The drinks doctor: Extra Cold

Every so often the drinks industry is faced with a tough problem. Who're you gonna call? The Publican's Drinks Doctor of course! He may not be in the Yellow Pages, but he's happy to give his advice to the readers of The Publican for the small fee of a Campari and soda, and a bag of nuts...

The ailment​

• Background:​

When Diageo introduced Guinness Extra Cold in 1998 it would never have believed the revolution was about to kick off. Seven years later and Extra Cold has become "the" way standard lager is drunk. Now most bars in the country have at least one cooler under their bar to give customers that really cold pint of beer.

It is arguably the most important innovation in draught lager in the last 10 years. It has increased volumes and ignited margins. Of the 80,000 pubs and bars that stock draught Guinness, 30,000 now stock Extra Cold. The introduction of Foster's Super Chilled has created a 2.5 per cent increase in sales volumes of draught Foster's. As a result, one wag at Scottish Courage allegedly coined the phrase: "If it's cold, it's sold".

What seems to be the trouble:​

• The four big brewers that use the Extra Cold innovation (Diageo, Carlsberg, Coors and Scottish Courage) all use different technology for their coolers meaning there is no sharing of technological systems. i.e. You cannot put taps for both Guinness and Carling through a Carling flash cooler, and vice versa.
• Thanks to the success of the Extra Cold innovation retailers are wanting the brewers to share technological systems - so, for example, one cooler can be used under the bar instead of three - to save on costs and free up under-bar space.
• The brewers have refused so far to do this, which has annoyed several major tenanted pub companies.

The brewer argument​

In essence the brewers' argument is "we have developed our own technological systems - why the hell should we share them with our competitors?" It is a cut-throat marketplace so naturally Foster's wants to serve Super Chilled differently to Carling. That is why it developed the POD system, which was launched into the trade six months ago, with its innovative HIT system and unique condensation font.

It is 1/8th the size of the old flash cooler system (called Calypso), which gave off 281 watts of heat and created 70 decibels of noise. ScotCo claims POD gives off no heat and creates no noise. Why would they want to share systems when they have invested so much?

Neil Skinner, Guinness draught brand manager at Diageo GB, puts it another way. "It is our preference to use our own Extra Cold cooling system as this has been tried and tested to ensure that Guinness Draught Extra Cold is served to the highest quality. We have great confidence in our cooling systems which ensure that consumers receive the highest standard product possible."

The pub company argument​

Given the massive popularity of Extra Cold, bars may well want to stock three different brands. But under current agreements this will invariably mean three separate cooling systems under the bar. The coolers take up space under the bar, giving off massive amounts of heat. It is no understatement to say the brewers' reluctance to share technology is massively frustrating for many pubcos.

Stephen Martin, beer and cider category manager for Punch Taverns, said: "We'd just like to get the four brewers into a dark room and round a table to talk about sharing systems."

What is annoying them even more is the prospect of ever-increasing costs with Extra Cold. Every time new technology is introduced old cooling systems will have to be thrown out and brand new ones installed - at considerable cost.

The pubcos believe if the brewers shared technology and worked together with retailers much of this could be avoided.

The treatment​

The question to ask here is why are the brewers being so obstinate?

The answer is, quite probably, money. In trying to get the best possible deal for themselves on beer prices pubcos have driven down the margins for brewers. They are making less money per barrel than they used to. So having finally found something that helps them increase margins their view is why should they give up any competitive advantage they might have over their rivals?

So should the pub companies take a hard look at themselves - have they in effect caused this whole problem by driving down beer prices?

On balance I would say the real issues lie on the side of the brewers. They seem to be hanging on too tightly to the idea that Extra Cold is a financial goldmine for them to plough for years to come.

For how much longer will serving really cold beer be a competitive advantage over other brewers? Many regional brewers, including Brains and Hardys & Hansons, already use Extra Cold systems. Add to this the fact that many brewers which have not gone in for Extra Cold are still investing significant sums in better cooling equipment (e.g. Heineken).

Plus we are heading for a scenario where all standard lager will soon be Extra Cold. There are venues, certainly in the Punch estate, where licensees no longer want both "regular" and Extra Cold Carling and so are just keeping the latter.

Surely if the four big brewers involved in Extra Cold actually got together with the retailers they would realise that they would be better serving the needs of the customer? It would involve sharing good practice and increase the quality of beer served in outlet, which would result in better beer sales. So I believe the brewers should swallow their pride and do more than simply pay lip-service to the retailers.