The perfect compromise

McMullen's combines brewing and retailing to good effect, writes Lorna Harrison.

Hertford-based McMullen & Sons has a lot to shout about. A new brewery is about to open, a new training centre is helping its people do their jobs better and investment into its high-street brand Baroosh is paying dividends.

On the surface it all looks pretty rosy for the group, which operates 135 pubs and brews beers such as AK and Country. But the future it is now looking forward to with such zest follows a well-documented shake-up in 2003.

At that time the company announced that it was to consider options to best realise its value - interpreted by many as putting itself up for sale. It followed a family spat that saw some wanting to sell up while others, including David and Fergus McMullen, fought to continue brewing and retailing.

Then the Campaign for Real Ale got involved and members across the UK jumped on the bandwagon to fight for the company's survival. Two years on, the furore has died down and the business is back on track, controlled by a series of trusts. Contract brewing ended in February 2004 and McMullen's appears to have solved the typical "brewing versus retailing" dilemma.

While it is clear that McMullen's focus is firmly on retailing, the brewer has found a way to continue keeping its ales alive without the grand overheads a traditional Victorian brewery site commands. McMullen's, established in 1827, is in the process of building a new brewery at its Hertford headquarters, which will be operational early in the New Year. The new £1m set-up will allow it to continue brewing brands such as AK (ABV 3.7 per cent) to be sold solely in its estate.

The new annual 10,000-barrel capacity brewery will replace the original 100,000-barrel brewery site which, planning permitted, is likely to be sold for redevelopment. By reducing capacity, it also benefits from the Progressive Beer Duty scheme, in which tax relief is applied on production schedules of up to 36,660 barrels (60,000 hectolitres) a year. So at a time when many are shedding their brewing interests altogether to concentrate on the more profitable retailing estate, has McMullen's come up with the perfect compromise?

Controlled quality​

Managing director Peter Furness Smith (pictured)​ thinks so. "It makes sense," he says. "Our new brewery will allow us to brew cheaper and distribute cheaper than if we had to buy in. It also allows us to offer more choice to our customers and control the quality."

If you are going to retail cask ale it has got to be excellent, he believes. "Cask ale is in decline and people wonder why. But with 40 per cent of it sold sub-standard it's hardly surprising. We sell cask ale in all of our pubs bar one, and you won't find people more committed to ensuring quality and consistency.

"We are focused on retailing because that's where all the profit is made. It is important that what we do in a retail outlet is the best - we need to be the best in the local trading area."

McMullen's estate is mainly concentrated in Hertfordshire, but stretches into neighbouring counties. Of its 135 pubs, 53 are tenancies and the remainder are managed. The whole estate breaks down to 50 per cent rural and village, 30 per cent food/destination and the remainder is a mixed bag of high street and community.

And while the estate has remained fairly static for several years, it is particularly focused on the Baroosh high street bar model, of which there are soon to be five with the opening of its Chelmsford, Essex, site next year. Over the past five years, £15m has been ploughed into this concept. "People are moving away from the traditional tenancy to more contemporary pubs and we feel that Baroosh will be successful as long as it is consistent in quality and standards and continues to offer what people want," says Peter.

Baroosh was modelled using an All Bar One template but in reality it is quite different, offering an updated twist on the original contemporary bar.

Making an entrance onto the high street in light of recent negative press is a brave move for a traditional brewer.

However, McMullen's feels it is fighting back with its strict door policy and emphasis on good training. "We haven't gone down the me-too route of focusing on Friday and Saturday night liquor sales," says Peter. "We have real focus on daytime trade up to 8pm and are food driven."

He adds: "We can't let the easy business on Friday and Saturdays overtake the rest. We are very selective about our customers - that's why we are winning. If we were doing what everyone else is doing we would struggle to compete on price and we'd lose."

McMullen's is planning to grow the Baroosh concept and has two site-finders actively on the look-out for suitable premises. "One new opening a year would be extremely good," says Peter.

Home-grown managers​

Meanwhile, McMullen's opened its new training centre last year and aims to home-grow 50 per cent of its managers - the current rate stands at 25 per cent. "Six years ago our staff turnover was about 120 per cent and it now hovers at between 88 and 100 per cent, which is a real achievement," says Peter.

But despite great training, he admits the biggest problem facing the licensed trade at the moment is new legislation and red tape.

"Unfortunately, with licensing reforms a small minority of local residents will have a wonderful opportunity to curtail or restrict activities in a pub," he says. "All we wanted was an extra hour and we got a monster piece of legislation that is not going to solve the problem of late-night disorder."

Peter doesn't believe one of the key aims of the new legislation will be achieved: "There will be no staggered closing as I can't imagine licensees will do anything different to their competitors."

The new licence applications will cost the company more than £300,000, but Peter's greater fear is smoking legislation. "We must be allowed to trade on a level playing field. With clubs being exempt, I believe 30 per cent of my businesses will become unviable. If the objective is to protect employees, the logical conclusion has to be an all-out ban. Self-regulation was working and you have to ask what gives politicians the right to interfere?"

Despite wider industry problems, McMullen's is forging ahead with its new-look company and is confident about the future. It has pledged to market itself better and raise its profile nationally via better PR and by building a portfolio of award-winning pubs. Peter says: "We realise we should be doing more. Now is an excellent time to be doing it."