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PUBS BREW OWN BEER FOR ONLY NINEPENCE A PINT
In Britain, Australia and the United States, the tide is already running strongly against large-scale, centralised production when it comes to beer. After a period in Britain in the 1960s and 70s when easier road transport and changes in brewing technology enabled at least one regional brewery and its tied houses to be gobbled up by a major brewing chain every month, the reverse is now taking place and a micro-brewery serving free houses in its area, or a pub brewery just looking after its own needs, is opening, on average, every week. By the end of 1995, around 450 small breweries were trading, predominantly in England, and well over a thousand different small-brewery beers were available. Some of these were located in the most unlikely places, including ex-cowsheds owned by the National Trust in Devon, a disused sawmill in Hereford, an old foundry in Lancashire and a converted carpet warehouse in Yorkshire.
Two factors explain the revival of interest in small breweries. One is that many drinkers are bored with the bright, clear, fizzy, standardised, pasteurised keg beers the brewing giants substituted for the traditional cask-conditioned beers which require much more knowledge and care from the publican since the yeast they contain is still alive and they go on changing until they are served. The drinkers' dissatisfaction was channelled through CAMRA, the 67,000-member-strong Campaign for Real Ale which kept the taste for cask-conditioned beers alive and demonstrated to publicans that they could be an attractive commercial alternative to the mass-produced brews. "Drinkers are now trading up to beers full of flavour and character" says Jeff Evans, the editor of CAMRA's Good Beer Guide. "Keg beer is fading fast and lager is past its peak."
The second part of the explanation for the renaissance of small-scale traditional brewing is that, if there is a demand for real ale, it is best met from breweries close to where it will be consumed as this enables significant savings to be made in transportation and marketing and allows the brewery to educate publicans and their staffs exactly how its product needs to be handled, cared-for and served. "Many beers do not reach the customer in prime condition. It is absolutely essential that we are able to monitor our beer from fermenter to glass" says David Roberts, who set up the Pilgrim micro-brewery in Reigate, Surrey, in 1981. Indeed, the best solution is for the brewery to be in the pub itself as this eliminates transport and marketing costs altogether and ensures the brewer is always on hand to see the beer is always served at its best. One of the major brewing conglomerates, Allied Breweries, has realised this and has established its own 'Friar and Firkin' brew pub chain.
"There were between 6,000 and 7,000 pubs which brewed their own beer in Britain before World War I but a shortage of raw materials put almost all of them out of business. Only three or four brew pubs from that generation are still open today" says David Smith, who runs a consultancy based in York for people wishing to set up micro-breweries and brew-pubs. "Brewing on the premises is the best way to ensure that quality is maintained. It is also the least risky way of getting into the business: you have your market all ready and waiting for you in the bar. Most pubs will get through four or five barrels, each of 288 pints, a week and with a four-barrel brew plant you can probably supply all your needs in-house. You also have to remember that a brew pub not only attracts bitter enthusiasts but their spirits- and lager-drinking friends as well."
Smith left Samuel Smith's brewery in Tadcaster where he had worked for twelve years, initially as a production brewer and then as a brewer responsible for quality control, in 1988 to set himself up as a quality control consultant to the growing number of independent breweries. However, he gradually became involved in advising would-be brewers how to start up and by the end of 1994 he had been involved in the birth of twenty-four breweries, ranging in size from four to thirty barrels. His biggest brew-pub is in Jersey, with a twenty barrel capacity. He argues that a brew-pub can deliver considerable savings over a stand-alone micro brewery: "Many pubs have outhouses where the brewing can be done, so there's no extra overhead for premises as there would be if you were starting a brewery. Another saving is that the landlord can often do the brewing himself and may not have to employ anyone specially. And there's a saving in capital - if you set up a micro-brewery you're going to have to pay an extra £4-5,000 to buy a suitable secondhand van for deliveries. Many people overlook that."
Breweries also have the problem of selling their beer. The Border Brewery in Berwick-on-Tweed had to buy a pub to ensure that it could sell beer in its own town and a largish 'small' brewery in Wilshire, Moles of Melksham, even bought up an entire chain. The alternative for both firms was to try to establish sufficient loyal outlets in the face of fierce competition from major breweries and from other micros and, in the meantime, to survive on the highly-uncertain sales to be achieved by featuring as a guest beer in real-ale pubs. "Everybody knows about the cosy supply deals which are not uncommon in supposedly 'free' houses and there's no secret about the heavy discounts that large breweries offer to ensure that other suppliers cannot compete" Jim Laker of Exmoor Ales complained in the licensed trade's paper, Publican.
Someone who knows the difficulties of not having secure outlets is Alan Gill, a former telephone engineer who set up what was at the time Britain's smallest brewery in a wash-house behind his home in Sutton-on-Trent, Nottinghamshire, in early 1992 using part of his redundancy money from British Telecom. "I'm looking for a pub where I can brew as well" he told me when I spoke to him in late 1994. "Next week I'm moving from here to a ten-barrel brewery in an industrial unit until I can find a pub to buy and move the equipment there."
Not that Gill had had too much difficulty selling the 2,300 pints he was producing every week in the wash-house. "There's a huge market I haven't attacked" he said. "I'm having to ration my customers now. I've got a 2.5 barrel plant here and brew four times a week. At present it's a struggle to make enough beer to get to break-even and distribution is pretty inefficient as the van goes out from here only half or one-third full. Eight pubs take my beer on a permanent basis and another eighty or so as a guest beer. I sell some beer through agencies but the problem with them is the length of time it takes for my barrels, which cost £43 a time, to come back. My bigger brewery will enable me to spend less time on brewing and more on marketing. Most decent free houses will try a beer for the first time and, after that, it's got to stand on its own."
The Cavendish Arms Hotel in Cartmell, Cumbria, took guest beers from real ale breweries like Gill's until September 1994 when it began to brew its own. "I had a normal week's supply of eight guest beers on the premises when we started" says Nick Murray, the hotel owner's son who runs the brewery, "and I had to throw a lot of it away. We've only had four guest beers in the twelve weeks since them. It's been very good for business. There were three or four other pubs in South Cumbria which which offered guest beers but now we've got something which isn't available elsewhere. We brew two beers normally, Lakeland Gold, which is golden, hoppy and sharp and has 4% alcohol and Cartmell Trophy which is darker and slightly stronger. However, I've just brewed a special beer for Christmas which I haven't yet tried."
Besides exclusivity, there is another major advantage for pubs which brew their own: price. David Smith calculated that the price of beer from one of his installations is about £25 per barrel for materials and energy, which works out at less than 9p per pint. To this has to be added duty, which depends on the beer's alcoholic content but will typically add about £65 per barrel. "You can reckon on a cash cost including duty of £85-£90 a barrel" he says. This about half the price of a comparable bought-in beer, a difference of 30p a pint, although interest, depreciation and labour obviously have to be covered from this margin. The rest of the price of a pint is made up by the mark-up in the bar and VAT at 17.5%. Thus a brew pub selling a pint at £1.50 will find itself paying 45p in VAT and duty to the government and 9p for materials, leaving 96p to cover its own costs. It is scarcely surprising that very few have failed.
It is surprisingly cheap for a pub to start beer production too. Smith mentions a figure of around £15,000 for the installation of a four-barrel unit using secondhand equipment, the actual sum depending on the amount of work needed to prepare the premises. "You can double that figure if you want to make the brewery a feature of the pub itself and instal it behind glass where the customers can see it, with wood cladding on the fermenters and copper tops on the mash tuns." Alan Gill's 10-barrel brewery cost him £30,000 to open in his industrial unit and Nick Murray spent 'around the cost of a small house.'
Lack of brewing experience does not seem to be an obstacle. Murray spent a week and £250 on a one-week brewing course at the University of Sunderland and then carried out four brews under David Smith's supervision. During the last brew with Smith, Murray trained his assistant who now carries out brews on his own. "It's not difficult if you've got a system" he says. Gill was an enthusiastic home brewer when he worked for BT and went on a three-day course at Malton Brewery paid for by BT as part of his redundancy package. "I felt I needed a better back-up of technical knowledge" he says. Since then he has taught courses of his own and says that at least six breweries have been started by people he has trained.
Gill and Murray have had few problems with officialdom. "Although I'd been expecting difficulties, the environmental health officer was very helpful" Murray says. "He didn't require the brewery room to be tiled because he said that as we would be moving barrels around they could easily get cracked and that would create a health hazard. Four good coats of paint was all he required." Gill finds Customs and Excise easy to deal with, too. "They come about four times a year to check that I am paying enough beer duty. I have to keep invoices for all the materials I buy and issue invoices for all the beer I sell. That's all."
Given their success in Britain, why have micro-breweries and brew-pubs not come to Ireland too? "I think the reason is that Guinness is a real beer and is not pasteurised. It takes 50% of the market" says Liam O'Dwyer whose family owns a chain of pubs in Dublin and who was associated with an unsuccessful attempt to start a real ale brewery, Dempsey's, between 1986 and 1988. The 25-barrel venture eventually closed with the loss of £200,000. "It sold into about fifty pubs and the major problem it experienced was the lack of knowledge in the bar trade" he says. "There was an education problem. We'd train the staff in one pub and, being nomadic people, they'd move on."
Another approach to local brewing has proved successful in Birmingham and the entrepreneur responsible, Robert McLauchlan, intends to sell franchises so that his model can be used elsewhere. It works like this: anyone able to use about 85 pints of beer, ale, stout or lager can go to McLauchlan's Ivy Bush Brewery in Edgbaston, select a recipe from the 40-odd available and brew up the ingredients, which he provides, in a special small copper kettle under the supervision of an experienced brewmaster until they come to a rolling boil. "No experience is necessary and if ever anyone gets a brew which is not up to standard they can brew it again free of charge" McLauchlan says. The process takes about an hour, after which the amateur brewer goes home. When his brew has cooled - and most of the Ivy Bush's customers are male- yeast is added and it is placed in a temperature-controlled fermenting room for seven or eight days. The brewer then returns and bottles his creation to take it away.
"We sell only the ingredients and the use of the brewery. It is our customers who brew the beer and consequently Customs and Excise have agreed that they do not need need to pay duty" McLauchlan says. This means that the price of a pint from the Ivy Bush can range from 35p for Pub Bitter to 90p for Extraordinary Barley Wine, although most brews work out at 59p, very much more than the 9p per pint reckoned by David Smith to be the typical cost of the ingredients and energy used in one of his breweries. This margin has helped make the Ivy Bush a goldmine for McLauchlan. It opened in mid-1994 and by the end of that year, over a thousand permanent memberships had been sold at £40 enabling him to recoup its entire capital cost and build a second brewery. He had also sold an undisclosed number of temporary memberships at £2.50 for three months despite charging this class of member 17.6% more than the permanent ones for the ingredients for every batch of beer they brewed. Sales of reusable bottles at 29p each earned him even more and since at least half of the £100,000 cost of each franchise he sells will be pure profit, he is being well rewarded for a good idea. The idea was not new, however, as the Ivy Bush operates on the exactly the same basis as time-share holiday accommodation, and it is certainly one which communities should consider adopting for a wide rage of projects of their own.
2003 Update by Caroline Whyte
The Ivy Bush closed in 1999, and other DIY-type breweries have also not succeeded in the UK, although elsewhere they have had better luck. Iain Loe, the research and information manager at CAMRA, wrote in a January 2003 e-mail:
"The reason why the Birmingham Brew on premises site closed, as did (as far as I know) the ones elsewhere in the country were, I believe, cask flow problems: lack of a strong customer base who regularly used the premises. The reason why there were not more customers was I believe because the offering did not appeal to enough people. It was not a full mash operation....there was a restricted choice of recipes."
He added, "There is a lot of very good beer being produced by the many new small breweries about. The pricing structure was probably wrong. Brew on Premises operations have worked well in places like Canada where in many parts there is a dearth of good beer."DA Smith Brewing Services, 6 Church Street, Copmanthrope, York YO2 3SE; tel +44 19040706778; fax +44 1904 705698, e-mail email@example.com.
CAMRA, 230 Hatfield Rd., St Albans, Herts AL1 4LW, UK; e-mail firstname.lastname@example.org.The editor of the Good Beer Guide is now Roger Protz.
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