Delivering a good deal

Middleton-based JW Lees is always on the lookout for quality pubs to add to its estate, says Tony Halstead

Twelve months ago William Lees-Jones was in the news for bemoaning the "over generous" duty subsidies enjoyed by the UK's small brewers.

One year on, the managing director of Manchester family brewer JW Lees still has gripes about the excise concessions.

The Government's progressive beer duty (PBD) scheme is hitting larger operators whose beer volumes lift them outside the scope of the tax allowances.

Lees-Jones says the subsidies, which rise to as much as £50 per barrel, make a major dent in the freetrade operations of his business.

"Our direct-delivered cask-ale trade has taken a significant hit because of these discounts," he says. "We have had to recoup the lost business by exploring other niche areas such as imported beers, which gives us the chance to get into other supply chains."

But PBD should be reviewed because it is destabilising the marketplace and giving very small brewers a hefty advantage, argues Lees-Jones. "Other brewers around our size are also being hit and we feel it's time the Government takes another look at how this tax break operates," he adds.

Lees-Jones, however, does not want to be perceived as the moaning sort. His business at the Greengate Brewery and across the company's 170 pubs is holding its own, despite the difficult times the trade is experiencing.

Tradition rules

Continuity is a key component of business at the company's Middleton headquarters and across its tied pub estate in the north west and north Wales. JW Lees has been in business since 1828, so vertical integration is a way of life and tradition rules.

The family brewer is trading its way through the business downturn relatively well. Its 142 tenants work via traditional, straightforward agreements and while licensees may not be trading in paradise, JW Lees says they're not confronted with the anguish experienced by many others in the trade.

The company says few of its tenants are paying more than 10% of turnover as rent, while an average of £5,000 per pub is spent on refurbishment each year.

"I think we give our tenants a good deal and while nobody is claiming life is perfect our licensees get the chance to earn a decent living," Lees-Jones stresses.

Lees-Jones likes to go about his business in a calm, unhurried manner, but he is not one to hide from making difficult decisions.

Refusing to use Sky as a loss leader, Lees-Jones has withdrawn the service in several pubs and it remains installed in just eight managed houses.

"It was costing us £26,000 in one managed pub and there was no return for us, so we took it out," he says.

Big pub acquisitions are not on its agenda. The brewer acquired just four new pubs last year, which were its first purchases in 18 months and Lees-Jones insists more would have come on board if quality opportunities had presented themselves.

"We have been forced to play a waiting game," he concedes. "Most pub operators want to expand their estates, but if poor

quality, over-valued houses are all that is on offer we do not want to play.

"Life is getting tough in the industry, but some of the pub prices quoted to us are

ridiculous, and our only hope is that prevailing economic conditions bring some sense to the market."

Investing in the future

Like other traditional family brewers, JW Lees owns most of its pubs' freeholds and the

company does not carry a great deal in the way of debt. This paves the way for careful expansion in other pub retail areas, such as an ongoing £2m investment in a new-build combined pub and budget hotel lodge.

The company, like all others in the business, is bracing itself for a difficult 12 months, but if imponderables such as summer weather and consumer confidence show an upturn, then Lees-Jones and his colleagues remain optimistic. "We have been in this business for 180 years, so I suppose we have learnt to take the rough with the smooth," he says.

Carlsberg comes on board

Most drinkers in the north west know JW Lees for its distinctive beers - "John Willie to his mates", as one of the company's more recent poster ads proclaimed. But traditional cask ale - the product on which Lees built its reputation - continues to struggle.

The Greengate Brewery has been investing time and effort in developing a broader portfolio to satisfy demand.

It remains one of only a handful of brewers to produce its own house lagers, but recently the choice was expanded to include Carlsberg, which it now brews on licence for the Danish company.

"Licensees were telling us they wanted a change and we listened to what they had to say and responded," says Lees-Jones. "Some told us rival pubs did not want to join darts leagues in which JW Lees pubs participated because of the lager issue. They obviously wanted a product that was better known to them so we were happy to make the change."