 per cent less gas per square metre and 67 per cent less electricity per square metre compared to the old warehouse.
Last year, Adnams installed an anaerobic digestion facility next to the centre, which takes brewery and food waste from its pubs and hotels. This creates biomethane, which goes back into the National Grid. The longer-term plan is to run the company's commercial vehicles on biomethane. "That will stabilise the price we pay for our fuel, security of supply, and it's doing the right thing for the environment," explains Wood.
But these are not just vanity projects, they make good business sense too, he adds. "We're eliminating waste from the business which reduces our operating costs. Rather than producing a separate corporate responsibility report, we are saying, this is part of the way we do business," he says.
But while Adnams is proud of its environmentally friendly facilities, Wood says the company's sense
of difference really comes from its corporate culture, which fosters ideas and innovation. By encouraging the head brewer to experiment and talk to the
sales team, who are out in front of customers, this is how Adnams has been able to move from four per cent of its beer volumes coming from new product development to 22 per cent, explains Wood. "The real engine room of the business is our people and the ideas, commitment and passion they have to drive this business forward," he says.
People tree
Wood likes to see people rewarded for their contribution to the company. He tells the story of operations director Karen Hester, who started
with the company as an office cleaner. "She has progressed through her own talent, tenacity and drive to being somebody who is running a significant part of the business and that is replicated many times throughout the company," says Wood.
Adnams has a strong internal coaching and mentoring system. It also works with the University of East Anglia and University Campus Suffolk to offer management development programmes to staff. "When you marry that with our culture, that's what's making Adnams the business it is today," he says.
Such values prove popular with its workers, too. Employee retention is high and 94 per cent of people in a staff opinion survey said they were proud or very proud to work for the company.
Wood is pleased by the relationships the company forges with its pub licensees. "We've focused hard on giving them good customer service and listening to their needs. For the last three years we've held down beer prices as a commitment to the on-trade [pubs]. This has been well received from our own pubs and the free trade," he says. As well as its 71 pubs, Adnams has around 4,500 distribution channels to pub companies and wholesalers and to around 14,000 direct free-trade customers (non-tied pubs).
During the downturn Adnams sold a few pubs that were no longer aligned to its strategy but it has also acquired new ones. "We've been careful to only select pubs where the Adnams brand adds something to the pub and the pub adds something to the Adnams brand. We acquired three riverside or coastal pubs in 2009 and we just bought another coastal pub last week," says Wood.
As for the company's two hotels, the Swan and the Crown in Southwold, both have continued to enjoy 70 per cent average occupancy rate despite them being "big ticket items" which, says Wood, have suffered more during the recession. But, he adds, customers are taking longer to think about such purchases. "Today's savvy consumer knows that if they hold out long enough there might be a deal to be done," he says.
Adnams aims itself at discerning consumers who care about what they're eating and drinking and where it comes from. The company is looking to enter into a dialogue with them. As well as traditional advertising channels, Adnams finds social media is an attractive way to do this. "We're fortunate that Adnams is the type of business that our customers want to have a conversation with. Although we've been around since 1872 and we are proud of our heritage we've got to look forward and continue to recruit new customers. Social media is a fantastic way of doing that."
Wood believes the future is focused on these consumers and that Adnams is well placed to attract them. "We have innovative people, fantastic products and loyal customers. We'll continue to be an iconic brand in the East of England and we'll judiciously take it broader. Our beers are successful in London, both in pubs and retail. As for our spirits there are excellent opportunities around export. We will continue to buy pubs when the right ones come up."
Dear David
If Wood could ask the government to do one thing to help companies such as Adnams progress it would be to remember medium-sized businesses. He believes there is a lot of focus on small firms yet there is a group of mid-size companies, such as Adnams, which are largely ignored but employ lots of people, have massive growth opportunities, spend most of their money in local economies and tend to stay put for years providing economic benefits to communities.
Wood's biggest bugbear is progressive beer duty, introduced by the Labour government, which gives very small companies a duty break. "It's brought lots of new entrants to the market, introduced new styles of beer, vibrancy and change, which is great. But it's capped growth because these companies are not going to grow beyond a certain point because they'll lose their duty. Meanwhile, there are companies such as Adnams that can grow and create more jobs but we're not being supported in a similar way. That's an area I'd like the government to focus on. Mid-cap companies in the UK can do a lot more and help return the economy to growth."
