Shepherd Neame, which fights with Young & Co of Wandsworth for the title of Britain's oldest surviving brewer, exhibited a perfect example of the problems facing cask-ale suppliers when it announced its interim results earlier this year. A row with JD Wetherspoon over the price Sheps was prepared to take for its flagship Spitfire ale meant total beer sales for the Faversham-based company dropped 1% for the six months to December 25. The company's chief executive, Jonathan Neame, says: 'We weren't prepared to reduce prices to maintain volumes, and as a result our sales to JD Wetherspoon reduced significantly. However, sales of draught Spitfire to other customers increased by 20%, so the overall decline was still less than the market's overall fall.
Sheps also had problems with family member and former vice-chairman Stuart Neame, who thought the company should look at whether it ought still to be in brewing at all, rather than simply pub retailing. However, the Kentish brewer's shareholders decided they wanted it to carry on being an integrated brewer and pub owner, and overwhelmingly rejected a proposal to change.
The shareholders' support, Jonathan Neame says, is part of the ethos that fills and powers companies such as Sheps, but Neame says they will only continue to invest if, as with Sheps' membership of the Ofex share market, there are tax advantages and if the company continues to have a strong balance sheet and strong property assets to back up the investment. That tax regime is very important, Neame says. Without it there would be an even faster decline in the number of small family brewers.
He is pessimistic about the chance of attracting new drinkers, or changing the habits of established lager drinkers. For family brewers and most of the small independents, Neame says the big opportunity is to capture people's growing interest in regional beers and take sales away from what he calls the 'legacy volumes of the big national cask-ale brands. He says they still have massive sales left over from the days when the national brewers had huge tied estates of their own and then, when those were broken up, signed long-term supply deals with the newly-formed independent pub companies. However, he believes the market is moving from one driven by volume growth to one driven by value growth.
If volume is to be driven by anything, he says it will come from a concentration on quality. Sheps has declined to join Cask Marque, the organisation dedicated to driving up cask-beer standards, preferring instead to concentrate on its own master-of-beer programme, which looks at everything from service to glassware, not just the beer in the glass.
He also sees more potential for developing sales of beer with food, something Sheps is pushing through its association with the Folkestone-born chef Phil Vickery. The initiative involves using as much Kentish-grown produce as possible, something Sheps already tries to do with its beers, using Kentish hops and, where it can, Kentish barley, which all chimes with the trend towards people's desire for locally-sourced products.
On pricing, Neame points out that in London and the south east the price of premium ale is already not far off that of premium lager, and he believes it is 'perfectly possible for pubs to charge more for ale than lager, 'so long as it's good quality. Premium locations, too, should be able to charge more but, again, only if the quality is right.
Sheps invests heavily in maintaining and improving the quality of its beers, Neame says, but while it is 'reviewing options in the cask plant, after a lot of investment last year the brewery is 'by and large a very modern plant in good shape for the foreseeable future.