The Changing Structure of the UK Brewing and Pub Retailing Industry Essay Example

The industry has engaged in "a vigorous round of horizontal integration, with several companies consolidating their operations in either brewing or pub-running," as stated by The Economist (1991, p84). Many firms have divested their brewing divisions to concentrate solely on pub retailing, such as Whitbread and Bass, both of whom sold their brewing interests to the Belgian behemoth Interbrew.

After selling its pub retailing business to what is now known as The Laurel Pub Company, Whitbread has exited the market. Meanwhile, Bass has transformed into an international leisure group and rebranded as Six Continents. Currently, four major brewers dominate the industry, but analysts predict that this number will dwindle to two or three. The British brewery sector has shifted from being centered exclusively in the UK to becoming a part of a broader European and potentially global industry. According to Mintel (2001), as profitability peaks in the UK, surviving breweries are seeking growth through acquisitions abroad.

It is becoming too challenging to achieve organic growth, causing some British brewers to choose a different approach: exporting their whole pub overseas. An example is Guinness, a British brewer with Irish roots, which has established 800 Irish pubs in 100 cities around the world since 1992, from Montreal to Moscow (The Economist, 1995 p71). This strategy's success may be attributed to the fact that just as Britons desire foreign culture in their surroundings, consumers worldwide long for a taste of our culture in their surroundings. We romanticize them and they romanticize us. Retail pub chains have also emerged, taking control of a significant portion of the market.

According to Mintel, the tremendous expansion of major pub companies resembles the situation in

which smaller breweries were dominated by bigger ones before the Beers Order in 1992. Independent pubs and bars are facing considerable obstacles to stay afloat in today's fiercely competitive environment, as national pub companies have gained immense influence. With limited bargaining power and without the ability to negotiate lower prices with main breweries like their larger counterparts can, independent establishments cannot compete on pricing. Thus, their survival depends on excelling in other aspects.

The role of independent pubs and bars is gradually decreasing, making it increasingly challenging to maintain their existence. In 1993, Schmidt et al predicted that the traditional British Public House may soon become obsolete. (Schmidt et al, 1993, p35)