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Book Review: Government Intervention in the Brewing Industry

Worthington E Keg Beer

Government Intervention in the Brewing Industry (cover)Sooner or later in our journey through British brewing in the last half century, we knew we were going to have to look into that most thrilling of topics: the effects of government legislation on the industry. This book, originally published under the title Intervention in the Modern UK Brewing Industry in 2011, was recommended to us by several people as something of a definitive account.

The first point to note is that it is written by people associated with the big brewers: two of the writers, John Spicer and Simon Ward, worked for Whitbread; Chris Thurman was a longstanding employee of the Brewers’ Society (dominated by the Big Six); and John Walters was a stockbroker ‘specialising in the drinks and pubs industries’. This has obvious advantages, and disadvantages: their impressive inside knowledge of the processes, papers and committees is possibly offset by more than a few unsubtle attempts to direct the reader to conclude that the ‘unintended consequences’ of the Beer Orders were A Bad Thing, and sometimes without convincingly demonstrating cause-and-effect.

We don’t want to understate the good points. This is an extremely readable book considering the potentially dry subject matter. It makes extensive use of primary sources and is well-referenced, and yet still has a driving narrative, with good use made of recapping and summaries to structure the story and keep the reader afloat. The book manages to summarise the 1989 Supply of Beer report (three years in the writing; takes about the same to read) in a few efficient pages. There are lots of solid facts and tables of statistics. It is indeed, authoritative, and lives up to its aim of demonstrating wider lessons about the unintended consequences of government intervention.

A succinct history of enquiries since the mid-sixties makes the point that both Labour and Conservative governments kept coming back to the question of the beer tie, usually in the context of discussions about pricing (these were the days when prices for virtually everything were set by Government boards, and brewers had to apply to put prices up).  But we don’t feel the authors really explain why successive governments were increasingly obsessed with the issue. Could it be that they were reflecting a groundswell of popular opinion that something was wrong with the industry? Tellingly, the Campaign for Real Ale doesn’t get a mention until the story reaches 1985, and, even then, it is as if they appeared from nowhere. SIBA isn’t mentioned until the post-Beer Orders analysis and in the brief discussion of progressive beer duty.

There is a tension in the pre-Beer Orders part of the book between, on the one hand, the tendency to downplay accusations that the big brewers acted as a cartel, and, on the other, the depiction of a united front of brewers battling a succession of pesky interfering governments. This is a history that is centred on the big brewers as represented by the Brewers’ Society, at least in the main part of the book.

These may be churlish criticisms, given the background of the writers, and that their aim was to look at government intervention, not consumer or producer revolution. To us, the the rights and wrongs of the Monopolies and Mergers Commission (MMC) report is an interesting debate, but the question we’re really interested in is why was there (initially at least) such popular and official support for its conclusions. How had things got to a stage where absolutely no one had a good word to say for household names such as Watney’s and Whitbread?

The book has given us a very fresh perspective on the history, and emphasised areas that can be lost in some versions of the history. For example, the role of Guinness (a major player but without a tied pub Estate) in lobbying for reform, and in undermining the Brewers’ Society during negotiations with the Department for Trade & Industry (DTI) prior to the Beer Orders being passed. There are plenty of other nuggets that may provide food for future blog posts, such as the ongoing debate on lager pricing and whether it does cost more to produce.

Some of the details in Government Intervention have prompted a fair bit of discussion in Boak and Bailey Towers. Why, for example, did some big regionals such as Vaux give up on brewing, while others, such as Greene King, stuck at it? Incidentally, the book doesn’t make the case that the Beer Orders hastened the demise of Vaux, and in fact points out that the former Chief Executive of Boddingtons said that the company had decided to abandon brewing before the MMC report.

The book’s final analysis of the impacts of the Beer Orders is nuanced, and explores various angles, but does ultimately tend to the conclusion that harmful trends in the industry during the last twenty years (decline in numbers of pubs, increases in the price of beer) are due to the Beer Orders.

Now, having read their not-entirely objective analysis, we’d love to speak to the authors as actors in the drama.

We bought the recently printed paperback (print-on-demand?) edition at a very reasonable £18 from Amazon. The 2011 hardback will set you back something like £65. Some of it is available to preview at Google Books.

20 replies on “Book Review: Government Intervention in the Brewing Industry”

Maybe a subject that deserves its own post, but I would say the survival or not of family brewers is largely down to

(a) whether the family produced suitable heirs, and
(b) whether the family actually remained interested in continuing in the brewing business

He’s not appeared in recent years, but early Keg Buster cartoons sometimes featured Tarquin Crudgington whose main interests were squandering his inheritance on fast cars, fast women and slow horses.

It could be argued now that running a family brewery is, in a narrow economic sense, an irrational activity – you have to actually want to do it.

I have a copy of this book for review (coming soon). It does firmly point you in one direction and its weakness is in the lack of “why” though possibly in my view, the conclusions are correct.

I have still to read the book (I was sent a copy but have been too busy), so this is probably a premature conclusion, but my own feeling about the MMC report and what the government did next is that

1) the tied estates were an entirely artificial economic construct caused by the UK’s licensing restrictions

2) that artificiality meant it wouldn’t take much to bring the whole structure crashing to the floor

3) by tugging away at the big brewers’ tied estates, the government did just that – made the whole structure too unstable to survive

4) It can be argued (and I will, soon) that even had the big brewers not been pushed into ultimately abandoning their tied estates, they would have done so anyway eventually: the Beer Orders merely hastened that process

5) while what happened after the Beer Orders is a classic example of the Law of Unintended Consequences in action, in fact it should have been entirely predictabkle: indeed, as I’ve pointed out here before, a man called Arthur Seldon DID predict it, in 1950.

6) Therefore you can’t blame the Beer Orders per se for what happened next. And you can’t say “government intervention did it.” Government intervention merely shook what was already an unstable tower of Jenga sticks.

I was sent a review copy, though I haven’t had time to read all the way through it yet, I’ve already come across lots of useful material.

The role of Guinness in attacking the tie makes a lot of sense, looking back. But I was still surprised to learn of it.

If I remember rightly, Vaux ended up with an asset-stripping chairman, much like Morrell’s.

Was that photo taken in some sort of museum? There’s a very unlikely combination of beers: bottles of Ansells, Allsopps and Double Diamond and a Worthington keg font. Unlikely you’d have found beers from three of the Big Six in a single pub.

Martyn – I think we’d agree most of those conclusions; reading the book we didn’t see what the Beer Orders prompted that wasn’t already happening, and if there was a particular flurry of corporate mergers and takeovers afterwards it was probably due to the fact that such activity had been on hold since the announcement of the review.

Interesting point about licencing though, because (as the book highlights) licencing was eased in Scotland in the seventies. We don’t know enough about the licence trade in Scotland – did it develop in a different way after liberalisation?

I am old enough to have seen licensing laws in Scotland first liberalised with the argument that it would stop us being such awful boozers, and then quite drastically tightened up again with the same argument. “All-day opening” was a big thing in the media back then.

A slight qualifier to what I just said about the Beer Orders not changing things. I think it’s safe to conclude pubcos were entirely a creation of the Beer Orders?

In the late 80s there were already some pubco-style operations such as Belhaven who were acquiring bottom-end pubs from the Big Six. While Belhaven was a brewery it didn’t really aim to sell its own beers in its English pubs. Indeed by that time Greenalls had closed their brewery and turned themselves into a pubco.

Without the Beer Orders it is likely that we still would have seen the international consolidation of the brewing industry, but the probable outcome would have been the Big Six selling off their breweries while retaining the best of their tied estates. So they would have in effect become pubcos, but without the debt mountain.

no I dont think it is sorry 🙂 though Id accept it may depend on how you define a pubco, but I think we get so caught up with the big 6 and the selling off their pubs aspect flooding the market, we dont notice so much that there were companies in the 70s/80s buying up breweries & tied pubs to get at the property linked through the pub estates and to also run those pubs through a pubco tied model.

I think it likely that you can judge the success of the Beer Orders in that they achieved the exact opposite of what was intended. There was little look to the future. The breweries thought they had a cunning way round it, but all it did was weaken them entirely, resulting in their takeover and demise and cause mayhem in the trade.

The customer was meant to benefit in all sorts of ways, but none of them happened. More when I get round to my review. (And I don’t entirely agree with Martyn). For example there is much to agree and disagree with in these two statements alone.

1)the tied estates were an entirely artificial economic construct caused by the UK’s licensing restrictions

2) that artificiality meant it wouldn’t take much to bring the whole structure crashing to the floor

I think 1) is pretty spot on. The emergence of tied estates at the end of the 19th century coincided with another form of government intervention: actively reducing the number of licensed premises. Had new licences remained relatively easy to obtain, breweries wouldn’t have needed to sink huge amounts of cash into buying pubs. In reality, they weren’t buying pubs, they were buying licences.

“In reality, they weren’t buying pubs, they were buying licences.” True and it remained so for many a year. If licensing had been reformed, we might not have had the Beer Orders, but it was shelved and arguably was too late to have made a difference anyway. We have Scotland as an example of this.

On the other hand, buying pubs was always an easy way to expand. They could reasonably have built new or converted every time. There was, even then, only so many drinkers to go round.

Above should of course have read “They could NOT reasonably have built new or converted every time.” Even if licenses were unlimited.

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