The last of the family-run brewers of real ale have to contend with high taxes, the rise of lager and shareholder pressure. Matthew Gwyther meets the traditionalists.
They have just finished celebrating the 300th anniversary of Britain's oldest brewer, Shepherd Neame of Faversham. And with such a ready supply of partying raw material, we can be sure that the hangover was of a particularly piercing variety.
The 15th oldest registered company in the world was founded in 1698 by Captain Richard Marsh of the Cinque Ports Militia. To this day it nestles in the same spot, next to a muddy creek in this very quiet north Kent town, where little of a dramatic nature has occurred since local fishermen held the no-good King James II prisoner when he tried to flee to the Continent in 1688.
The birthday celebrations of this family-owned and family-run business were overshadowed, however, by an unusual, guerrilla-style legal action that the Neame clan is taking against HM Treasury over levels of excise duty on beer. For better or worse, 'Sheps' has temporarily become better known for fomenting revolt against the chancellor than fermenting wort in its vessels.
Britain's brewers felt they knew where they were with the former chancellor, Kenneth Clarke. The Hush Puppy-wearer, famed for his love of a pint and a slim panatella, had heeded their lobbying about high excise duties on beer - they are five times the level of those in France. Aware that the consumption of beer is in long-term decline in this country, he held its taxation steady.
Gordon Brown has so far proved less sympathetic. He increased duty by a penny a pint in his first budget, and it is this decision that Sheps is challenging, on the grounds that it contravenes the spirit of the Treaty of Rome, which set up the Common Market. Next stop, later this month, is the Court of Appeal. In a classic publicity coup, they asked Cherie Booth, the prime minister's wife, to argue their case. And the Number 10 versus Number 11 ding-dong achieved hundreds of column inches.
It's not just tax, though. In addition, the Government has been considering toughening drink-driving laws, introducing scored glasses to ensure drinkers get a full pint and insisting those glasses are made from toughened glass to prevent their easy use as weapons in pub brawls. All of these moves will adversely affect the bottom line of the brewers, and they are now convinced that Brown would be far more at home in Islington sipping Sancerre than supping pints with the working man.
Bobby Neame, 64, is the company's chairman and one of the few brewery bosses these days who actually knows how to make a pint, having served his apprenticeship more than 40 years ago and passed his brewing exams. He is one of a handful of senior members of what is left of the 'beerage' in this country.
Now that there are no longer any Watneys, Basses, Whitbreads or Courages left in the game, the flag is flown by the 36-strong group, the Independent Family Brewers of Britain. And a belligerent bunch they are, too. Chairman Neame has the looks and manner of a superannuated prop-forward and Brown would do well to avoid meeting him on a dark night walking home from Whitehall.
'We may have made it to 300, but we're now the only brewer left in Kent,' he grunts. (There were 305 family brewing companies in Britain in 1954, but fewer than 60 remain.) 'When I came into the business in the '50s, things were already pretty bloody awful. They relied on the "If the beer's good it will sell" approach. (It didn't.) If we hadn't done a variety of different things, we'd be in some difficulty ourselves.'
Family feuding among the many Neames over the correct way forward has led to spats over the years, but Bobby's way has prevailed. He realised that pubs had to move away from the traditional, dreary, male drinking dens with stinking lavatories, and become more attractive places to families.
They also had to offer better food than the odd stale-and-curling ham sandwich, packets of mildewed crisps or peanuts and ageing Cornish pasties.
Bobby has been an unsentimental boss - 'I took a totally different line from my predecessors in that I was willing to sell and buy pubs and to invest money improving them.' His more mild-mannered cousin, Stuart Neame, came in from IBM and introduced computers to the business. Stuart is also masterminding the legal battle that they say they will take all the way to the European Court, if necessary.
Although the overall size of the Shepherd Neame estate has grown in the past 10 years, the company has been forced to close or sell 45 pubs in Kent since European borders eased in 1993. They now have 361 tied houses in their estate. The Channel ports and badlands of Thanet in East Kent have been particularly hard hit. Shepherd Neame's current struggle is summed up neatly by looking at the price of a bottle of their celebrated Bishop's Finger ale. At Sainsbury's in Canterbury it will set you back £1.59; hop over the Channel to a Calais hypermarket and it will cost under £1. Duty is 31p per pint in the UK and 5p in France.
Bootlegging booze has become a major industry in Kent where, it is estimated, one pint of beer in three is a French import. (Shepherd Neame itself sells more than half a million bottles of beer in Calais annually, a fraction of which is finding its way down French throats.) Meanwhile, in Dover, bootleg gang members have taken to shooting each other in turf wars.
It is to its credit that, despite this adversity, Shepherd Neame is riding as high as it has ever done in its 300-year history. It turns over nearly £60 million annually, which yields a healthy £6.5 million profit for the clan's many shareholding members. 'I've long taken the view that I've been working for my grandfather's sister's progeny for far too long,' notes Bobby.
Knowing they could never compete with the big boys and their huge advertising budgets, Sheps has become a highly successful figure in niche markets.
Its beers, such as Spitfire and Master Brew, are all extremely good, consistently winning awards worldwide. They have come up with clever packaging and even their own patented bottle design.
Another smart move was to move into the Indian restaurant market. Bobby realised there was money to be made from brewing Indian beer in this country, and acquired a licence from Bangalore to produce Kingfisher. Each year, 25,000 barrels of Kingfisher now leave Faversham and offer a welcome alternative to Heineken or Carlsberg when washing down chicken jalfrezi and nan bread.
Bobby now hopes to get into the Chinese restaurants and is brewing Sun Lik - 'Hong Kong's finest tipple' - to help the sweet 'n' sour pork on its way.
Julian Herrington, the company's head brewer, is currently getting to grips with the exotic Sun Lik. He won plaudits for his 1997 Christmas Ale, which daringly introduced oranges into the mix, and he brewed a well-received 1998 Celebration Ale.
Meanwhile, someone has sat down and worked out that, despite already running up a legal bill of more than £100,000, the broadcast media coverage of the David and Goliath-style Sheps versus Brown struggle has yielded more than half a million pounds worth of free advertising. No small beer in Faversham.
A legal spat with the chancellor is nothing compared to the grief that befell the Bateman family, fellow IFBB members, in the mid-1980s.
Batemans, based in Wainfleet, Lincolnshire, was founded by George Bateman, a local farmer, in 1874. It got through the ravages of the keg beer surge in the '60s and early '70s - when Red Barrel ruled supreme - only to be nearly felled by a family dispute that made King Lear look like a Partridge Family episode.
Harry Bateman, the founder's son, had three children, among whom he divided his shares in the brewery: 40% went to George, who became chairman and managing director; 40% to his second son, John; and 20% to his younger daughter, Helen.
'Harry obviously felt,' states the official history in measured tones, 'that being his own flesh and blood, this was a fair division. How wrong could he have been? For a while, there was a simmering pot, and in March 1985 it boiled over. John and Helen announced to George that they wanted to put the brewery up for sale.'
Mr George, as he is known at the Salem Bridge brewery, was tested to the full during a bitter three-year struggle involving lawyers, merchant banks and no shortage of harsh words. George and his wife Pat, who handles hotels, decor and refurbishment, even went on Radio 4's Today programme.
One day a local farmer came in with £3,000 to invest, if it would secure the future of his pint. In the midst of it, Batemans Premium Ale XXXB got a boost from the Campaign for Real Ale, which made it their Beer of the Year. Eventually the shares were bought back, but the schism never healed.
Just before the ructions began, Jacqui Bateman, George's daughter and a qualified nurse, made a late and slightly unexpected entrance into the business. She was appointed the brewery's first credit controller and was sent off chasing bills owed by pubs, some of which had been outstanding for six years. Then she hit the road as sales manager and encountered a characteristic sexism and roughness that must have made changing bedpans and lifting bed-ridden 16-stone patients seem a doddle. Now she's the marketing director.
Batemans is small by comparison with Shepherd Neame. It has only 60 pubs and its brewery production is at full capacity. They couldn't even brew a lager because they didn't have the space to separate the different sort of bottom-fermenting yeast that lager requires. 'We're small but that doesn't mean we're not inventive,' says Jacqui. 'We were one of the pioneers of flavoured beers - strawberry, toffee, liquorice, vanilla.' They've expanded outside Lincolnshire and even had a crack at the US market, but a strong pound and intense competition has led to a recent Stateside withdrawal.
Batemans sold its free-house trade - to Carlsberg Tetley - to raise cash, and it no longer does its own bottling. In common with dozens of family brewers who brought in management consultants at some point, Batemans was advised to sell the brewery and concentrate on retailing. (Certainly it is the 'superpubs', first devised by Wetherspoons, that have seen all the real action in the beer game during the '90s.) They did, however, what many would regard as the sensible thing and bought in an outsider to become chief executive - Haydn Biddle, who had formerly been with Scottish & Newcastle and Procter & Gamble.
Jacqui Bateman has the right name but she's never going to get rich doing what she does at the moment. When pushed, she admits to being on more than £30,000 but less than £40,000. 'But I'm happy,' she says. 'It's our business.' Meanwhile, she has yet to tell Biddle she's already spent all of next year's advertising budget.
The beer game doesn't get any easier. The brewers had a lousy summer last year, despite the World Cup, and the longer-term trends are more alarming. The hard data is enough to jolt any publican out of a muzzy, three-pint haze: back in 1979 some 43 million barrels were drunk in the UK; last year that figure was 34 million, and it continues to fall. (Brewers are still in business because the average alcoholic content of what passes over the bar top has substantially increased, and with it the margins.) So, as we emerge into a new post-industrial millennium where the sweaty trades of old, such as mining and heavy industry, no longer require extensive fluid replacement for the workforce at the end of the day, beer sales are steadily dropping. A pessimist could argue that beer is, in fact, looking less and less like the British national drink of the 21st Century. Where will it all end? Bacardi mixers, Baileys and Bristol Cream all round?
The full scale of the difficulties facing a company like Batemans - which produces cask-conditioned or 'real' ale exclusively - can only be realised when you consider what the big boys produce. Lager is now king, having overtaken ale in volume terms back in 1989.
In a hugely over-stocked market, two mega-brand big boys have risen to the top of the pile: Carling Black Label and Fosters. This pair of gassy-liquid leviathans have cornered 13.5% of the UK beer market between them. What is even more terrifying is that Fosters grew by an amazing 20% last year, pushed upwards by a marketing spend of £25 million. Two million pints of it go down the hatch here every day, which means it has an annual retail sales value of more than £1 billion - more than Mars, Persil and Pepsi combined - a sizeable chunk of which goes to the chancellor.
John Young's feelings about Australian lagers are barely printable. 'Mr John' is the mighty 77-year-old patriarch of Young's of Wandsworth in south London. He had a spot of bother at this year's company AGM with an antipodean, Blake Nixon, representing City investors Guinness Peat, which holds 18% of Young's A shares. Guinness Peat was unhappy with the way the company was being run and wanted to 'unlock shareholder value for everyone'.
Young's share structure, which means that family members and former employees have 60% of the voting rights, meant that the Guinness Peat motions to re-organise the system stood no chance. John Young, who has attended previous AGMs equipped with boxing gloves, symbolically cast aside a dog's muzzle before haranguing Nixon. Another 66-year-old in the audience said she had three sons in the City and, 'if any of them acted like Mr Nixon and his organisation, she would give them a sound thrashing'.
'Bloody colonial carpetbaggers,' splutters Young at the memory. He's still not happy about reports in the News of the World after the resignation of former Welsh secretary Ron Davies, which described his prized Windmill pub on Clapham Common as 'a noted gay hang-out'.
Nor is he happy about the practice of some employers who now apparently breathalyse workers on their return from lunch breaks. 'I didn't fight Hitler and Mussolini over totalitarianism (he was mentioned in battlefield dispatches) so that working people would be banned from having a drink in a pub at lunchtime. It's a disgrace.'
Truly, a couple of hours spent with John Young must be one of the liveliest ways to pass time outside a place of public entertainment.
Young's was regarded for a while as one of the sleeping giants of the industry and Guinness Peat clearly regards it as still half asleep. Even Young concedes that the company allowed things to stagnate in the late '80s and early '90s, neglecting its off-trade sales. 'But that's all over. Now we're on the up and up,' he says. It has a new marketing director and profits are up 27% to £6 million on a turnover of £78.5 million. Being strong in London, the book value of its fixed assets, including 181 pubs and hotels, is a cool £164 million.
The company exudes history. The earliest record of commercial brewing in this part of Wandsworth goes back to 1581, although the Youngs became involved at the beginning of the 19th Century. John's long-suffering and heavy-smoking son, James, is deputy chairman.
'I don't shout at you, James, do I?' barks John. 'Yes, you do, sometimes,' replies James, quietly.
James' wife, Clare, runs the wine division in their pubs and has pioneered high-quality wines preserved in vacuum-sealed bottles. As yet, the couple have no children.
In a business such as this, there are clearly values besides the bottom line. Young's is not ashamed of its strongly paternalistic culture, which was encouraged by John Young's father, Allen, a socialist, who was strongly opposed to nepotism. There are workers in the brewery whose families have been Young's employees for generations and its profit-sharing scheme was one of the first of its kind.
Neither is the company ashamed of its love of animals and has a virtual menagerie living within the brewery walls. Their famous king-sized dray horses, which deliver to nearby pubs, recently got involved in two road-rage incidents with impatient drivers, which led to bolting dashes. They had to be withdrawn for a while. 'It's incredible,' says John Young. 'I've even been rung up on my mobile by men bellowing that they're stuck behind our horses on Putney Bridge.'
The in-house ram - a stubborn indomitable symbol of the brewery and its corporate identity - resides there, along with a donkey, a few geese, three goats and a Shetland pony.
Which leads us back to the more subdued, animal-free surroundings of that quiet creek in Faversham and the next in the generation of Neames.
Jonathan, now trade director, aged 34, is the image of his father, but with fair Fotherington-Thomas curls. He was called to the Bar, then spent several years with COBA, a consultancy formed as a breakaway from Bain.
Jonathan knows the values of a family business but he is not a sentimental man. 'We are not running a charity here,' he says. Jonathan's parents separated when he was quite young. He stayed with his mother, then went away to boarding school. So he's having far more to do with his father now than he did as a child.
'Inevitably inside a family business there are some pretty frank discussions,' he says. 'But on balance we work pretty well together.' What about the future? Does he think they'll be run in the same way in 50 years' time or will we all be washed away on a tidal wave of Fosters?
'It'll take a very strong family to hold the whole thing together,' Jonathan says. 'The last thing you want is an ineffective family member as chairman.'
If he makes it to the top job, ineffective is one thing Jonathan Neame is unlikely to be.