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Scottish & Newcastle plc
Company Profile

Scottish & Newcastle plc
Abbey Brewery
111 Holyrood Road
Edinburgh EH8 8YS
0131 556 2591
Fax: 0131 556 2807
Public Company
Incorporated: 1931 as Scottish Brewers Ltd.
Employees: 44,256
Sales: £2.022 billion (1995)
Stock Exchanges: London
SICs: 2082 Malt Beverages: 5813 Drinking Places; 5180
Beer, Wine, and Distilled Beverages; 5921 Liquor
Stores; 7011 Hotels and Motels

Although Scottish & Newcastle plc operates two successful lines of hotels, its name and history are most strongly associated with beer. In 1994, almost half of the group’s revenues came from making and marketing beer. In 1995, having acquired the second largest U.K. brewer. Courage, from Foster’s of Australia, the brewing division of Scottish & Newcastle (S&N) became known as Scottish Courage Ltd. and the company became Great Britain’s largest brewer, displacing Bass Brewers Ltd. Moreover, following the Courage merger, S&N moved into the ranks of Europe’s top six breweries. (Before the merger, only about 15 percent of S&N's turnover came from Europe excluding the United Kingdom.) Scottish Courage markets such foreign brands as Holsten, Kronenbourg, Miller, and Anheuser-Busch in the United Kingdom.

Since the days of seafaring British colonialism, English beer has traditionally been marketed worldwide. More than 30 countries, including China, were supplied with Scottish Courage products in the mid-1990s. However, the home market has resisted foreign domination due to the strength of its own distinctive traditions. While most of the world switched to the lager style of beer developed in Continental Europe in the 19th century (particularly the pale Pilsner lager of Bohemia), the British remained largely loyal to ale. (The yeast used to ferment ales rises in foam; that in lagers, brewed at colder temperatures, sinks.) Several distinctive styles are associated with various regions in the British Isles: brown ales near Newcastle, for example, and milder ales and porter to the south.

Scottish & Newcastle’s roots begin with the establishment of the William Younger Brewery in Leith in 1749. Its founder left management of the brewery to his wife, Grizell, in 1753 when he became an exciseman. Grizell continued to operate it. and another brewery he had purchased in the late 1760s, after her husband died in 1770. Grizell Younger married the original owner of the second brewery, Robert Anderson, in the 1780s; by then her sons had apprenticed under her and the elder, Archibald Campbell Younger, had set up a brewery at Holyrood Abbey. This generation of Youngers established several other breweries in this area, and sold the Leith Brewery in 1801. In 1821, William Younger II, the youngest son, combined the various family interests into William Younger & Co,, which prospered in the 1830s and beyond. William Younger II took on his son, William Younger III, and Alexander Smith and his son Andrew as partners in 1836. Smith's son Andrew and several Younger heirs served as partners until 1887, when the company was registered as a limited liability company, two years before its stocks were traded publicly. The previous year, William Younger IV and Andrew Smith had built the Holyrood Brewery after purchasing an additional site next to the company’s existing property. This brewery continued to operate for 100 years, and was rebuilt by Scottish & Newcastle (partially financed by Guinness for the Harp Lager consortium) in 1971.

In 1931 William Younger & Co. merged with William McEwan & Co. Ltd., another Edinburgh brewer, forming Scottish Brewers Ltd. Later, Scottish & Newcastle would locate its headquarters in William Younger’s Holyrood Abbey Brewery and their production facilities in McEwan’s, each on opposite sides of Edinburgh, a brewing center since the monastic breweries of the 12th century.

McEwan’s was started by William McEwan, a shipowner’s son who established the Fountain Brewery in 1856 at Fountainbridge. Edinburgh, after serving an apprenticeship. McEwan's nephew. James Younger, managed the operation after 1886. when William McEwan entered political life. Three years later the firm was registered as William McEwan & Co. Ltd. Before the merger with Younger, McEwan s acquired the trade of yet another Edinburgh brewer, Alexander Melvin & Co., in 1907. Scottish and Newcastle continued to brew at the Fountain Brewery into the 1990s. McEwan’s Export (sometimes identified as "MacEwan's" in foreign markets), a light ale, led canned ale sales for Britain in the 1990s.

Scottish Brewers acquired several more operations after World War II, including Manchester's Red Tower Lager Brewery Ltd. in 1956 and Edinburgh’s Thomas & James Bernard Ltd., J&J Morison Ltd., and Robert Younger Ltd. in I960. In April of that year, Scottish Brewers and Newcastle Breweries merged to form Scottish & Newcastle Breweries Ltd. After the merger, the wines and spirits businesses were combined and the two brewing centers essentially carried on business as before.

Newcastle Breweries Ltd. had incorporated in 1890. Proud of its urban origins, the brewery’s logo featured the city’s skyline in silhouette against its trademark blue star. The city of Newcastle itself claimed, somewhat tenuously, to be England’s first brewing town. Newcastle Breweries was most strongly identified with its Newcastle Brown Ale (in the 1990s, the largest selling bottled ale in Britain), which continued to be produced in the city of its namesake throughout changes in ownership. Nicknamed “The (Brown) Dog,” the beer won a top award for bottled beer in London in 1928, a year after it was introduced.

Like Scottish Brewers, Newcastle Breweries was an amalgamation of regional brewers, all family-controlled: John Barras & Co. Ltd. (which dated back to 1770), William Henry Allison & Co., James, John & William Henry Allison, and Carr Brothers & Carr. The Barras company operated the Tyne Brewery, which became the center of the Newcastle Breweries’ production and, like the Fountain Brewery, remained operational under Scottish and Newcastle. In Newcastle Breweries’ first thirty years other brewers and pubs were acquired, such as John Sanderson & Sons (1898), Fosters’ Bishop Middleham Brewery Ltd. (1910), Addison, Potter & Son (1918), and Matthew Wood & Son Ltd. (1919). Between the end of World War II and the creation of Scottish & Newcastle, Newcastle picked up the Northern Corporation (1955), the Duddingston Brewery (from Steel, Coulson & Co. Ltd. in 1954), James Deuchar Ltd. (1956). and John Rowel) & Son Ltd. (1959).

In the 1950s and 1960s, many breweries were scrambling to form alliances of one type or another. Some brewers, including Courage, Barclay, and Newcastle, received some protection from hostile mergers in the form of the Whitbread “Umbrella,” investments by the giant brewer in the late 1950s. In return, these associations offered Whitbread certain marketing advantages. Another type of alliance was formed in 1961, when Courage, Barclay & Simonds, Scottish & Newcastle, and Bass, Mitchells, & Butlers all joined Ireland's Guinness firm in the Harp Lager Lid. consortium, which produced a very successful draught lager, quickly leading its category in sales. The Harp lineup changed considerably over the years, with Courage and Scottish & Newcastle leaving in 1979 but becoming franchisees.

S&N produced and marketed wine and spirits through Mac-kinlay-McPherson Ltd., formed in 1962. This division was later known as Waverly Vinters. It sold the products of Glenallchie Distillery Co. Ltd. and Isle of Jura Distillery Co. Ltd. County Hotels & Wine Co. Ltd. was acquired in the 1962; Christopher & Co. Ltd. was added in 1972, and wine and spirit distributors Gough Brothers Ltd. were owned from 1979 to 1984.

In 1965, the company entered the leisure industry with Thistle Hotels Ltd., which was expanded in 1979 with the purchase of Thorn EMI’s hotel group. In 1989. S&N acquired a majority interest (65 percent) in the Dutch hotelier Center Parcs (founded in 1967) while it sold Thistle Hotels for £645 million. It bought Pontin’s Ltd. the same year. In 1991, the rest of Center Parcs was obtained. The Leisure Division achieved turnover of £406.6 million in 1995, when it operated 14 resorts under the Center Parc name in five countries and 17 Holiday Club Pontin’s hotels in the British Isles. By that time. Center Parcs attracted over three million guests a year to its recreation-oriented, natural settings.

S&N attempted to buy Cameron in 1984, but the bid was scuttled by government regulators. In 1985, Moray Firth Maltings was acquired. In 1986, when company turnover was £828 million, it acquired Nottingham's Home Brewery (including 450 pubs), and the next year (in its second attempt) Matthew Brown. These purchases gave S&N the Theakston line of ales and three breweries that continued to operate in the 1990s. The cost for the Home, Brown, and Theakston breweries was £272 million.

In 1990, a retail division, headquartered in Northampton, was formed to manage pubs and restaurants. Although ownership of bars by brewers was forbidden in the United States, this market could not be ignored, since it accounted for most of the beer sales in Britain. S&N became the fourth largest pub operator in the U.K. after acquiring Chef & Brewer from Grand Metropolitan plc in 1993 for £628 million. Operating over 2,600 sites in 1995, including those of Inntrepreneur Estates Ltd. acquired in the Courage merger, the division earned operating profits of £142.7 million in 1995 on turnover of £722.7 million. Brands included Chef & Brewer, T&J Bernard, Barras & Co., and Rat ‘N’ Parrot ale houses; Homespreads and Country Carvery & Grill restaurants; and Vino Veritas bistros. Big Hand Mo, a line of pubs featuring video games, was designed to attract 18- to 24-year olds.

The forerunners of these establishments were the revived, multi-use pubs introduced by brewers such as Courage and Newcastle in the 1920s and 1930s to meet the demands of competition and public responsibility. The brewers sought to attract middle-class customers with elaborate architecture and restaurants. Barclay Perkins opened one of the most grand, the Downham Tavern, near Bromley in 1930. In order to promote food sales, it had no bars, but it did have a huge hall where Shakespeare was eventually performed. Nevertheless, the take-home market eroded pub sales so that by 1980 pubs only supplied 63 percent of the beer market, down from 80 percent in 1955. In 1963, Courage, Barclay & Simonds owned 4,800 establishments; Scottish & Newcastle 1,700. S&N’s holdings remained between 1,400 and 1,700 houses for the next two decades, but by 1970 Courage owned 6.000. which fell to about 5.000 by 1986. John Smith’s owned 1,536 in 1967. Amusement With Prize machines helped brewers dependent on tied estate survive through hard times. In the mid-1970s. Courage received about £2.5 million per year from them. S&N owned 2300 pubs in 1990, when it employed 20.000.

The name of Scottish & Newcastle’s beer division was changed to Scottish Courage Limited in 1995 after taking over Courage Ltd., a wholly-owned subsidiary of Foster's Brewing Group of Australia in a transaction worth the equivalent of £858 million. Based in Bristol and Plymouth, Courage had been traditionally strongest in the southwest of England. John Courage. a shipping agent and a Scot of French Huguenot extraction, founded Courage at a brewhouse he bought in London for £615 in 1787. After his death in 1793. his wife Harriet took over the firm's operation; she was succeeded by John Donaldson, the senior clerk, upon her death in 1797. Within a few years Donaldson had become a partner. Around mid-century John Courage. Jr. and his sons began to run the business as the Donaldsons assumed a less active role.

Although the company specialized in mild ale, Courage brewed porter (which from the 1700s to the 1830s had been London’s main brew) in a London brewery acquired in the late Eighteenth Century; production there ceased in 1980. In the late 1800s Courage bought fashionable pale ale from Burton brewers to meet demand in London; in 1903 it bought Hall’s Hampshire brewery, rebuilding it.

Courage produced an estimated 10,000 barrels in 1830 and 250,000 in 1880. The company, typical of London brewers, continued to use draught horses to distribute their products locally throughout the 19th century. Courage owned about eighty horses in this period, a larger brewer like Barclay Perkins, perhaps two to three times as many. After World War I they were eventually displaced.

At the turn of the century, Courage sought ownership of more pubs, and bought several brewers: Alton Brewery Co. (1903), Camden Brewery Co. Ltd. (1923), Farnham United Breweries Ltd. (1927), Noakes & Co. Ltd. (1930), C. N. Kidd& Sons Ltd. (1937), and Kingston Brewery Co. Ltd. (1943). In the Edwardian period. Courage was one of the top twenty brewers in Britain, and one of the top fifty industrial concerns. William McEwan, William Younger, John Smith, and Newcastle Breweries occupied a lower tier.

In 1957, Courage & Barclay Ltd., a limited liability company registered in 1955, took over the brewing rights of both Courage & Co. and Barclay, Perkins & Co. In the post war years, Courage & Barclay was the country’s fourth largest brewer, based on its capital of £15.8 million. A new wave of acquisitions followed: Reffell’s Bexley Brewery Ltd. (1956), wine and spirit merchant Charles Kinloch & Co. Ltd. (1957), Nicholsons & Sons Ltd. (1959), and Yardley’s London & Provincial Stores (1959). In I960, H. & G. Simonds Ltd., a brewing concern which itself had expanded rapidly in the 1930s, was bought, whereupon Courage & Barclay Ltd. was renamed Courage, Barclay & Simonds Ltd. and its brewing rights were sold back to Barclay, Perkins & Co. Ltd., which then became known as Courage & Barclay Ltd. The company acquired a league of other breweries after these ownership shuffles, including Bristol Brewery Georges & Co. Ltd. (1961), Clinchy & Co. Ltd. and Uxbridge Brewery Ltd. (1962), Charles Beasley Ltd. (1963), Star Brewery Co. (1965), Plymouth Breweries Ltd. (1969), and John Smith's Tadcaster Brewery Co. Ltd. (1970). Again, in 1970, the company changed its name, to Courage Ltd.

The 1961 takeover of Bristol Brewery Georges came in response to a United Breweries takeover attempt, and outbidding United proved quite expensive: Courage & Barclay paid about £19 million for share capital previously valued at £12 million. However, it denied United access to Courage’s home territory, the South. The same year, a merger with Bass was discussed.

John Smith’s brewery in Yorkshire, next door to the Samuel Smith brewery, merged with Courage in 1970. John Smith’s dated back to 1847. A new brewery, housing Courage’s headquarters, was built in 1883, and another brewhouse was added in 1976: yet another replaced the original in 1984.

In 1972, Imperial Tobacco Group Ltd., continuing a diversification into less controversial products, bought Courage for £320 million, whereupon it became known as Imperial Brewing & Leisure Ltd. Ironically. S&N had also made a bid for Courage, and observers saw the northern and southern firms as complementary. However, Courage’s wary directors believed the company would be significantly restructured in such a deal, beginning with a relocation of its headquarters to Edinburgh. In 1986, when Courage's turnover was £839 million, Hanson Trust plc acquired the Imperial Group and sold Courage to Elders IXL (owners of the Foster’s brand) for £1.4 billion. Courage held 9 per cent of the British beer market in 1988. Scottish & Newcastle finally bought it in 1995.

Scottish and Newcastle’s considerable success from 1960 to 1980 was powered by a few brands—such as Newcastle Brown Ale and McEwan’s Export—that led the free trade sector. From 1965 to 1975 its U.K. sales nearly doubled; its free trade sales increased by about 150 percent. Besides participating in the Harp consortium. S&N developed its own lager brands— McEwan’s and Kestrel—in the mid-1970s. The acquisition of Courage strengthened its brand lineup overall, to the point of possibly overstocking its import lager category.

The title of largest brewer in the United Kingdom has shifted several times throughout the centuries. With virtually all of its units posting sales gains in the mid-1990s and overall profits up 19 percent in 1995, Scottish & Newcastle plc seemed assured of a reasonably long tenure at its unique position in the world of brewing.

Principal Subsidiaries:

Center Parcs N.V. (Netherlands); Cleveland Place Holdings plc; The Chef & Brewer Group Limited; Huggins & Company Limited; Waverly Vinters; Canongate Technology; Moray Firth Maltings; Public House Company Limited (50%).

Principal Divisions:

Scottish Courage Limited: Scottish & Newcastle (Retail); Leisure Division.

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