Have Courage

ScotCo aims to regain its market-leadership status. John Porter reports.

Scottish Courage is back, and this time it's personal.

Personal, that is, in the most pleasant sense of the word. This signifies a renewed focus on customer service and attention to all the little details that make a difference to hard-pressed licensees looking to source the essentials of the offer - beer and, since last year's takeover, Bulmer's cider.

Not that ScotCo has actually been away, of course, but the UK arm of global brewer Scottish & Newcastle (S&N) is willing to admit - now at least - that it had dropped the ball to some extent in terms of meeting customer needs, both in the on and off-trade.

Stephen Glancey (pictured)​, chief operating officer, sums up the state of play: "Last year, we were on the back foot. Now, we're definitely on the front foot."

The sale of the Scottish & Newcastle Retail pub operation to Spirit Group last year drew a line under the vertically integrated, national brewer and pub operator business model.

The vast estates which a few years ago were owned by S&N, as well as Whitbread, Bass and Allied are now separated from the business of brewing.

As the supply deals that accompanied the sales of those estates start to come to an end, new opportunities arise, both for S&N and for its rivals - reinvented as Coors Brewers, Interbrew and Carlsberg UK. However, at one stage it looked as if S&N might not be ready for the challenge.

Although it remains the market leader, with a 27 per cent market share of UK beer volumes at the last count, market leadership can easily slip away if it is not continually re-earnt.

At the risk of going over old ground, at the end of 2001, ScotCo embarked on a major overhaul of its supply chain, prompted by the increasing share of sales to be taken by the off-trade. This included reorganising its warehousing, distribution and planning, and streamlining its on-trade distribution from a network of smaller depots into fewer larger, regional distribution centres.

This proved to be a more complex and costly process than anticipated, and was in itself somewhat overshadowed by the more general reinvention of S&N as a focused global brewer.

The arrival of new S&N chief executive Tony Froggatt, and new ScotCo managing director John Dunsmore last year prompted more fundamental, and in some cases quite tough, decisions about the direction of the UK business.

This included the decisions to close the Fountain Brewery in Edinburgh and the Tyne Brewery in Newcastle. "Those were tough choices that went to the heart of our identity and our history," says Stephen, "but they were very necessary."

Moving forward, he sums up the key changes as, firstly, the decision to put flagship brand Fosters firmly at the heart of the business, with a big step up in marketing support and a clear target for Fosters to replace the Coors-owned Carling as the UK's best-selling beer over the next decade.

Supporting Fosters are three more core brands - Kronenbourg 1664, John Smith's and the newly acquired Strongbow. These four brands will get the lion's share of ScotCo's support.

Other brands in the portfolio, such as Courage, Newcastle Brown and McEwans, have been given "local hero" status, used to help the key brands gain entry in specific regions.

Through its minority stake in the revived Theakston's business and the tie-up with Deuchars brewer Caledonian in Scotland, ScotCo is increasingly allowing specialists to handle the craft brewing side, at the same time keeping an interest in any sales upside and focusing its own resource on the big volume brands.

There's also a bigger commitment to product innovation, the first evidence of which came with the launch earlier this year of Kronenbourg Blanc, a white beer variant of the premium lager. "New product development is going to be increasingly important, particularly for the on-trade, to meet changing consumer tastes," says Stephen.

Supporting the brand portfolio is what Stephen describes as the most "effective and efficient operation" of any of the UK players, as well as the "best team in the industry, with the right people in the right jobs."

Such claims may raise a few eyebrows with licensees who experienced the impact of ScotCo's supply chain problems, but Stephen insists the pain has been worth it. Although ScotCo undoubtedly has its eye on big supply deals with major pub operators, he points to changes which have considerably raised its game in terms of the offer to individual licensees. "The free trade is very important to us in terms of its place in the overall business."

The acquisition of The Beer Seller as part of the Bulmer's takeover, and its subsequent merger with ScotCo's wine and spirits arm to create Waverley TBS has boosted the effectiveness of the company's on-trade distribution considerably.

Another big factor is the out-sourcing of the technical services to Serviced Dispense Equipment (SDEL), the joint venture between ScotCo, Carlsberg UK and, since August, Coors. "Handing that aspect over to specialists is a big step forward, " comments Stephen.

Also targeted squarely at the free trade is the reinvention of the brewery loan. ScotCo has launched an innovative new financial product in conjunction with Bank of Scotland, offering a way to sourcing capital for business expansion at reduced cost. "Access to financial support for expansion is one of the biggest issues for the free trade," Stephen explains. ScotCo has always been a big player in the brewery loans area, and has high hopes for the new offer.

The strategy seems to be paying off - in the six months to June 30, the UK outperformed S&N's other markets, with volumes of the key brands up strongly.The market is more competitive than ever, but the reinvented Scottish Courage believes that it has the winning formula.

Watch this space.