Changes a-brewing

Southwold brewer Adnams is proud of its past but has just invested £10m in its future, including a state-of-the-art brewhouse. A plc with strong family input, it has its own way of doing things, from a quietly profitable green strategy to a new product it hopes will reach the parts other real ales don't. Andrew Saunders reports.

Last Updated: 09 Oct 2013

They like to do things differently at Adnams. That much is plain as soon as you arrive at its picturesque Southwold, Suffolk, base, where the mellow yellow brick of the famous brewery contrasts with the white-painted wood of the landlocked lighthouse - and the slow, grey rollers of the North Sea break on the shore of the bay a hundred metres away.

There is no shiny office block, no towering atrium and, best of all, no surly security staff. Just a modest reception area and a ready smile and cheery hello. 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 equally far from the corporate archetype. In jeans and puffa waistcoat, he's dressed for the outdoors, not the boardroom; lean and weatherbeaten, he looks every inch the keen sailor that he is. Until quite 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 not unknown; visitors abandoned in this way must have felt 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 his laurels. The firm's brand-new £4m brewhouse is his pride and joy, the culmination of a five-year renewal programme, replacing equipment from the 1970s and earlier with the 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 what your ancestors did in the past,' he says.

Impressively high-tech to look at, the new plant is highly efficient and requires minimal human intervention - 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 to put in. 'I was up at six this morning playing with our new brewhouse,' he grins, adding that he has been trying to keep out of it till 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?' Judging from his barely restrained enthusiasm, they must all be used to dealing with a certain amount of 'advice' from the chairman, anyway.

Adnams is small - last year it made just over £4m on a turnover of £46m, and its shares trade on the tiddlers' Plus Markets 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 that Jonathan Adnams does. He's passionate about quality and consistency - whether it be the famous Adnams' The Bitter, the stronger Broadside ale or one of its 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 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, he adds. 'We used to get less than 1% of our barrels returned because the beer was spoiled,' he says. 'But now we are down to less than 0.1%.'

The business - it also includes a high-end wine merchant, a retail arm, 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. It 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. 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 natural construction materials and a reed-covered-roof, it doesn't need heating and air-conditioning systems to maintain an even temperature and should save £500,000 on energy bills over next 10 years. It was also a 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 that the firm has been taken over by a bunch of sandal-wearing eco-warriors. 'We're not tubthumpers, but we have been interested in sustainability and the environment since long before it became fashionable,' says MD Andy Wood. 'They're on our list of organisational values. Lot of firms have similar lists; we bring ours to life through our capital expenditure programme and decision-making.'

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 aspire.

'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. That Adnams can is because, in part at least, of its ownership structure - it may be a traded plc, but family interests control a majority stake.

Wood - younger, more overtly ambitious and definitely a snappier dresser - 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 patriarch, he is chairman of a plc, and we 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 Aviva (then Norwich Union) previously.

It all seems to be working. The cask ale market overall in the UK is in decline, 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 do so ad infinitum without new sources of growth. In forthright style, the firm is trying to create a brand-new market segment with its latest Spindrift ale.

A 'premium English ale', Spindrift is a cross between real ale and the pricey, premium draught lager punted out by mega-brewers like Inbev and SABMiller. It's a keg beer, served chilled, 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 the big brewers - 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 Adnams plans to hit that within a 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, sharpish. Surrounded by huge established rivals on one side and smaller, dynamic upstarts on the other, Adnams can't 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. Selling the Adnams range of bottled beers as well as independently sourced wines, plus a select range of kitchenware and foods, the shops are spread across the more affluent parts of 'greater East Anglia': Stamford, Woodbridge, Saffron Walden - places that, like Southwold, 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, 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 this is a tall order. '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.'

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, responsible for the successful 'Not just food... ' campaigns and a premier-league signing for the firm. And, yes, he does have a weekend place in Southwold.

Checking out potential locations, Farquharson has hit on an unexpected example of the benefits of doing things differently. 'Best practice 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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