50 East Fettes Avenue
Edinburgh EH4 1RR
Telephone: 0131 528 2000
Fax: 0870 333 2121
Incorporated: 1931 as Scottish Brewers Ltd.
Sales: $5.31 billion (1999)
Stock Exchanges: London
NAIC: 31212 Breweries; 72241 Drinking Places (Alcoholic Beverages); 42281 Beer and Ale Wholesalers; 44531 Beer, Wine, and Liquor Stores; 72111 Hotels (Except Casino Hotels) and Motels
1749: William Younger establishes the William Younger Brewery in Leith, Scotland.
1821: William Younger II, the founder's youngest son, combines the various Younger family interests into William Younger & Co.
1931: William Younger & Co. merges with William McEwan & Co. Ltd., forming Scottish Brewers Ltd.
1960: Scottish Brewers Ltd. merges with Newcastle Breweries.
1989: Scottish & Newcastle purchase a majority interest in two hotel chains.
1990: Company forms a retail division to manage its pubs and restaurants.
1995: The name of Scottish & Newcastle's beer division is changed to Scottish Courage.
1999: Scottish & Newcastle purchases a line of pubs, restaurants, and lodges.
2000: Company sells its hotel business and acquires majority interest in Danone Group.
Scottish & Newcastle plc is the United Kingdom's largest brewer. It produces several brands, including Courage, McEwan's, and Newcastle, which are marketed in approximately 50 countries. Scottish & Newcastle also owns and operates a 2,800-unit chain of branded restaurants and pubs, which serve Scottish & Newcastle beers. The company is in the process of selling two chains of vacation resort villages--Center Parcs and Holiday Club Pontin's. It is also in the process of acquiring a majority interest in Danone Group, a French brewing group with operations in Belgium, Italy, and France.
1700s and 1800s: The Youngers and the McEwans
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 its 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.
Mid-1900s: Scottish-Newcastle Merger
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 1960. 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 30 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 Rowell & 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 Ltd. 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.
Scottish & Newcastle produced and marketed wine and spirits through Mackinlay-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 1962, Christopher & Co. Ltd. was added in 1972, and wine and spirit distributors Gough Brothers Ltd. was owned from 1979 to 1984.
Expanding into the Leisure Industry: 1966-95
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, Scottish & Newcastle acquired a majority interest (65 percent) in the Dutch hotelier Center Parcs (founded in 1967), and 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 Parcs name in five countries and 17 Holiday Club Pontin's hotels in the British Isles. By that time, Center Parcs attracted more than three million guests a year to its recreation-oriented, natural settings.
Scottish & Newcastle 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 Scottish & Newcastle the Theakston line of ales and three breweries, which 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. Scottish & Newcastle became the fourth largest pub operator in the United Kingdom after acquiring Chef & Brewer from Grand Metropolitan plc in 1993 for £628 million. Operating more than 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. To promote food sales, it had no bars, but it did have a huge hall where Shakespeare eventually was 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 owned 1,700. Scottish & Newcastle'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. Scottish & Newcastle owned 2,300 pubs in 1990, when it employed 20,000.
Courage Ltd. Acquisition in 1995
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 18th 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 its products locally throughout the 19th century. Courage owned about 80 horses in this period, whereas a larger brewer like Barclay Perkins owned perhaps two to three times as many. After World War I they eventually were 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 20 brewers in Britain, and one of the top 50 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 postwar 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 1960, H. & G. Simonds Ltd., a brewing concern that 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. It denied United access, however, 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, Scottish & Newcastle also had made a bid for Courage, and observers saw the northern and southern firms as complementary. Courage's wary directors believed, however, that 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 nine percent of the British beer market in 1988. Scottish & Newcastle finally bought it in 1995. The purchase made Scottish & Newcastle Great Britain's largest brewer. Moreover, following the Courage merger, Scottish & Newcastle moved into the ranks of Europe's top six breweries. (Before the merger, only about 15 percent of Scottish & Newcastle's turnover came from Europe, including the United Kingdom.)
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. In addition to participating in the Harp consortium, Scottish & Newcastle 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.
Focus on Retail and Beer in 1999
In December of 1999, Scottish & Newcastle significantly expanded its retail division with the purchase of Greenall's pubs, restaurants, and lodges. The £1.4 billion acquisition consisted of 531 pubs, 234 pub-restaurants, and 61 lodges. This brought the company's total number of pubs to more than 3,400. Since Scottish & Newcastle was allowed to own no more than 2,739 branded, or 'tied' pubs&mdash mandated by the Department of Trade and Industry--the company was required to sell or 'unbrand' more than 700 of the outlets. In early 2000, therefore, Scottish & Newcastle agreed to sell 481 of its pubs to the Royal Bank of Scotland, and another 361 pubs to the Pub Estate Company. Together, the two divestitures generated £280 million.
After the Greenall's acquisition, Scottish & Newcastle restructured its retail division to include four discrete divisions: branded pubs, restaurants, local pubs west, and local pubs east. This restructuring was significant in that it evidenced Scottish & Newcastle's increased emphasis on branded pubs within its retail operations.
In February 2000, Scottish & Newcastle made a strategic decision to get out of the leisure business altogether by offering for sale its Center Parcs and Holiday Club Pontin's chains. The company felt that this divestiture would better allow it to focus on expansion of the beer and retail divisions. This intensified focus on expansion in the beer business was evidenced just a month later, when Scottish & Newcastle announced that it had entered into a merger agreement with Danone Group. Danone was the maker of France's top-selling premium lager. It also operated the second largest brewing operation in Belgium and held a 24 percent interest in Birra Peroni SpA, the second largest such operation in Italy. Under the terms of the deal, Scottish & Newcastle was to pay Danone a first installment of £470 million. In exchange, Scottish & Newcastle was to receive management control. Until May of 2003, Danone would have the option of selling its remaining interest to Scottish & Newcastle for £1.226 billion, or consolidating its holdings into a joint venture, of which it would own no more than 25 percent.
With the acquisition of Danone Group, Scottish & Newcastle was poised to become the second largest brewer in Western Europe, surpassed only by Heineken. Meanwhile, consolidation within the European beer market was rampant, with two major players in the U.K market--Bass and Whitbread--selling their brewing operations to larger competitors and focusing on their interests in the restaurant and hotel industries. It appeared that Scottish & Newcastle, however, would remain independent. In a June 2000 interview with Scotland's Evening News, Scottish & Newcastle's chief executive, Brian Stewart, outlined the company's plans: 'At the moment, we are satisfied that we can develop the business internationally as a major player. We will be the seventh biggest brewer in the world. We are satisfied we can move ahead from there on our own. We are not looking for partners.' It also appeared that Scottish & Newcastle would continue to focus on its beer business, rather than abandoning brewing in favor of pubs and restaurants.
Principal Subsidiaries: Center Parcs N.V. (Netherlands); Cleveland Place Holdings plc; The Chef & Brewer Group Limited; Huggins & Company Limited; Public House Company Limited (50%).
Principal Competitors: Bass plc; The Nomura Securities Co., Ltd.; Heineken N.V.
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