Changes a-brewing

They like to do things differently at Adnams. That much is plain as soon as you disembark at the firm’s picturesque Southwold base, where the mellow yellow brick of the famous brewery contrasts with the white-painted wood of the town’s landlocked lighthouse, and the slow, grey rollers of the North Sea break on the shore of the bay only a hundred or so yards away.

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Last Updated: 09 Oct 2013

In marked contrast to the modern corporate norm, there is no shiny office block, no towering atrium, no marble counter and, best of all, no surly security staff. Just a modest reception area and a ready smile and cheery hello for the visitor. It’s refreshingly straightforward and makes a wonderful first impression. This, one immediately feels, is a place where people rather than processes predominate.

Chairman Jonathan Adnams is just as far from the corporate archetype. Clad in jeans and puffa waistcoat, he’s dressed for the outdoors, not the boardroom; lean and weather-beaten, he looks every inch the keen sailor that he is. Until fairly recently he was a member of the local lifeboat crew, and when the maroon went up, he had to answer the call. Unpredictable departures from even the most important meetings were therefore not unknown; rumour has it that visitors abandoned in this way occasionally felt a little nonplussed.

Back on dry land, his other passion is brewing. His family has been producing some of the country’s finest traditional cask (or ‘real’) ales in Southwold since 1872, but he is clearly not one to rest on historical laurels. The firm’s brand-new £4m brewhouse is his pride and joy, the culmination of a five-year renewal programme, replacing equipment dating from the 1970s and earlier with the absolute latest in computerised beer gear. ‘It’s good to have roots, but value comes from what you are going to do in future rather than from what your ancestors did in the past’ he says.

Impressively high-tech to look at, the new plant is extremely efficient and requires minimal human intervention to keep it going smoothly – it even switches itself on in the morning, giving the staff a bit of a lie-in. Nonetheless, an early start is called for on days when there’s a brew on. ‘I was up at six this morning playing with our new brewhouse,’ he announces with a grin, adding that he’s been trying to keep out of there until the staff get to grips with their new toy. ‘They don’t want me hanging about while they are trying to learn to drive it, do they?’

Probably not, but judging from his barely restrained enthusiasm, they must all be used to dealing with a certain amount of ‘advice’ from the chairman, anyway.

Adnams may be small – last year it made something over £4m on a turnover of £46m, and its shares trade on the tiddlers’ Plus index (previously known as Ofex) – but there aren’t many FTSE bosses who take the kind of knowledgeable delight in the bread-and-butter of their business as Jonathan Adnams does. He’s genuinely passionate abut quality and consistency – whether it be the famous Adnams’ The Bitter, the stronger Broadside ale or one of the company’s numerous seasonal specials like Oyster Stout, Regatta or Tally Ho – and thinks that the enormous variation in the quality of some of the other products on the market is killing the trade.

‘Anyone can be a brewer, but doing it well and consistently is much more difficult,’ he says. ‘There are a lot of badly brewed and kept ales out there. There’s no reason why customers should ever get a bad-tasting pint of cask ale, but they do. We try very hard to avoid that.’

The new equipment has helped secure Adnams’ position as an industry leader in terms of product quality, he adds. ‘We used to get less than 1% of our barrels returned because the beer was spoiled,’ he says. ‘We thought that was pretty good. But now we are down to less than 0.1%.’

But just recently, Adnams – the business also includes a high-end wine merchant, a growing retail arm (more on this later), a select estate of 80-odd ‘character’ pubs and the two best hotels in Southwold – has been making the news for more than its beer. For as public and business opinion has focused increasingly on climate change and the environment, it has emerged that Adnams has quietly become one of the greenest manufacturing businesses around.

That new brewery not only makes great beer, it also incorporates state-of-the-art energy-recovery technology to recycle 90% of its waste heat, cutting down energy usage dramatically. Loyal drinkers who can’t get to an Adnams pub will be relieved to hear that the firm’s bottles are now the lightest – and thus the greenest – on the market. And to top it all, the new £6m distribution centre opened in October 2006 has been called the greenest warehouse in the country. Thanks to carefully chosen natural construction materials and a reed-covered roof, it doesn’t need powerful heating and air conditioning systems to maintain an even temperature and should save £500,000 on the firm’s energy bill over the coming decade. It was also a very low carbon build, as the hemp and lime block walls lock 150 tonnes of carbon into the structure.

But it would be a mistake to assume from this that the firm has been taken over by a bunch of sandal-wearing eco-warriors. ‘We’re not tub-thumpers, we’re not saying this is the only way to do business, but we have been interested in sustainability and the environment since long before it became fashionable,’ says managing director Andy Wood. ‘They are on our list of organisational values. Lot of firms have similar lists of values, but we bring ours to life through our capital expenditure programme and decision-making.’

That’s fighting talk – it’s not often one hears a board director mention ‘organisational values’ and ‘capital expenditure’ in the same breath.

The long-termism this engenders lies at the heart of the business. A carbon-neutral distribution centre may be 20% more expensive to build than a typical shed warehouse, but it costs much less in the end because it’s cheaper to maintain and run. So although Adnams does do many things differently, it does them in pursuit of the same competitive goals to which all successful businesses attain.

‘People might think it sounds like motherhood and apple pie, but it’s not. It generates both commercial advantage and consumer buy-in. Sustainability is a hot topic and it runs very deep at Adnams,’ insists Wood.

Simple enough really, but in these days of shareholder pressure and quarterly targets, it’s increasingly uncommon to find companies that can afford the luxury of taking this view. Adnams can, in part at least, because of its ownership structure – technically, it may be a traded plc, but family interests still control a majority stake.

Wood – younger, more overtly ambitious and definitely a snappier dresser than his chairman – represents another important distinguishing feature of the firm. Despite the strong family interests, you don’t need to have the right surname to succeed at Adnams. In fact, the chairman is the only family member currently on the board.

‘Jonathan is not a family patriarch, he is chairman of a plc, and we go out to hire the best people wherever they are,’ says Wood. ‘That means going outside the industry; where is your competitive advantage going to come from if you keep hiring from the same pool of talent?’ Wood himself has been at Adnams since 1994, but was at Norwich Union (now Aviva) before that.

It all seems to be working. The cask ale market overall in the UK is in decline and has been for years, but Adnams is bucking the trend. Production last year was just over 90,000 barrels, up from 45,000 a few years ago. However, it can’t continue to do so ad infinitum without seeking out new sources of growth. And so, in typically forthright style, the firm is trying to create a brand-new market segment with its latest Spindrift ale.

Described as a ‘premium English ale’, Spindrift is a kind of cross between real ale and the pricy, heavily advertised premium draught lager punted out by the mega-brewers like Inbev and SABMiller. It’s a keg beer and, like lager, is served chilled from a font, but it’s top-fermented and so has more colour and a more traditional beery flavour.

If all goes according to plan, this new product will give Adnams access to the kind of fashion-conscious drinkers and trendy venues that would not normally have anything to do with real ale. ‘There are no Brits in this speciality beer market. Spindrift began with a conversation about whether the Adnams brand could make the leap from its traditional markets into this new market that is dominated by the Germans and the Czechs,’ says Wood.

Taking on some of the big boys of brewing – whose marketing budgets alone eclipse Adnams’ entire annual profits – is a brave move and the firm is pinning a great deal on it. The capacity of the new brewery is 150,000 barrels a year, and the company has plans to hit that figure within a fairly short timescale. ‘We’ve got big ambitions,’ says Wood. ‘We won’t have all that headroom for very long.’

But if Spindrift doesn’t deliver, it’ll be back to the drawing board, or the recipe book, pretty sharpish. Many of Adnams’ former rival brewers have been acquired – quite a few by near neighbour, Greene King, in Bury St Edmunds – a fate Adnams is keen to avoid. Surrounded by huge establish rivals on one side and much smaller, dynamic upstarts on the other, the firm cannot afford to stand still.

There’s little danger of that. Not content with trying to elbow its way into new beer markets, it’s also growing apace on the retail side. By the end of this year there will be eight Adnams Cellar & Kitchen Stores open, where only a year or two ago there was but one, in Southwold. Selling the Adnams range of bottled beers as well as its highly regarded, independently sourced wines, plus a select and growing range of designer kitchenware and premium food products, the shops are spread across the more affluent parts of what is charmingly described as ‘greater East Anglia’. Stamford, Woodbridge, Saffron Walden ¬– places that, like Southwold itself, tend to have a high proportion of second-home ownership.

If this seems like a slightly odd business for a brewer to get into, think again, says managing director of retail Rupert Farquharson. What started out as an experiment is building fast – ‘We opened first in Holkham, which was risky, very much a secondary site, middle of nowhere. But, my goodness, that store has traded its socks off.’

Farquharson wants to open 30 stores by 2012, although he realises that this is a tall order for an outfit like Adnams. ‘We’re so small, we have to do everything differently. Every person we hire is crucial; it can set us forward or back by six months.’

But be in no doubt that the firm means to do it, as the appointment of new non-exec director Steven Sharp demonstrates. Sharp is Marks & Spencer’s marketing director, the man responsible for the hugely successful ‘Not just food…’ campaigns, and a premier-league signing for the firm. And, yes, he does have a weekend place in Southwold.

In the course of checking out potential new locations, Farquharson has hit on an unexpected example of the benefits of doing things differently. ‘Best practice in this business says that when you’re looking for new sites you never say who you are working for,’ he says. While tin-hat-wearing property scouts from the likes of Tesco and Sainsbury doubtless do all they can to remain anonymous, Farquharson finds honesty to be the best policy. ‘But when I say I am from Adnams, doors open up and people really want to help. It’s amazing the way people respond to this brand.’

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