Adnams, the Suffolk brewer, has admitted its Cellar & Kitchen retail operation has so far not justified itself in cost terms.
The brewer opened the first Cellar & Kitchen store, which sells a high-end range of wines and kitchenware, five years ago. Trading has since been patchy, a situation which two years ago drove Guinness Peat, an Adnams investor, to call for a rethink on the whole project.
In its half year results announcement issued today Adnams conceded it had had a "mixed experience" with the stores and that while it had been "widely praised" in some quarters, "so far the overall performance of the shops has not justified the central costs of a wine and retail operation.
"Nonetheless, we believe that this business has great potential and has had positive impacts on other parts of our operations," it added.
Adnams comments came as it reported turnover for the six months to June 30, 2010, down one per cent at £23.1m, with operating profits 10.4 per cent lower at £826,000. The group said the poor weather in the early part of the first half had played its part in suppressing demand for its products and services.
Pre-tax profits were a little over 27 per cent down at £641,000. The company said it would pay an unchanged dividend of 65p per 'B' share and 16.25p per 'A' share.
On the trading front, Adnams said its own-brewed volumes were down 6.8 per cent over the period. Directly-delivered volumes were up six per cent, but it had seen larger falls in volumes to tenanted and leased pub companies.
Adnams added its weight to calls for the 'progressive beer duty' regime to be reformed, saying it hoped the Chancellor of the Exchequer "will have made some move towards reducing the excessively high taxpayer subsidy given to the smallest brewers" by the time of his next Budget.
The brewer said its pub estate had found trading "particularly tough" in the first six months, but that it had worked with its licensees to help them through the current market. It added that its new code of practice was on the verge of being accredited by the BII.
The group's hotels business had "felt the full impact of the long hard winter and spring". Adnams said its iconic hotel operation, the Swan, located in its home town of Southwold, had had a "relatively good performance compared to last year", thanks to being able to trade newly refurbished rooms for the full six months.
Looking ahead, chairman Jonathan Adnams said there was no doubt the beer industry was not having an easy time of it, but that his company "prides itself on its long term focus".
"We have built a reputation for doing the right thing, we are continuing to invest and build and we believe that this will bring us success, whatever the challenges we may face," he added.