Scottish & Newcastle deal marks the end of an era

THE inimitable stench of hops, once ever-present across the capital, has all but disappeared.

And now with the takeover of Scottish & Newcastle (S&N), the future of one of the last brewing companies that in the past helped Edinburgh gain its nickname of "Auld Reekie" is now in doubt.

S&N has occupied a fond place in the capital's heart for generations, from its small beginnings in Leith to its current standing as a multi-national company.

But the £7.8 billion bid by European brewing giants Carlsberg and Heineken heralds the end of S&N in its current form.

William Younger established his brewery in Leith in 1749 and although his modest firm expanded and underwent numerous mergers and changes, it has always taken pride in its Scottish heritage and remained headquartered in Edinburgh.

But after more than 250 years, the demands of the global economy have hit home and S&N has become the latest part of Scotland Plc to be acquired by interests from overseas.

With a 1,000-strong workforce and a corporate headquarters in Edinburgh, Scotland remains an integral part of the firm's brand identity.

Whether Heineken, which is set to take control of S&N's UK interests, is likely to agree remains to be seen.

The head of Scotland's licensed trade body believes such factors ought to encourage S&N's new owners to not only maintain their presence north of the Border, but invest in it.

Paul Waterson, chief executive of the Scottish Licensed Trade Association, said: "There's always concern when there's a takeover, and we hope S&N will still be based in Edinburgh and have Scotland at its heart.

"It's as important for the country as it is the licensed trade industry, and we've seen how damaging it can be when whisky companies have been lost and swallowed up."

The deal also raised concerns from the Campaign for Real Ale (Camra) over consumer choice and the future of S&N's products which include John Smith's, Newcastle Brown Ale and Foster's alongside the familiar Scottish brands.

Mike Benner, the organisation's chief executive, warned: "The inevitable result of consolidation is brewery closures, brand losses and less choice for Britain's consumers."

S&N began in 1749 when Younger noticed a niche in the market. With plans for the New Town fast progressing, the construction sites were filled with working men.

A canny Younger thought it a prudent business plan to quench their thirst, and soon, the likes of his Edinburgh Pale Ale found widespread favour.

After two centuries of consolidation in its heartlands and a successful expansion internationally, S&N's portfolio held big-name brands including Kronenbourg 1664, McEwan's and Strongbow cider.

From that humble brewery in Leith emerged one of Scotland's most successful companies, proud to still be headquartered in its home city, exemplified by its successful rebuttal of a takeover attempt by Australian brewer Elders IXL in 1988, when S&N's feisty political savvy made much of its Caledonian roots.

According to Mr Waterson, that trait ought to be seen by Carlsberg and Heineken as an asset to build on.

He said: "We appreciate that business must move on, but maintaining the ethos of S&N is vital. The company has a hugely respected sales force in Scotland, and we need to keep the people, the tradition, and the culture intact. Carlsberg and Heineken have had a fairly anonymous presence in Scotland, and we have to hope they see this acquisition as a way of entering the Scottish market and investing to make it stronger."

The immediate future, of course, will be notable for basic pragmatism, not yearning for days gone by.

On the streets of Edinburgh yesterday, the concern was not over preserving S&N's brand identity, but job security.

John Chalmers, from Dalry, himself a former brewery worker at the firm, said: "Yes, a bit of history is biting the dust. But that's the thing about the free market – you don't really own anything. S&N aren't going to be losing any sleep over it, they'll be dancing all the way to the bank.

"It's a shame but it's naïve for anyone to get upset about any business unless you're going to be unemployed. I enjoyed my time there, it was hard work but it was part of the city. But we are just cogs in the machine."

A driver for S&N, who did not want to be named, said: "This doesn't mean to say brewing is going out of Edinburgh but I am going to start looking around for another job ASAP.

"S&N have been downsizing for years – they sold off the Fountain Brewery and bits of land and property all over the town, as if they were getting ready for the main event.

"But it's the shareholders who make the decision. Money talks.

"It's not as if some big bad wolf has come in. I suppose we'll be what they call 'collateral damage'."

With Alex Salmond, the First Minister, vowing to do all he can to safeguard jobs, only time will tell which part of S&N Heineken sees fit to streamline. Its administrative division is thought the most susceptible.

Iain MacLean, national officer of the trade union Unite, said: "(The takeover] will result in a period of uncertainty for the workforce and we are primarily concerned about the implications for UK jobs.

"We have a meeting with S&N next week, and we will be looking for Carlsberg and Heineken to guarantee the security of our members' jobs."

Shirley-Anne Somerville, the SNP MSP for the Lothians, added: "Scottish & Newcastle have a highly skilled workforce based in Edinburgh and the Lothians and it would be a great shame for all those employed by S&N if the new owners were to let those skills go."

Industry frothed up, but finally lost its fizz

EDINBURGH'S brewing industry began in 1749 in Leith, where William Younger founded the company that was to become Scottish & Newcastle (S&N).

The Victorian era was a good time to be in the trade, with the city's New Town slowly taking shape and waves of construction workers eager to slake their thirst.

With his Edinburgh Pale Ale, Younger did not disappoint, though by today's standards it may not have passed muster. It was, the Scottish writer and publisher Robert Chambers wrote, a "potent fluid, which almost glued (together] the lips".

Soon, others sought to emulate Younger's success. In 1856, William McEwan established his Fountain brewery, and half a century later, both companies – brewing 24 hours a day to supply a nation at war – merged to become Scottish Brewers. At the end of the Second World War, some 17 breweries were sited in Edinburgh, employing more than 4,000 people.

In 1960 another merger, with Newcastle Breweries, created S&N. But the mergers, Calvinist licensing measures and falling exports took their toll, and by the late 1980s and early 1990s, several breweries – including Heriot and Craigmillar – were wound down.

Finally, in 2004, the 150-year-old Fountain brewery also closed its doors.

MARTYN McLAUGHLIN

AN EDINBURGH INSTITUTION THROUGH THE AGES

1749 – William Younger Brewery established in Leith, Edinburgh

1803 – William Younger II acquires the Abbey brewhouse in Horse Wynd

1856 – William McEwan establishes his Fountain Brewery in the village of Fountainbridge

1890 – William Younger Company becomes a publicly limited company

1913 – On William McEwan's death, the running of the brewery in Edinburgh falls to his nephew, William Younger, from the Alloa Youngers

1931 – William Younger and William McEwan merge to form Scottish Brewers Ltd

1960 – Scottish Brewers and Newcastle Breweries merge to form Scottish & Newcastle Breweries Ltd

1965 – Thistle Hotels formed from a standing collection of traditional S&N hotels, to which the company adds a number of flagship purpose-built hotels in principal regional cities of the UK

1979 – S&N acquires theRoyal Brewery, Manchester

1985 – The company sells its Scotch whisky business, Charles Mackinlay & Co

1987 – The group acquires Matthew Brown breweries for £118m

1988 – The group purchases a majority shareholdings in Center Parcs and Pontins, and sells off its interests in the Thistle Hotel franchise

1995 – Acquires Courage for £429m

1999 – Takes control of Greenall's pubs, pub restaurant and lodge business for £1.4bn

2000 – Disposes of Center Parcs portfolio for £670m

2002 – Forms a strategic partnership with United Breweries, the leading brewer in India

2004 – Closes the historic Fountain Brewery in Edinburgh

2004 – Buys a stake in the Chinese Chongqing Beer Group, paying some £35m

2007 – Carlsberg and Heineken's joint takeover offers are rebuffed on two occasions

2008 – Carlsberg and Heineken eventually find success with their £7.8bn takeover of S&N

Source: MARTYN McLAUGHLIN and SHAN ROSS The Scotsman, Saturday, 26th January, 2008