Industry's Glass Is Left Half-Empty as UK Brewers Are Caught on the Hop; IN ASSOCIATION WITH Rensburg Sheppards Investment Management Faced with Ever-Spiralling Costs and Tax Hikes, 57 Pubs a Month Are Closing Down. Alex Turner Reports

Article excerpt

Byline: Alex Turner

BREWERS, like bookies and bankers, find sympathy in short supply when times get tough.

Beer alone accounted for profits of pounds 810m in 2000, according to a report by accountants Ernst & Young, so it will be difficult to find too many drinkers crying into their pint glasses at their current plight.

But the sector is going through some very tough times - pubs are shutting at an alarming rate and profits were down to pounds 65m in 2005 - as it fights battles on several fronts.

The smoking ban has been followed by the next moral crusade, against excessive drinking.

Alcohol duties continue to rise at a time when consumer spending is being constrained. Global rises in food costs have caused steep increases in the cost of the industry's raw materials, malt and hops. To cap it all, beer drinking is falling.

And that's before the indirect, but potentially damaging, effect of England's failure to reach this summer's Euro 2008 football championships. It's not just at the FA headquarters in Soho Square that this has caused concern.

The British Beer and Pub Association estimated that, in Euro 2004, supporters consumed an average of an additional 7m pints during the three group games and 10m pints in the defeat against Portugal.

Two years later, defeat to Portugal in the World Cup quarter-final took an additional 15m pints to help ease the suffering.

It was estimated that pounds 285m was spent on beer during the tournament, a figure that will be badly hit by the failure of any of the home nations to qualify for this summer's tournament in Austria and Switzerland.

While this accounts for only a fraction of the annual UK consumption of around 10bn pints, it is a missed opportunity that the industry can do without. The consumption of beer fell 7% - more than 700m pints a year - between 2003 and 2006.

The effects are not only hitting profits, but they are affecting the viability of pubs and chains.

Last week, Laurel Pub Company, the owners of brands such as Slug & Lettuce and Hog's Head, was reported to be on the verge of entering administration after it failed to find a buyer for its lossleading stores, which made up about one-fifth of the group's 460 outlets.

This led to the closure of most of the 95 loss-making sites, including Yates's Wine Lodge in St Helens. In January, the Sports Cafe chain went into administration, blaming the smoking ban and poor trading conditions. Investment fund Agilo bought five of the eight sites, but Liverpool, Manchester and Bristol were not part of the deal.

And Agilo is also expected to step in to rescue the UK's second-largest nightclub operator, CanDu Entertainment, after the company was reportedly close to going into administration.

Last week Luminar, the UK's biggest nightclub operator, which owns brands including Oceana and Liquid, announced it was slowing down its expansion plans to focus only on sites in prime target towns in light of "challenging" trading conditions.

Three UK pub chains have recently announced falls in like-forlike sales during the second half of 2007. Regents Inn, owner of Walkabout and Jongleurs, were down 3. …