Safe haven

Belhaven may be something of an unusual beast in regional brewing terms but marching to a different drum is certainly not doing it any harm. Phil Mellows met chief executive Stuart Ross.

There was groan of disappointment from beer lovers last month when Caledonian, Scotland's great bastion of independent brewing, climbed into bed with Scottish & Newcastle. The cad had finally seduced the virgin. What is left now of Scottish brewing?

The answer is, of course, Belhaven. Unlike every other regional brewer in the UK though, Belhaven does not make cask ale - or not very much of it at any rate. Its beer business is based on Belhaven Best, not only a nitrokeg ale but the first nitrokeg ale. And in 1997 it became the first extra cold beer too.

Stuart Ross, the company's chief executive, is as proud of those claims as other regionals are of their cask ales. And why not? Belhaven Best recently became Scotland's biggest selling ale.

The brand is a symbol of the way Belhaven has steered its own course since it was relaunched in a management buy-out led by Stuart a decade ago. Its strategy has been based on a cool analysis of the peculiarities of the Scottish marketplace, a realistic long-term vision and some hard commercial decisions.

It makes a difference, of course, that more than 30 years have passed since Belhaven was run by a family. The Hunters sold up in 1972 and the brewery went through a bizarre succession of owners including the founder of the Miss World contest, Eric Morley, 1991 Asian of the Year Nazmu Virani, former Bell's whisky chairman Raymond Miquel and Nazmu Virani again, except this time jail was looming as a result of his part in the BCCI bank collapse scandal. It was when justice caught up with the tycoon that Stuart and his team took charge. And Belhaven's progress has been onward and upward ever since.

The company floated on the Stock Exchange in 1996 and has taken profits from less than £4m to nearly £11m last year. In that time beer volumes have soared by 62 per cent in a shrinking market and the pub estate has grown from 69 to 189.

Progress is likely to accelerate. In raising £25m on the Stock Exchange last July to fuel expansion, Belhaven promised investors it would aim to increase its number of pubs to 300 by the end of 2005. "At the moment only 20 per cent of production goes through our own pubs," Stuart said. "That proportion will certainly grow."

As the overall market for its beer continues to shrink, an expanding tied estate will both buoy up production at the brewery and give Belhaven greater purchasing power with its own suppliers. This is crucial for a company in Belhaven's position. Scotland's domination by the freetrade led the brewer to promote itself as the champion of the independent publican, offering a high level of service that includes a comprehensive range of factored brands. Belhaven is, for instance, the biggest customer for Tennent's Lager.

Belhaven's strong presence in the freetrade has another positive spin-off for its pubs division. The steady growth of its estate, in a period when other regional brewers have found the cost of freehold property on the open market prohibitively steep, has been helped along considerably by the brewer's close relationship with owner-operators throughout Scotland. "Because we know our freetrade customers so well, we find we can do a lot of deals to buy their pubs off-market," says Stuart.

The strategic focus on the freetrade took a fresh twist last September when, in the face of price rises by the major brewers, Belhaven took the decision to cap the price rises passed on to its tenants and freetrade customers at £9 per barrel for three years.

In a letter to customers, Stuart took a long-term view of the impact of steeply rising on-trade prices at a time when the off-trade is becoming increasingly competitive. "The gap between on-trade prices and take-home prices for many leading beer brands has widened significantly, encouraging the couch potato culture that is such a threat to all of us who depend on the pub and club trade for our livelihood," he wrote. "It would be easy for Belhaven to shelter behind the rest of the brewing industry on this issue but it is so important to the future fabric of the trade that we feel we must stand up and be counted."

For Belhaven the importance of the pub lies in the way a healthy on-trade can support the drinks division of the business.

A tour of the Belhaven estate shows this isn't simply a question of numbers. Under the wing of pubs managing director Jeff Myers, each outlet aims to be responsive to its local market. The company explicitly rejects retail branding - despite the success of the Celtic-themed Drouthy Neebors, Pivo Czech café-bars, the music-led Yards and the most recent introduction, Factory. These are not considered brands within Belhaven. They might have the same names but they have different markets and they each operate differently.

The new Factory in Dunfermline, Belhaven's biggest ever investment, is a good example. Since it opened at the end of last year it has done astonishing trade. The people of the Fife town have embraced the giant venue eagerly, and it plays a role not just as a late-night venue but as a meeting place for the whole community.

A more traditional pub, the Four Marys in Linlithgow, West Lothian, despite being a managed house is replete with cask ales from a wide selection of brewers and demonstrates that Belhaven does have a commitment to cask - in the odd Scottish pub where there is a demand.

Surprisingly, the Dunbar brewery also produces real ale for some Scots microbrewers when they run out of brew length. So it's not a question of not being able to do it.

Belhaven: a mission for every division​

In contrast to the usual bland pious "we aim to be the best" mission statements that most companies have, the Belhaven Group has produced a more substantial document that reflects the clarity and concreteness of its vision of the future.

It contains, in fact, detailed mission statements for each division, as well as for the group as a whole, and includes standards of performance for both managed houses and the tenancies.

Here are some of the highlights:

• Grow profit by a minimum 10 per cent each year
• Increase the pub estate to 300 units by the end of 2005
• Grow the volume of beers brewed and packaged by at least five per cent every year
• Seek new opportunities to contract-brew and package for third parties
• Increase the volume of beer, cider and soft drinks distributed to freetrade by at least 5,000 barrels
• Grow Belhaven Best's market share each year by at least 0.5 per cent a year
• Achieve a return on capital employed of at least 16 per cent at pub operating level.