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Adnams Consultancy Project Imperial College London Hannah Griffiths, Oliver Lawder, Sarah Robertson, Mark Scott, Animesh Sourabh


Acknowledgements We would like to thank Adnams for the opportunity to work on this project. In particular, we couldn’t have succeeded without the help of Andrew Brookes and Emma Hibbert. We also appreciate the time both Andy Wood and Kevin Wells took to show us around the Southwold distribution centre. Special thanks go to Mike Tennant – our fearless leader – whose insight and feedback kept us on the right track. Finally, we’re grateful to our colleagues on the Business & Environment Option who gave us much-needed advice and lifted our spirits when the going got tough.


Table of Contents EXECUTIV E SUMMARY: ________________________________________________ 1 PROJECT SCOPE: ______________________________________________________ 3 HISTORY AND ACHIEVEMENTS : ______________________________________________ 3 VALUES AND APPROACH TO THE ENVIRONMENT: _________________________________ 3 THE BRIEF: _____________________________________________________________ 5 DELIVERABLES: __________________________________________________________ 5 REFINING THE DELIVERABLES: _______________________________________________ 6 O VERARCHING STRATEGY: _________________________________________________ 7 MARKET RESEARCH AND TRENDS: ______________________________________ 9 THE DRINKS I NDUSTRY: ___________________________________________________ 9 SUSTAINABLE SUPPLY CHAIN BEST PRACTICE: __________________________________ 12 ADNAMS’ BUSINESS: ____________________________________________________ 16 ADNAMS’ SUPPLY CHAIN: _________________________________________________ 17 ADNAMS’ SUSTAINABLE SUPPLY-CHAIN BEST PRACTICE: __________________________ 18 SUPPLY CHAIN CHALLENGE & STRATEGY: _____________________________________ 20 THE BITC MAYD AY NETWORK: ____________________________________________ 21 THREATS AND OPPORTUN ITIES: _______________________________________ 22 PESTLE: _____________________________________________________________ 22 MATERIAL I SSUES TO ADNAMS AND ITS SUPPLY CHAIN: ___________________________ 23 CONCLUSIONS & I MPLICATIONS: ____________________________________________ 26 RECOMMENDATIONS: ________________________________________________ 27 FIRST PHASE (ENCOURAGE, EXEMPLIFY, REWARD): ______________________________ 28 SECOND PHASE (EXPANSION): _____________________________________________ 32 RISKS & MITIGATION STRATEGIES (ENCOURAGE, REWARD, EXEMPLIFY): ______________ 34 THEORY (BEHIND RECOMMENDATIONS): ______________________________ 36 AREAS OF FURTHER RESEARCH: _______________________________________ 40 REFERENCES_________________________________________________________ 42 APPENDICES_________________________________________________________ 46 COMMUNICATIONS LITERATURE:____________________________________________ 46 ADNAMS’ B EST PRACTICE (RECOMMENDATIONS):_______________________________ 48 POTENTIAL REWARDS (RECOMMENDATIONS):__________________________________ 50 COMPETITION LAW: _____________________________________________________ 52 BEST PRACTICE ACROSS I NDUSTRIES:_________________________________________ 54 SECONDARY RESEARCH O VERVIEW:__________________________________________ 59


Executive Summary: Adnams has been brewing ales in Southwold since 1872. It’s a values-led company with a brand identity based on pride and passion, a sense of place, innovation, and quality. The company already has one of the most energy efficient and water efficient breweries and distribution centres in Britain.

Adnams’ brief presented us with the goals and expected deliverables from the project. In the scoping section, we identify the project’s challenges, and explain how we refined the deliverables in light of these to maximise the desired impacts and meet Adnams’ strategic goals.

Business goals: 

Focus on ‘win-win’ solutions that also minimise cost and/or mitigate risk.

Minimise the operational and implementation cost of potential supply-chain solutions; Maintain existing supplier relationships.

Avoid replication of existing efforts.

Grow markets overseas.

Refined Deliverables: 

Research best practice to identify what can be learnt from others.

Create a cost-effective strategy for influencing the supply chain to adopt more sustainable practices.

Design incentives targeted at specific areas of Adnams’ supply chain.

Write communications literature to support the roll-out of the above supply-chain strategy and encourage sign-up to the project, including the BITC MayDay Network.

At the heart of the brief is the need to both influence and incentivise. Adnams requested the following constraint: Suppliers are not to be ‘dropped’ or threatened with contract termination to bring about change. The solutions we propose integrate collaborative approaches, reward rather than punish suppliers, and establish a collective vision across Adnams’ supply chain.

Adnams has a diverse supply chain, and it was clear from the project’s start that a ‘one-size-fits-all’ approach would not be feasible. This presented two challenges: 

How to develop an overarching strategy that could accommodate for this diversity over time and allow Adnams influence the entire chain.

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Where to focus our efforts when developing incentives to maximise return on investment.

It was important to avoid replication of existing initiatives or focus on areas that already are being successfully managed by Adnams. We, therefore, have focused on suppliers involved in the company’s core business operations of brewing and distributing beer. But, as will be explored later, many of the recommendations can be applied more broadly across the supply chain.

We conducted secondary research into the key market trends influencing the drinks industry. We identified best practice across applicable sectors, and available platforms and supporting bodies to gather inspiration and understand the best mechanisms for delivery. We undertook a detailed analysis of Adnams’ supply chain using perceptual mapping to identify the material challenge s to the business.

Our key findings were that the greatest potential for greening the supply chain will come through cooperation with other regional brewers. Because of Adnams’ size, the integrated nature of the supply chain, and the mutual threat from large and micro-brewers, it is only by acting as one that regional brewers can maximize the returns form sustainability efforts.

We recommend Adnams build a peer-led network of regional brewers that develops a shared vision for sustainability. The company should use BrewFIT, a current collaboration focusing on finance and IT approaches, as an initial starting point, so that Adnams can influence its supply chain. We have delivered example communication literature that can help persuade other regional brewers.

Our recommendations also detail the structure for delivering an incentive system deployable within BrewFIT and across the supply chain when supported by the BITC Mayday Network. The incentives are broken down into a three-stage process: Encourage Change, Reward Action, Exemplify Results. We also have included key risks and mitigation strategies needed for successful implementation.

We also detail the theoretical underpinnings of our recommendations. We cover human behavioural psychology linked to spreading and sharing ideas, and the foundations of cooperation. We identify the power of creating frameworks for supporting collective progress, the benefit of collective power, and the need for divergent thinking to deliver system-level solutions.

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Project Scope: History and Achievements: Adnams has been brewing ales at the Sole Bay Brewery on the Suffolk coast in Southwold since 1872. Renowned for its cask conditioned ales and bottled beers, Adnams can be found widely in East Anglia, across Britain, and in international markets. Its locally sourced ingredients produce beers such as Broadside, Explorer, and Lighthouse, which are available in more than 2,000 UK stockists. Moreover, Adnams’ beers are growing in popularity abroad, particularly in the United States and Scandinavia.

The company has distilled its own spirits – vodka and gin – since 2010, soon to be followed by whisky in 2013. In addition, Adnams sells wine found from all over the world. The company owns: An estate of seventy-four pubs in Suffolk, Cambridge, Essex, Norfolk and London; Five hotels and self-catering accommodations; and a Chain of ten wine and kitchenware stores.

Quality and innovation pervades the Adnams brewing heritage: The company has won countless awards and medals since the company was founded. For example, Adnams was named “Business of the Year” in 2002, and was the first small company to win top honours in Business and the Community’s annual Awards for Excellence – the 2003 Impact on Society Award. More recently, Adnams won “Beer of the Year” in 2011, awarded by The Good Pub Guide.

Adnams is an active member of Business in the Community (BITC), and is keen to share, influence, and learn from others. The Adnams charity was founded in 1990 to celebrate Adnams’ centenary as a public company. It awards grants to causes within a 25-mile radius of Southwold. Grants are funded from a percentage of Adnams’ profits and go towards projects in education, health and social welfare, the arts, recreation, building facilities, and environment/conservation.

Values and Approach to the Environment: Adnams believes ‘doing the right thing makes business sense’, and is committed to managing its operations to make sure the company’s impact on the environment and society is a positive one. Adnams’ connections to Southwold are of fundamental importance to its brand. The company associates itself with the tranquil landscape and traditional sense of community. Adnams’ values are rooted in making great products without costing the earth, combining social and business benefits with

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long-term sustainable success. The company strives to continuously improve environmental performance through capital investment and driving business efficiencies.

The company’s values are: Working towards a sustainable future; Encouraging diversity of choice, experience and employment; Fulfilling customers and employees; Offering the best quality products and services; Managing environmental impact; Building strong relationships; Committing to values, and translating them into everyday realities; Taking pride in the local community; and Inspiring others.

Adnams’ values were strengthened in 2000 when the company’s organisational structure changed (more detail below in ‘Market Trends’ section). Adnams builds its staff’s self-esteem and encourages them to lead from its values and beliefs. The staff is committed to the quality and character of the Adnams brand, and contributes within a progressive and values-driven environment. An employee survey conducted in 2003 revealed nearly 90% of respondents were ‘motivated’, or ‘extremely motivated,’ to work for Adnams, and ‘proud’, or ‘extremely proud,’ to be part of the company. The brand is based on pride and passion, a sense of place, innovation and quali ty. It is clear from the Adnams’ accessible advertising that the company does not take itself too seriously.

Furthermore, in recent years, Adnams has won acclaim as a leading company in the area of sustainability and carbon reduction. It has one of the most energy efficient and water efficient breweries and distribution centres in Britain with equipment such as: A steam capture and storage system; Solar-thermal panels; a Green roof; and an Anaerobic bio-digester, which not only powers the production of Adnams’ beer and spirits, but also returns green methane gas to the national grid. In 2008, the company also has launched ‘East Green’, the Britain’s first carbon neutral beer.

Adnams works closely with the Carbon Trust to achieve the big changes and it also has an Environmental Action Group with representatives across the business constantly looking at ways to reduce Adnams’ impact on the environment in smaller ways. For example: Replacing standard light bulbs with low energy versions; Introducing a policy to maximise tyre usage on HGVs; Ordering biodegradable plastic bags for the wine cellar and kitchen stores; and Formulating an internal education campaign to encourage changing behaviour.

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The Brief: The brief presented us with a specific business need, Adnams’ desired positioning towards their supply chain, and the expected deliverables from the project. In this section, we outline those elements and explain how we refined the scope to maximise the desired impacts to meet Adnams’ strategic goals, as well as identify the project’s challenges that helped refine the deliverables.

As outlined above, Adnams is a leader in environmental practice in the drinks industry. Its environmental practice is driven by an understanding that “taking sustainable decisions for the long term makes good business sense” (Adnams, 2011). It is based on two core assumptions: 

The cost of fossil fuels is going to rise

The polluter is going to pay (Wood, 2011)

Adnams’ strategy to pursue sustainable capital investment today for long-term benefit tomorrow is, therefore, both a cost saving and risk-mitigation exercise. The current focus on the supply chain is an extension of Adnams’ corporate strategy, which identifies the need to avoid “working with partners/suppliers who go against everything we have built our reputation on” (Adnams, 2009). Adnams recognises the reputational benefits of a strong environmental record. In response, this project has identified cost-effective measures that will help strengthen and secure Adnams’ bottomline and brand reputation.

Adnams values-led approach has implications for how the company wishes to position itself relative to the suppliers and partners it works with: “This is not about Adnams looking smug, or wagging our finger in a telling way, it’s more about passing on the message” (Adnams, 2011). Adnams is a mediumsized business with roughly 400 employees. Its ethos, therefore, appropriately recognises the company’s relative size (£51 million turnover in 2009 (Adnams, 2009), compared to £12.7 billion for Heineken (Heineken Annual Report 2010 - Home. , 2010)) and limited leverage with larger suppliers. The company pursues its sustainability agenda through collaboration and based on the need to have a balanced approach of “shar*ing+, influenc*ing+ and learn*ing+ from others” (Adnams, 2011).

Deliverables: Over the course of the project, Adnams gave us a clear sense of the business objectives. These included: 

Focus on ‘win-win’ solutions that also minimise cost and/or mitigate risk.

Maintain existing supplier relationships. 5


Avoid replication of existing efforts.

Grow markets overseas.

To spread the Adnams message to meet these business objectives, and reflect and reinforce Adnams’ positioning, several deliverables were outlined: 

Research what others have done in this area.

Develop minimum standards sign up for new suppliers.

Develop an incentive plan for customers.

As a minimum, we would like to encourage sign-up to the BITC MayDay Network.

These deliverables were discussed and explored with Adnams’ senior staff to identify how they related to business objectives and practical management constraints within which any solution would have to operate. In light of these discussions, we refined the deliverables to better meet the desired outcome (for more detail, see ‘Refining the Deliverables’): 

Research best practice to identify what can be learnt from others.

Create a cost-effective strategy for influencing the supply chain to adopt more sustainable practices.

Design incentives targeted at specific areas of Adnams’ supply chain.

Write communications literature to support the roll-out of the above supply-chain strategy and encourage sign-up to the project, including the BITC MayDay Network.

Refining the Deliverables: At the heart of the brief is the need to both influence and incentivise. Adnams’ environmental strategy focuses on ‘win-win’ solutions where both the environment and the business benefit. ‘Greening’ its supply chain, therefore, does not require significant direct investment from Adnams or a process of vertical integration through acquisition. The business case for environmental practice can, and should, be made to suppliers. Incentives should encourage and reward best practice , where necessary.

Adnams has an extensive supply chain due to the diversification of its interests across beer, wine, tiedestate pubs, hotels and shops. It was clear from the project’s start that a ‘one-size-fits-all’ approach would fail to account for the diversity among the supply chain. The relative sizes of different suppliers, and the variety of products and processes involved made such an approach infeasible. This presented two challenges:

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How to develop an overarching strategy that could accommodate for this diversity over time and allow Adnams influence over the entire chain.

Where to focus our efforts when developing incentives in order to maximise return on investment.

Full detail is provided in the ‘Recommendations’ section, but it is important to mention other constraints that were identified during the scoping process. These are primarily related to resourcing priorities, such as minimising the cost of implementation and operation in both direct financial terms and employee working hours. Any proposed solution was to require minimal management and very few, if any, additional personnel.

Alongside operational constraints, past attempts to spread environmental practice through the supply chain had failed largely due to overly complex processes of form-filling during contract negotiations with new suppliers. To avoid this approach and to reduce our recommendation’s administrative burden, we have moved away from formal process-orientated solutions to a more strategic approach based on encouragement and cooperation (for more detail, see ‘Recommendations’). Adnams, which chairs the Leadership team for East of England Business in The Community (BITC) Group, also wanted to assess the BITC Mayday Network’s potential to provide a platform for supply chain engagement.

A further constraint arose due to Adnams’ positioning as a ‘values-led’ business. Adnams is driven by a desire to work in partnership and to collaborate with those who share its vision for a more sustainable and efficient sector. It was made clear to us suppliers are not to be ‘dropped’ or threatened with contract termination to bring about change. However, all constrains contain opportunities, and this has been fundamental to shaping the project. The solutions we propose integrate collaborative approaches, reward rather than punish suppliers, and establish a collective vision across Adnams’ supply chain.

Overarching Strategy: Focus Areas: It was important to avoid replication of existing initiatives or focus on areas that already are being successfully managed by Adnams. The University of East Anglia is currently involved in a project to assess and propose environmental gains across Adnams’ tied estate by focusing on technological opportunities to improve the properties (Planning for conversion to organic , 2010). Adnams also has an existing strategy focused on energy reduction in its pubs and hotels, as well as communicating

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responsible drinking messages to its customers. These activities limited the potential for our project to contribute significant and new impact to these business divisions.

Adnams’ relatively new expansion into retail through its Cellar and Kitchen brand also was considered beyond the scope of this project. It is still a relatively small proportion of the business, and the re are existing efforts to work with wine suppliers (including the development of the ‘green leaf’ standard) – the main product category – towards more sustainable practices.

For these reasons, our project has focused on suppliers involved in the core activity of brewing and distributing beer. But, as will be explored later, many of the recommendations can be applied more broadly across the supply chain.

Spreading the Word: Adnams’ sustainability journey makes for a compelling story. While the company has been careful to tell the story to customers in a way that harmonises with its brand, Adnams CEO Andy Wood said the majority of benefits had come from B2B relationships, in particular with supermarkets (eg Tesco, rather than B2C) (Wood, 2011). Since this project is concerned with ‘spreading the message’ to supply chain partners, the scoping exercise identified a clear need for supporting communications material targeted at existing and potential B2B partners to tell Adnams’ sustainability story, highlighting the business benefits of environmental systems that would encourage them to become involved.

While the Adnams brand has a strong ‘sense of place’ and draws most of its beer sales from the South East of England, it is nonetheless keen to grow its market both in Britain and overseas. It has been an important consideration to identify how it can support this key business goal. In response, we have considered how our recommendations can help grow Adnams’ market share both at home and further afield.

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Market Research and Trends: The goal is to encourage members of the Adnams supply chain to reduce their harmful impacts on the environment. As a minimum, the brief asked for sign-up of supply chain to the BITC MayDay Network. To create the best strategy, we needed to gain understanding of the following areas: 

The Drinks Industry.

Best Practice in Sustainable Supply Chain.

Adnams’ Supply Chain.

The BITC MayDay Network.

The Drinks Industry: To understand the drinks industry, the group undertook secondary research from recent industry publications and market research reports, and primary research through interviews with key Adnams staff.

Secondary Research -- Market Reports and Articles Reports by Mintel, EBLEX, and Key Note covered the following aspects of the industry: Beer, Wines & Spirits, Sales, Consumption, Consumer behaviour, Public houses and Research & Development (R&D). For more detail, see Appendix ‘Secondary Research Overview’. Further analysis of these trends, and how they affect Adnams, are included in the ‘Threats and Opportunities’ section below.

The key findings from the reports are as follows: 

Alcohol is a highly legislated industry: Changes in government policies have the potential for huge impact on the industry’s future security. For example, the ‘Alcohol tax escalator’ has increased duty by two percentage points above inflation each year, and the smoking ban has reduced footfall in pubs. Recent government action, including the launch in 2007 of its ‘Safe Sensible Social’ campaign, the 2010 NHS review of spending on alcohol problems, and the sharpened criminal justice system on alcohol indicate a growing concern with binge-drinking and alcohol related health problems (Key Note, 2008).

Alcohol consumption continues to fall: Since its peak in 1975, alcohol consumption has fallen year-on-year (Key Note, 2010a). The sharpest decline since 1948 was recorded by the BBPA between 2003 and 2009 with a total decline of 13% (Key Note, 2008). The recent recession has had a negative effect on pub incomes. The price of beer has risen in pubs and bars much faster

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than it has in shops and supermarkets (Key Note, 2010b). This has contributed to the rise in home drinking, which threatens the security of pubs and smaller brewers, which do not have bargaining power with the supermarket giants (Muir, 2009) 

Consumer trends are evolving: The changing roles of men and women, immigration and evolving societal norms, changes in family life, globalization that enables new global, growing appreciation of wine, and the emphasis on eating, rather than just drinking alcohol (Key Note, 2010b) all fall under this category (British Beer & Pub Association - News. , 2010)

A move away from beer to higher-alcohol drinks: Recently released figures from the British Beer and Pub Association show there is a move away from lower-strength drinks towards higher-alcohol drinks. Beer producers believe this is due to unfavourable tax treatment for beer (British Beer & Pub Association - News. , 2010). Over the last thirty years, there has been a decline in ale drinkers. From 1978 to 1998, the proportion of ale to lager drinkers changed from 73:27 to 40:60 (UK Beer Statistics. , 2010). However, in the last few years, ale consumption has begun to rise. In 2010, ale's share of the overall beer market grew 0.2% to 20.6% (Real ale makes a comeback - Telegraph. , 2010). CAMRA (The Campaign for Real Ale) says that over 8.6 million people drink cask beer and the number of 18-24 year old consumers grew by 17% in 2009. Their recently published statistics from CGA Strategy 2009 show regional and local cask ale brewers increased volume by 1% and 5%, respectively, over recent years. CAMRA says: “Cask drinkers typically have a higher disposable income than non-cask drinkers, visit pubs more often, and spend more in them, not just on beer but on other drinks and food. Add to this the fact that it's usually the cask drinker who chooses the pub when groups of friends go out, and it's clear that cask ale can be a valuable sales and profit booster for our beleaguered pubs.” (Cask Report 2010-2011 27/09/10 - CAMRA. , 2010).

There has been a change in pub culture: Small ‘wet-led’ pubs – those whose offer is built around only drink – continue to close as the trend for ‘dry-led’ pubs offering food and entertainment, as well as their core drinks business, is growing. The closure of pubs in industrial communities has been growing for decades, but with rapid increase in the last two years. Today, 39 pubs close every week (Muir, 2009).

The growth of general health awareness: Beer, cider, and flavoured alcoholic drinks have declined in popularity as they are increasingly viewed as unhealthy. Wine and spirits, on the other hand, are seen as healthier options as they have fewer calories (Key Note, 2010a). This trend directly links to obesity, an issue of growing concern with strong potential for future

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government policy in this area (Key Note, 2008).Many producers are adding low alcohol, infused, organic, or fair-trade products to their beer to tackle this issue. Examples include: o

Asali Japanese ginger-infused beer, aimed at the health conscious and youth market (Key Note, 2010a).

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Butte Creek Brewing Organic Pilsner and Wells' Banana Bread Beer released in Britain in 2009, which were brewed using fair-trade bananas (Key Note, 2010a).

A trend towards both globalisation and micro-brewing: The British market illustrates the move towards global brewing: In the 1990s, foreign multinationals constituted less than 25% of the market, but following the acquisition of Scottish & Newcastle in 2008, they now make up 85% of the market. Smaller brands that don’t have the marketing and distribution operations are under threat (Key Note, 2008). There is also competition from the fast growing trend for microbrewers. According to Peter Swann, Professor of Industrial Economics at Nottingham University, the number of breweries in England fell from 1,324 in 1900 to 141 in 1975. This grew slowly to 480 in 2004, and is thought to have rocked to too today (Big beer producers caught on the hop, 2010).

The growth of R&D in Alcohol Packaging: Work in the last 20 years has lightened glass bottles. Several drinks manufacturers have created lighter bottles using embossing technology, including Coors, which has reduced its bottle weight by 13%. In 2009, Owens Illinois, the world’s largest glass container manufacturers, created a light-weight ‘lean green’ wine bottle using 25% less material. It also was responsible for the ‘Multi-layer plastic beer bottle’, introduced in 1998 by Heineken in Europe and Miller Brewing in the United States. This new bottle solved the problem of negative visual appeal, linked to Polyethylene terephthalate (PET), which until then was seen as the revolutionary alternative to glass for beer. Finally, Amcor created ‘Bind-Ox’, a material that prevents oxygen from reaching beer thereby adding to its shelf life, used to launch Beck's Gold in 2005 (Key Note, 2010a).

Primary Research -- Interviews and Company Presentations: To test the relevance of market trends to Adnams, we held informal interviews with key Adnams staff Andrew Brookes (Management Accountant), Emma Hibbert (Head of Corporate Affairs), and Kevin Wells (Head of Supply Chain). A brief Q&A with Chief Executive Andy Wood also was conducted on February 15 following a presentation on the business’ history, current stories, and future projects. These interviews were informal and carried out during a site visit, over the phone , and at Imperial College London. The group would have liked to conduct further interviews with sales representatives,

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farmers, and wholesalers, but it was not possible for Adnams to facilitate these meetings within the time frame. The aim of the interviews was three-fold: 

To probe into issues central to Adnams operations.

To attain a clear picture of day-to-day operations and the structure behind its green successes.

To explore Adnams’ motivation behind the supply chain project and any barriers to success.

Information from interviews with Adnams staff mostly mirrored our findings from the secondary research. However, two details differed: 

Adnams reported a growth in customer demand for cask beers and dark ales, bucking the overall market trend towards lighter ale and lager. This is possibly linked to the consumption of cask beer with food in Adnams tied estate.

Adnams did not suffer pub closures that beset the larger pub groups such as Enterprise Inns and Punch Taverns plc (Death of the British pub: Punch Taverns warns 1,300 locals have no future, 2010). The company ascribes this to continued investment in the business, ‘good oldfashioned service,’ and a quality business offering.

Sustainable Supply Chain Best Practice: We have produced an extensive list of best practices. We analysed over 70 different case studies across diverse sectors. The sectors include: Food and Beverages, Brewery and Spirits, Construction, Hospitality, Retail, Home Improvement, and Packaging. We have highlighted examples from Britain and overseas. The case studies were divided into 11 broad themes (for more detail, see Appendix ‘Best Practice Across Industries’).

The themes and number of case studies covered per theme are: 1) Supply Chain Management (17)

6) Responsible Drinking/Serving (5)

2) Use of Renewable Energy/Energy

7) Recycling (4)

through Waste (11)

8) Transportation (including Load Sharing) (4)

3) Energy Efficiency (9)

9) Fair Trade/Organic (4)

4) Packaging Reduction and Innovation (9)

10) Community Programs (2)

5) Water Efficiency (6)

11) Rainwater Harvesting (1)

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Best Practice: Summary (for more, see ‘Best Practice Across Industries’). 1) Supply Chain Management: One of the most widely used tools is providing the suppliers with an accreditation system, followed by regular audits. In some cases, the audit reports are uploaded onto SEDEX – an online platform to share ethical data within supply chains, which can be seen by other companies. Other policies include investing upstream to maintain a constant supply of raw materials and adopting a policy of using local produce wherever possible. 2) Use of Renewable Energy/Energy through Waste: Renewable energy technologies used by different companies include solar, wind power, fuel cell biodiesel, and light-motion sensors. The most common practice in the brewing sector is to use the nutrient-rich wastewater to generate electricity in a bio energy recovery facility, and use it in companies’ operations. This process avoided waste from going to landfill. Used vegetable oil also was converted to produce biodiesel. 3) Energy Efficiency: Energy efficiency is usually achieved by installing a new technology, which uses less energy. A commonly-used (passive) measure was to monitor energy use at each site and set targets for improvement. Performance league tables induce competition between different suppliers/sites. 4) Packaging Reduction and Innovation: Embossing instead of labelling has been used to light-weight bottles. Oxo-degradable and biodegradable materials have been used to reduce waste. Innovations in PET bottle technology have increased the visual appeal of bottle and shelf life of beer. 5) Water Efficiency: Companies have introduced advanced technology to either use less water or to reuse/recycle processed water. This included the use of air under high pressure in place of water to clean bottles. Water usage is monitored and figures are published regularly to inform the stakeholders of progress made. 6) Responsible Drinking/Serving: Responsible Drinking Campaigns are especially targeted at students. Bartenders’ training programs are run to equip them with responsible serving techniques. Communications are also produced and distributed to pub drinkers informing them on unit allowances. 7) Recycling: Aluminium cans are usually recycled. In some instances, waste from brewing can be used as an alternative cattle feed or aqua farm food. 8) Transportation (including Load Sharing): Pooling of transport arrangements with suppliers, customers, and competitors has been applied, and led to improved customer service, reduced stockholding, saving in fuel and vehicle costs, and carbon savings. Hybrid electric trucks have provided savings in both fuel and carbon emissions.

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9) Fair Trade/Organic: Some organic products used in the brewing process include Pilsner malt (Key Note, 2010) and Acai berries, while fair-trade products included are banana and Demerara sugar. 10) Community Programs: Community programs have involved water, sanitation, and health issues. 11) Rainwater Harvesting: Companies collect rainwater to rejuvenate surrounding aquifers and to reuse in their manufacturing plants. Other Issues – Labour and Food Security: Supply chain is a difficult area: Traceability of materials is a complex; Influence over suppliers is tenuous; and the implementation of codes and standards is difficult. That goes some way to explaining why companies have been slow off the mark to broach this aspect of their sustainability. Historically, certain industries have moved faster in this field. Amongst the first to tackle the social, economic, and environmental impacts within supply chain were the clothing and the food industry. Both can be linked to customer and NGO stakeholder pressure.

A series of press exposes in the late 1990s unearthed inhuman conditions for workers, who were creating garments for household brands, such as Nike and Gap. The ensuing public out-cry lead to swift action to improve transparency, management, and conditions within textiles supply chains. Today, the Sustainable Apparel Coalition (SAC) whose members include Gap and Nike strive for ‘an apparel industry that produces no unnecessary environmental harm and has a positive impact on the people and communities associated with its activities’ (Clothing Industry Giants Launch Sustainable Apparel Coalition. , 2010). Equally, public awareness and concern for food safety, fair wages for producers, and a general rise in health consciousness can be attributed to the increased transparency within the food supply chain.

Emphasis on ‘Stick,’ not ‘Carrot’: The most commonly-known success stories in supply chain improvement, such as Walmart (Wal-Mart: Making Its Suppliers Go Green - BusinessWeek. , 2010), have come from the ‘stick-’, not ‘carrot-’led approach. Companies have created strict measures and scoring systems on which they rank their suppliers. The threat of supply-chain expulsion or demotion to a less prominent shelf is a large incentive for compliance. However, Adnams has requested a soft approach to supplier action, which excludes expulsion due to non-compliance. We, therefore, will need to look for alternative ‘carrot-’led strategies of cooperation and relationship building to succeed.

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Best Practices – Possibilities for Regional Brewers: To manage supply chain partners, regional brewers can devise their own supply chain accreditation schemes suited to the beer industry. They also can use online supply-chain portal SEDEX to manage the supply chain data. This data is public and, therefore, available to other regional brewers, which can use it while making supply chain decisions. Using local suppliers, wherever possible, can be used as a branding strategy. Brewers also can provide forward contracts and pre-financing schemes to barley and hops farmers to ensure security of supply for raw materials. A platform like BrewFIT or the BITC MayDay Network can be used to share best practices in a non competitive space.

Energy and Water efficiency can be achieved in two ways: 

Active measures involve investing in a technology which uses less water and energy, or recycles waste water from the brewing process. Passive measures involve setting targets, measuring energy/water usage, publishing the figures, and ensuring targets are met – just like any other corporate targets.

Passive measures provide easy wins for any brewery, especially in their office space and warehouse establishments. They do not require any additional investment and can be achieved in shorter duration with support from staff. Pressurised air, for example, could be used in place of water to wash beer bottles to save water.

To meet a percentage of their energy usage, brewers can invest in renewable energy technologies (solar, wind, biodiesel, fuel cells). Waste water from brewing process is nutrient-rich and can be used to produce electricity. The payback period is usually shortened given the likelihood of future increases in oil and natural gas prices. The CO2 produced during fermentation process can be captured and used later for bottling beer to save energy. Energy usage also can be cut through joint logistics with other suppliers, which may lead to less vehicle and fuel costs, as well as a reduction in greenhouse emissions. The leftover grain from the brewing process can be used as cattle feed to provide an extra source of income.

To promote responsible drinking, brewers can initiate regional awareness campaigns, similar to Adnams’ existing campaigns, to increase their reputations with customers. They also can partner with the 'Drinkaware Trust,' which delivers educational guidance on responsible drinking.

Brewers can demand light-weight packaging and innovations from their packaging partners. They can call for innovations like PET, biodegradable or oxo-degradable packaging, all of which have a low

15


environmental footprint. These transformational changes can help brewers cut down their energy use, solid waste, and greenhouse gas emissions.

Fair trade or organic contents can be adopted if they are both price neutral and available in sufficient quantities. They should be proactively sourced, and provide another opportunity for product differentiation and branding.

Adnams’ Business: For the past decade, Adnams has been ahead of its direct competitors and the majority of their supply chain on ‘greening’ its operations. The company has become synonymous with an environmentallyfriendly and innovative way of doing business. Although Adnams’ environmental and ethical values are ingrained in its operations, it is clear the key driver behind successful green initiatives has been financial savings.

This ‘green’ leadership can be explained by Adnams’ change in operational structure in 2000. The move from a silo-based business structure to a meritocracy in which embedded values and market lead innovation drive decisions set the platform for the promotion of green project ideas. The open structure means ideas from all staff are given equal weight.

Although new areas of operation are thriving, Adnams continues to see brewing at the heart of its business. The company does, however, see the international export market as a key area for growth. Adnams is also acutely aware that it cannot compete with multinational brewers on price . It views its unique selling point and brand strength in its excellent service, passion, expertise, quality products, and sense of place.

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Adnams’ Supply Chain: The Adnams products supply chain can be depicted by the following diagram:

Sourcing of Raw Materials

Packaging

Brewing/

Transportation

Storage

Distilling

Pubs/Hotels/ Supermarkets /Cellar & Kitchen Stores/Other Breweries

Raw materials for brewing are mainly sourced from large farms in Europe and the United States. Hops, in particular, have distinctive flavours depending on their country of origin and the specific species grown. While Adnams sources locally as much as possible, the company has little ability to influence growers overseas, and it was stated that organic beer was not a current aspiration for Adnams due to lack of supply of organic certified ingredients (Hibbert, 2011). Transitioning a farm to organic methods can take three years (Planning for conversion to organic, 2010) and involves financial risk due to loss of yield during this period. There also is a concern regarding the impact on flavour, particularly if different variants were needed to suit organic methods.

Brewing and distilling is both energy and water intensive. Adnams has made efficiency improvements in both categories a priority. It has reduced water use to below the industry average and now reuses steam to decrease energy intensity. Efficiency savings in this category tend to require technological solutions and involve capital expenditure.

In terms of packaging, Adnams fills its own barrels, kegs, and firkins on-site at the brewery, but outsources its bottling operations to a nearby company. While the company has created a light-weight bottle, this process requires a close working relationship with the bottling company, as well as investment in research and development. Furthermore, bottle shape is considered an important part of the brand image, so standardisation across the industry is likely to be resisted, although this would greatly increase the viability of a collection and re-use scheme.

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Beers need to be stored at around 13°C to maintain their shelf-life (Wells, 2011). Ales are ‘live’ beers, which continue to ferment after they are sealed. Bottles, however, have a longer life. The key environmental implication is the temperature control of warehouses, particularly during loading and unloading deliveries where buildings are open to the external environment. Adnams have combating this problem by building double door entry areas to their eco designed distribution centre to maintain temperatures.

Because customers demand a range of brands in their pubs, storage and distribution will involve product from various manufactures. This means the nature of the drinks supply chain is highlyintegrated and everyone has product in others distribution systems. The upside is there are occasional opportunities for doing each other’s deliveries where there is an obvious efficiency saving. However, it also means it is difficult for companies to act in isolation if significant changes to the system are to be achieved. The presence of major multinational companies, such as Britvic and Carlsberg, can make it more difficult for smaller companies to innovate because of the significant leverage and public demand for large companies’ products. This has had a significant impact on our recommendations.

Transportation is a key area for all distribution industries, and a focus on efficient logistics has been a long-standing concern across industries. Fuel options for delivery lorries remain fairly limited and Adnams’ investment in using biogas from their anaerobic digester is highly innovative. Efficiencies are also constrained by their customers’ locations, which are unevenly distributed. In Norwich, for example, Adnams makes almost daily deliveries due to the concentration of customers. This leads customers to be less efficient with their ordering as they know Adnams’ focus on customer service will mean they will make the effort to deliver regardless of order size.

Adnams’ Sustainable Supply-Chain Best Practice: Data sourced on Adnams supply chain came from internal documents, senior management interviews, and a Q&A session with Supply Chain Manager Kevin Wells during a walk-around at the company’s distribution centre. When questioning Kevin, we explored the potential hurdles to Adnams ambition to green the supply chain, and the opportunities to optimise green behaviour already in place.

Adnams has addressed different parts of its business operations and its supply chain. Below is a table and summary of initiatives from across the company:

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Supply Chain Component

Initiative

Raw Materials

Sourcing of Bodicea hops in Suffolk, Barley malted in East Anglia, Long-term contracts with Local farmers. Organic or Biodynamic wine

Brewing

Energy & Water Efficient Brewery, The Copper House Distillery

Packaging

Lightweight Bottle

Storage

Eco-distribution Centre

Anaerobic Digester

Renewable Energy For Production and Sale

Transportation

Renewable Gas powered Trucks (in progress)

Carbon Neutral Beer

‘East Green’ Beer Production with Tesco

(Adnams, 2010) 

Raw Materials: Adnams has secured specific commodities needed in the beer-making process by engaging local, Suffolk farmers in long-term contracts. It also sources locally-grown hops and barley (where appropriate). The company employs two wine-buyers that work with small-scale vineyards that have similar environmental values. Adnams attempts to sell a proportion of wine that is either organically-grown or that is the result of biodynamic agricultural methods.

Brewing: In 2008, Adnams opened an energy-efficient brewery, which recovers 100% of the heat from each brew to reheat the next. It has reduced the amount of gas needed during the brewing process by 30% (Hibbert, 2010). The company has improved its overall water efficiency: It now takes 3.2 pints of water to make a pint of beer, compared to an industry standard of five pints of water (Hibbert, 2010).

Packaging: In 2007, Adnams light-weighted its beer bottle from 445g to 299g. The packaging reduction cut the company’s CO 2 emissions by 415 metric tons a year – the equivalent of taking 132 cars off the road (Hibbert, 2010).

Storage: In 2006, Adnams designed and built an eco-distribution centre, which has reduced the company’s annual energy consumption by over 50% (Adnams, 2007). The building uses 58% less gas and 67% less electricity per square metre compared to the old warehouse, and was one of the first industrial buildings to attain an ‘excellent’ rating under the BREEAM green-building standard (Adnams, 2007).

Anaerobic Digester: Energy and fuel: Adnams is planning to run its fleet of trucks on renewable energy produced by an on-site anaerobic digester. Opened in 2010, the facility cost £2.75 million,

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and generates enough electricity to heat 235 homes each year (Hibbert, 2010). The company has teamed with Waitrose, which supplies waste to the anaerobic digester from seven of its nearby branches and from a John Lewis department store. 

Carbon Neutral Beer: In 2008, Adnams launched East Green, the Britain’s first carbon neutral beer, which was distributed exclusively by Tesco nationwide. Every stage in the development of East Green – from the growing of the hops to the packaging – was designed to minimise carbon emissions. The remaining carbon, which equates to less than 1 penny per bottle, was offset through Climate Care (Hibbert, 2010).

Supply Chain Challenge & Strategy: The challenge for Adnams is to take appropriate measures to engage its supply chain partners and bring them together on the same platform to monitor environmental performance. This is an uphill task because of the breadth of its suppliers. Adnams has about 760 suppliers. The big players include Carlsberg, Heineken, Diageo and Coca-Cola, and regional partners, such as are Thwaites, Sheppard Neame, Fuller’s, and Charles Wells.

Adnams has limited bargaining power to persuade big brands to fall in line with their requirements. The company’s relationship with other mid-sized breweries is complementary as they stock or sell each other’s products. This limits Adnams ability to force partners to comply with its supply chain guidelines. It can only persuade its new partners to follow guidelines that are incorporated into contracts.

Given the breadth of its supply chain, it will be difficult for Adnams to have a ‘one size fits all’ supply chain guidelines. As a start, the company can concentrate on mid-sized regional partners. It maintains good relationship with them through BrewFIT – a body comprising major regional brands. The organisation currently meets three times a year to discuss finance and IT issues. This forum can be utilised by Adnams to expand the scope of discussions and include supply chain policy/guidelines to make a business case for environmental improvements (for more detail, see ‘Recommendations’ section below).

Adnams can approach the regional brewers with the following set of steps: 

Share its own examples and show the savings achieved.

Showcase examples of other major names in the food and beverage industry.

Provide a set of recommendations in the short- and long-term.

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Demonstrate the usefulness of tools like the BITC MayDay Network.

The BITC MayDay Network: The Business in The Community (BITC) Princes’ Mayday Network is “a collaboration of businesses at all stages on the low carbon journey.” It offers support for businesses, which are trying to reduce their environmental impact. It does this by creating a non-competitive forum for peer-to-peer learning where companies can ask each other for help and advice as well as share best practice and post case studies.

The Mayday network is a voluntary scheme based on the spirit of collaboration and, as such, does not impose mandatory targets (although it aims to achieve a 10% reduction in emissions by 2012 from a 2008 baseline). We were initially concerned this would be off-putting for Adnams’ suppliers as it leaves relatively little time to have impact. However, after discussion with The Mayday Network Director Matt Millian, it is clear the target is only an aspirational, and is meant to help give direction to the group as a whole, rather than a strict goal for each individual member. After 2012, there are no current plans to refine or replace the target, but the rest of the scheme will continue as it currently operates.

The Mayday Network also enables companies to share information on their emissions reductions, and the software that supports the members ‘journey’ from high to low carbon currently is being updated. This will allow Adnams to create an online group within which suppliers can communicate and report on their progress. However, The Mayday Network does not provide an independent validation scheme for members reporting, which could pose difficulties for incentivising members as the absence of third party assurance may lead to free-riders.

We also have considered ISO standards and the use of carbon-footprinting agencies to support efforts to green Adnams’ supply chain. While both may be useful, they will impose a higher burden on both Adnams and its suppliers in both financial and bureaucratic terms.

ISO standards require annual monitoring and reporting, as well as continuous efficiency gains. This will not only prove challenging for smaller suppliers, but also may not lead to the most efficient use of funds. It would be most effective, for example, to target the big-wins across the chain rather than focusing on marginal improvements within a specific area. Furthermore, this approach fails to recognise and encourage additional benefits gained by taking a systemic approach to improving the

21


environmental impact of the chain: For example, increasing emissions in one part of the chain to have a net saving across the chain elsewhere.

Carbon-footprinting is an effective way of identifying key areas to focus attention on reducing emissions. There are broader consultations available that would include water and waste impact, among other environmental issues beyond GHGs. There is, of course, a cost involved and the existing work done by Adnams, as well as other best practice in the sector, will serve to encourage supply chain partners to start reconsidering their operations. Nonetheless, the use of these services would be a valuable way to measure success, verify emissions savings, and bring fresh ideas to those involved should progress slow.

Threats and Opportunities: To make our research valuable to the project, we needed to analyse and synthesise it into meaningful recommendations that suit market conditions. The following section describes this process, and draws a series of conclusions from which we built the strategy and structure of our recommendations.

PESTLE: First, we used the PESTLE tool to build a clear picture of the key threats and opportunities to Adnams and its supply chain. We identified and categorised the macro-environmental factors (political, economic, social, technical, environmental and legal) that could potentially impact on Adnams current and future success. We selected the PESTLE analysis over a SWOT because of its focus on wider external factors. A SWOT (Strengths, Weaknesses, Opportunities and Threats) focuses on factors that affect the business directly. The PESTLE looks at issues on a local, regional and global level, while a SWOT looks at factors on a company level (Similarities Between SWOT & PEST Analysis, 2010).

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1

(Key Note, 2008); 2(Key Note, 2010b); 3(Key Note, 2010a);5 (Key Note, 2010c);6(Wood, 2011);7(The Publican - Home - Pub Food Trends: Back to the future, 2010);8(Small business, 2010);

The PESTLE shows the most prominent issues to the Adnams business. The data is taken from market research and interviews with key Adnams staff. Please see the Appendix ‘Secondary Research Overview’ for an enlarged, referenced version.

Material Issues to Adnams and its Supply Chain: Having identified the opportunities and threats, and macro market trends, we established the most material concerns to Adnams and its supply chain. If left unaddressed, these issues that could have disastrous operational, reputation, or financial impacts. The purpose was to select a specific group within Adnams supply chain on which to focus our strategy.

Initially, we wanted to carry out a materiality analysis. Materiality is a risk analysis tool used to identify, assess, and manage social, environmental, and economic issues. It ranks the identified issues by their internal significance to the business, their external significance to stakeholders, and the degree to which the company has control over the issues. External and internal significance ranks are then mapped against each other. Those issues ranked as high significance to both business and stakeholders are selected as a priority to accept, avoid, mitigate, or manage. However, when we tried to rank the issues in order of significance and level of control to stakeholders, we were reduced to basing positions

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on our own assumptions (due to lack of available data from the client). We therefore decided any conclusions would not be sufficiently objective. Instead, we elected to use perceptual mapping. This approach identifies two dimensions, (for example internal significance and internal control), and plots issues on a matrix. The resulting plot allows comparison of the importance of the issue and the level of control the company has. From the PESTLE and market trends research, we identified a list of ten key issues pertinent both to Adams and the wider brewing industry: 

Sector security for medium sized, regional brewers.

Growth of small microbrewers.

Globalization & big brand take-overs.

Growing utilities costs due to finite resource scarcity.

Security of raw materials threatened by climate change.

Growing fuel prices due to finite resource scarcity.

Alcohol consumption decline and the rise of health trends.

Recession & reduced customer spend.

Closure of pubs.

Increased ethical & organic demand.

We ranked these in order of their importance to Adnams, and in order of the influence that Adnams has over the issue. The issues were then ranked in order of importance to the industry and the influence of the sector over the issues. To determine which areas of Adnams complex supply chain to focus.

The two perceptual maps and ranking scales can be seen and compared below. Please note these issues have been ranked by the project team and not based on previous discussions with Adnams staff. Importance Ranking Scale

Influence Ranking Scale

1.0

Irrelevant

1.0

None

2.0

Awareness but no concern

2.0

Very small

3.0

Broad awareness and some concern

3.0

Small

4.0

Considerable concern among a few

4.0

Average

5.0

Widespread concern

5.0

Large

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Significance/Control of issues (Adnams):

Significance/Control of Issues (Other Brewers):

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Conclusions & Implications: • Security of regional brewers is important to Adnams and similarly positioned regional brands. Through collaboration, it is an issue that regional brewers could have a large impact on. The threat to the security comes predominantly from the rise of microbrewers and the growth of the globalised large sector players like Carlsberg & Heineken. • There is opportunity to add value to regional brewers through the creation of a peer group network. This would enable the sharing of best practice and innovation, where together members can strengthen their overall market positioning, brand value, and future revenues. • Rising commodity prices threaten regional brewers’ ability to stay competitive. Brewing is an energy and water intensive process. In the United States, brewers’ energy consumption is equal to 3 – 8% of their production costs (Industrial Energy Analysis, 2010), and the average pint of beer is up to 95 per cent water (Why beer needs watering down - Times Online., 2010). Any rise in gas, oil, or water prices will have financial implications on profit margins. Companies of all sizes are working to reduce their carbon and water footprints such as Shephard Neame, Kent (Why beer needs watering down - Times Online. , 2010).The continued adoption of energy and water efficiency measures and technological alternatives will keep Adnams and others regional brewers competitive. Investing in these changes now will also mitigate future costs, as finite resources become scarcer and the likelihood of stricter water and carbon regulations come to fruition. • Security of raw ingredients is the next big issue for brewers to tackle . Adverse weather conditions and changes in arable land bought on by climate change are growing concerns to suppliers. This relates not just for crop security, but also for changes in customer demand. With altered weather patterns come different tastes (Key Note, 2008). This is an issue we believe Adnams and its supply chain can tackle through investment in environmental progress. • Adnams holds little influence or bargaining power with large global drinks players. Adnams is a small player in the global drinks industry. When dealing with global suppliers like Heineken, Carlsberg, or Coca-Cola, it holds little influence on their behaviour. In general, Adnams has to comply with their demands on standards and prices. Big companies are clearly an important part of the supply chain, and a section that we would like to tackle in the future when we regional brewers joint negotiation power (see ‘Areas of Further Research’ section). • Expansion of Adnams export to the international market is high on the agenda. Widening the peer support group and the Adnams brand beyond Britain would not only add to the environmental efficiency knowledge, but also would open up new opportunities for trade abroad (e.g. guest

26


promotion of beer if the company puts beers from environmentally-conscience global partners in its tied states). • Social issues linked with drinking are a growing concern. Although we believe this issue falls out of the project’s scope, tackling social issues within the supply chain could be an area of interest for Adnams in the future (see ‘Areas of Further Research’ section). A large number of drinks multinationals, such as Diageo, Bacardi, and Heineken (Key Note, 2010a) already are working in this area, but no one is steering the agenda. • Downstream supply chain members are already being tackled. Adnams, in collaboration with the University of East Anglia, already has invested time and resources to ‘green’ its tied pubs and hotels. Projects such as roof insulation, energy monitoring, and reverse logistics are already in place .

Recommendations: Incentivizing Adnams’ supply chain and customers to ‘go green’ will be a three -stage process: Encourage Change, Reward Action, Exemplify Results. It is focused on promoting best practice and highlighting potential ‘win-wins’ to alter people’s behaviour (The Do Lectures, 2010).

The strategy draws upon our market research and the PESTLE analysis of Adnams’ supply chain. The decline in pubs and ‘wet-let’ alcohol sales, the threat of multinational acquisitions, and expansion of craft micro-brewers has created a ‘perfect storm’ that threatens to engulf Adnams and other regional brewers. Rising commodity prices and the impact on supply chain security also has placed companies’ environmental strategies at the heart of business operations.

Adnams’ position in its supply chain (eg: limited bargaining power with multinational suppliers, but with long-term, collaborative relationships with fellow regional brewers) provides an existing structure that can be expanded to include the sharing of environmental best practice (dependent on competition restrictions, see below).

This collaborative approach has multiple benefits. By working within existing structures, additional expense and working hours can be kept to a minimum. It also promotes reciprocity across regional brewers: While they compete for national market share, each company is dominant within its own region of the country. This ensures collaboration can promote cost-savings across the BrewFIT

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network, while having a limited impact on businesses’ competitive positions: Regional brewers will still compete on taste, brand, and changes in consumer trends.

We haven’t provided a specific timeframe for the three-stage process, but could envisage the initial project to last between three-to-five years, depending on industry acceptance/participation and improvement in the wider economic environment. All three elements can be promoted in parallel to reflect the different stages of development in environmental systems within the regional brewing sector. The project’s potential risks are outlined at the end of this section.

The steps: 

Encourage Change: Adnams will use its environmental leadership to encourage fellow regional brewers to share best practice to develop and share a vision. The existing BrewFIT network will be extended to cover supply chain issues, and be used to promote sign up to the BITC MayDay Network by showing the business benefits of improved environmental management. Communications literature will promote the business case for environmental management.

Reward Action: Adnams and fellow BrewFIT members will reward each other’s environmental improvements through the sharing of best practice, employee-led workshops, and potentially more capital intensive schemes (in the mid-term, see below). Primarily, rewards are not financial: Knowledge sharing and mutual cooperation around similar environmental problems will be the focus.

Exemplify Results: To encourage greater participation, Adnams and fellow BrewFIT members will promote best practice to internal and external stakeholders. The goal is to build brand reputation, to find new market opportunities, and to spread environmental best practice. Promotion will include to the broader MayDay Network, to companies’ supply chains, and to the general public.

First Phase (Encourage, Exemplify, Reward): Below are the detailed steps related to Phase One (potentially years one-to-two). The priority is to engage with BrewFIT members and to encourage sign up to the BITC MayDay Network.

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Encourage Change:

Adnams’ green credentials are both extensive and exemplary. They offer a business case for implementing environmental improvements, which can help similar regional brewers to understand the financial savings that result from incorporating sustainability into their operations. Encouraging change focuses on creating excitement within the BrewFIT membership about the business effi ciencies available through sharing environmental best practice. It also will highlight the benefits of sign-up to the BITC MayDay Network.

To engage fellow regional brewers, communications literature (see below and Appendix ‘Communications Literature’) will highlight the ‘Adnams Shared Vision’ towards a more environmentally-friendly business. The material’s tone will not be preachy, but will offer potential partners concrete examples of projects’ short-, medium-, and long-term financial benefits, as well as their impact on Adnams’ environmental footprint. It will centre on creating a shared sense of direction, and will be targeted at regional brewers’ financial directors, accountants, and board-members.

Example Communications Literature:

The literature will highlight low-cost examples of environmental best practice, as well as long-term investment opportunities: (See Appendix -- ‘Adnams’ Best Practice’). 

Low-cost, Effective Early Wins:

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Offer simple, cost-neutral examples to engage BrewFIT members (eg: Blankets at Adnams’ hotels, Converting pubs’ used cooking oil to biodiesel, etc).

Long-term Investment Wins: 

The redevelopment of Adnams’ distribution centre and brewery, and resulting cost savings and environmental improvements.

The installation of Adnams’ anaerobic digester and its impact on energy bills and carbon footprint.

The launch of Adnams’ East Green carbon neutral beer and its effect on improving the relationship with Tesco.

The financial and environmental payback resulting from investing in the French vineyard.

To maximize its impact, the communications literature will be launched when Adnams next hosts the meeting of the industry working group BrewFIT in early 2012. To allow brewers’ sufficient time to prepare and ensure the necessary people can attend (such as companies’ chairmen, CEOs, boardmembers, and supply chain managers), Adnams will announce the agenda at an earlier BrewFIT meeting and provide background material on the business efficiencies created through environmental best practice. Adnams’ management will talk with their counterparts at other regional brewers to build consensus between willing partners that can potentially be consolidated at the meeting. Other regional brewers also will be given the opportunity to highlight their own environmental programs within the BrewFIT organization.

By sharing environmental best practice at the BrewFIT meeting in early 2012, Adnams can also champion an open letter, signed by members, to Government and the Office of Fair Trading. This will focus on promoting increased collaboration within the regional brewers’ network, which may currently run afoul of competition law. Sector cooperation is a potential risk (see ‘Risk & Mitigation Strategies’ below) due to perceived collusion over such issues as price fixing.

By lobbying government to highlight the environmental benefits of sharing best practice, Adnams and fellow BrewFIT members can address this concern head-on. The company also can draw upon similar associations in other sectors (eg: Sustainable Apparel Coalition, more detail found in ‘Risk & Mitigation Strategies’ below) to convince government of the social benefits provided through the sharing of best practice.

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Reward Action:

To encourage collaboration between regional brewers, Adnams will propose a rewards scheme overseen through the BrewFIT network (potentially incorporated into the BTIC MayDay Network). To provide mutual benefits from sharing best practice, the rewards won’t focus on financial incentives. The goal is to institutionalize pre-existing relationships between regional brewers without creating onerous bureaucracy. The reward for sharing of best practice (reduced operational costs, for example, by implementing warehouse retrofits) will bring initially-sceptical BrewFIT members on board. The more breweries adopt mutually-shared values, the more pressure there will be on other companies to adopt industry standards on environmental protection and sustainability.

While initially non-financial, rewards could extend to capital investments in the mid-term (three to five years), depending on competition issues. We have divided rewards into four categories (See Appendix ‘Potential Rewards’). The different schemes vary on implementation time, cost, and needed working hours and oversight. Examples of potential rewards include: 

Knowledge Sharing: Collaborate through BrewFIT to share best practice (eg: anaerobic digester, eco-distribution centre).

Training: Offer other brewers knowledge and experience from Adnams’ employees on implementing green projects.

Discounts / Promotion: Give mutual preferential treatment on contracts and payment lead-times to BrewFIT members that fulfil green promises, dependent on competition law.

Financial Investment: Partner with NGOs and/or energy services companies to finance joint energy efficient improvements or energy projects.

For the reward scheme to operate successfully, Adnams must not be the sole engine for environmental best practice. Initially, the company’s successful track record should be used to engage others to follow suit. And by highlighting environmental benefits from other brewers, Adnams also will benefit from other best-practice knowledge within the sector.

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Exemplify Results:

To maximize the financial benefits and environmental improvements of sharing best practice, Adnams and its fellow brewers must highlight their actions to stakeholders. This will have multiple benefits: 

Early adopters will gain a competitive advantage through increased brand awareness and improved business efficiency.

Concrete examples of potential ‘win-wins’ will build support with brewers either wary of either sharing their practices or incorporating environmental strategies into operations.

Promotion will spread the message across the regional brewers’ network and institutionalize collaboration and knowledge-sharing.

Regional brewers can strengthen their bargaining power with suppliers and other potential collaborators eager to benefit from the industry’s increased brand value.

The promotion of best practice falls into two categories: 

Within BrewFIT: Early adopters can share environmental and business ‘win wins’ with others in the industry. That will incentivize regional brewers to adopt best practice, provide new opportunities for collaboration, and offer increased financial returns and new market opportunities to companies that adopt environmental initiatives.

To the wider community: Promotion of environmental improvements to the general public will increase individual regional brewers’ brand value. The association of BrewFIT members with environmental best practice provides a competitive advantage against both multinational brewing companies and local microbrewers: The sector will be linked to the sustainability movement, which will act as a market differentiator between regional brewers and multinational and local competitors.

Second Phase (Expansion): Below are the detailed steps related to Phase Two (potentially years three-to-five). The priority is spread best practice of BrewFIT members to their broader supply chains and build relationships with international brewers. 

Expand BrewFIT and BITC MayDay Network:

The collaboration across regional brewers on environmental best practice could be extended across the industry’s supply chain. That may include bringing strategic partners into the BrewFIT structure or expand the existing BITC MayDay Network (either on an adhoc or institutionalized basis). Their

32


inclusion will allow understanding of stakeholders’ business and environmental issues. By engaging upstream and downstream partners, Adnams could increase the stability of its own supply chain, solidify partnerships with existing suppliers, and identify potential new market opportunities.

More capital-intensive rewards, such as mutual financing agreements, can be promoted through reciprocal actions across the industry, dependent on competition law. Examples include: 

Cooperation in product distribution (beyond current reverse logistics arrangements).

Promotion of other companies’ beers across tied estates.

Share standardized bottles and/or casks.

This will reward environmentally-friendly behaviour, while free-riders and/or broken promises can be excluded through collective ostracisation (eg: removal of beer from pubs or reduced payment leadtime on deliveries). It will be more beneficial, however, to reward best practice: Creating an industrywide standard will encourage companies to toe the line. 

Global Expansion to Access New Markets:

In the mid-term, Adnams can extend its collaboration within BrewFIT and the BITC MayDay network to Europe, North America, and other global markets. This can be conducted through formal institutionalized meetings or informal one-off events. Market research (see above) shows regional brewers around the world are carrying out environmental improvements to increase business efficiency. Cooperation with these companies (which aren’t direct competitors) has multiple benefits: 

Expand Adnams’ global sales through agreements with overseas brewers to promote each other’s product as a reward for environmental improvements.

Reduce costs and improve efficiency through knowledge-sharing with like-minded companies to implement new environmental best practice.

Consulting – Potential New Revenue Stream:

Adnams could expand its collaborative network into other industries through a separate consultancy division (similar to an existing structure at carpet company Interface). The company could offer its environmental expertise to others looking to green their own operations. Sharing employee knowledge could offer an additional revenue stream through monetizing Adnams’ expertise in implementing change management across its business and through collaboration. This business opportunity would

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incur additional costs in time and manpower, which could be offset through the potential new revenue stream.

Risks & Mitigation Strategies (Encourage, Reward, Exemplify): The creation and adoption of green incentives across Adnams’ supply chains will not be without risk. A primary concern is the loss of Adnams’ competitive advantage. The company has built brand value by taking a proactive stance towards environmental management. Allowing other regional brewers to adopt similar practices potentially could detract from Adnams’ market position.

Yet knowledge-sharing across the regional brewers sector need not dilute Adnams’ environmental credentials. Indeed, the company’s brand value based on regionality, customer service, and a highquality product can be strengthened through BrewFIT’s adoption of environmental best practice. By incorporating sustainable business techniques within member brewers’ operations (and promoting them to the wider public), Adnams can benefit financially from the entire sector increasing its market share against multinational and micro-brewers.

Below are specific risks to the three-stage process and steps to mitigate them. 

Encourage Change:

Risk:

Solution:

Lack of sign-up by BrewFIT members.

Promotion of Adnams’ environmental ‘win-wins’ in a collaborative way that doesn’t become too preachy. Discuss environmental targets with willing BrewFIT stakeholders to find consensus ahead of main meeting. Team with engaged BrewFIT members to push ahead with knowledgesharing despite lack of sign-up.

Scepticism by other regional brewers about the

Use the communications literature to tell the

business case for environmental management.

‘Adnams’ Story,’ highlighting the financial savings, new market opportunities, and increased brand value resulting from environment-related investments.

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Reward Action:

Risk:

Solution:

Free-Riders benefiting from BrewFIT early-

Use BrewFIT and BITC MayDay Network meetings

adopters’ sharing of best practice.

to highlight the benefits of sharing best practice. Reward fellow early-adopters through workshops, and create group mentality (eg: “I’ll have what she’s having”) by making the business case for investment.

Competition law restricts potential rewards.

Write an open letter to Government (see above) highlighting the benefits of sharing environmental best practice. Challenge competition barriers by highlighting social benefits of environmental knowledge-sharing. Consult with lawyers to ensure potential rewards don’t conflict with competition restrictions. Use examples in other industries to highlight the social benefits: The Sustainable Apparel Coalition, for example, was founded by global apparel and footwear companies (Nike, Levi Strauss, Gap, etc) to build a common approach for measuring and evaluating apparel and footwear product sustainability performance, and spotlight priorities for action and opportunities for technological innovation.

Lack of BrewFIT institutional structure limits the

BrewFIT meetings allow for regular updates on

monitoring/measuring of environmental projects.

companies’ performance. Mutual benefits, such as reduction lead-time on contract payments, ensure reciprocity: Individual brewers face ostracization and increased financial costs if they don’t meet industry standards.

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Exemplify Results:

Risk:

Solution:

Criticism from other companies over BrewFIT’s

Engage with stakeholders (NGOs, media,

‘green-washing’.

government) to highlight individual brewers’ actions to promote transparency and understanding of BrewFIT’s programs.

Collaboration doesn’t strengthen bargaining

Promote BrewFIT’s best practice to link regional

position with supply chain.

brewers sector with organic, sustainable, and environmentally-friendly practices. Maximize brand value from environmental investments to increase companies’ overall market share, which will provide financial muscle during contract negotiations.

Other companies and/or sectors copy and out-

Collaborate with other companies and/or sectors

compete BrewFIT’s early adoption.

to spread knowledge-sharing through the BITC MayDay Network. That will spread best practice across industries, and reduce competition issues as Adnams will be partnering with companies from outside its sector.

Theory (Behind Recommendations): Adnams advised that our approach to incentivising its supply chain should be carried out in such a manner that was encouraging and gentle, not prescriptive or forceful. Thus, we focussed on a ‘carrot’ rather than ‘stick’ approach. After extensive market and trend research (see above), we identified the need for collaboration among the supply chain to meet the project objective.

There are several prominent and relevant theories that support our strategy, which come under the broad umbrella of “Change Management”. Emma Bollan from WSP (Bollan, 2011) maintains changing behaviour through encouragement is more powerful than relying on discipline. Moreover, Dot Griffiths from Imperial College Business School (Griffiths, 2011) believes sustainable development should be

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communicated in such a way that empowers others to act by forming a powerful guiding coalition and establishing a sense of urgency.

The following theories further emphasise the importance and relevance of encouraging change through a supportive, collaborative network:

“I’ll Have What She’s Having:” The first appropriate theory arose from Earls (The Do Lectures, 2010), a consultant on human behaviour who believes the most effective way to change peoples’ behaviour is through individuals spreading and sharing ideas. He maintains government campaigns and marketing has little effect in terms of getting people to embrace a new idea, or a different way of doing things. Instead, change occurs more naturally.

Humans are fundamentally social, and our lives are a chain reaction of interactions with others, reacting and responding to individuals and their ideas. Earl (The Do Lectures, 2010) suggests human thinking is actually a social phenomenon in that we do not think individually, but as a collective. Humans outsource vast amounts of knowledge from the individual brain to the many brains around us. We think with other people and are more intelligent together than we are separately.

He compares our cognitive activity to that of a gorilla. Like these animals, we do not use our brain entirely for thinking, but for empathising and copying others. Humans are always keeping an eye on what others are doing, understanding them and the nature of their relationship. This means that behaviour and perceptions are fundamentally shaped by others.

This theory of thinking collectively and copying can be applied to behavioural change. The catch line ‘I’ll have what she’s having’ has been used to spread fashions, names, brands, songs and messages. Such a slogan (from the film ‘When Harry Met Sally’) conjures up notions of doing things together and being involved with what everyone else is doing. This is very powerful as it feeds our natural desire to copy others without being too forceful in making people do something. It is the art of gentle persuasion.

This effective tool of engagement forms the basis of the project strategy to incentivise supply chain members to adopt Adams’ green credentials. It supports the idea that if a peer group network was created, businesses would naturally copy others so as not to be left behind and be out-competed.

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Those who go above and beyond in greening their businesses will shine out above the rest, and will be rewarded in peer and consumer recognition, and brand value. The network will provide an avenue to encourage behavioural change instead of being outright told what to do.

Evolution of Cooperation: The second relevant theory to the project is cooperation. It is widely understood that the pursuit of self-interest by individuals leads to a poor outcome for all (the prisoners’ dilemma). Our civilisation is heavily based on cooperation: between individuals, companies, organisations and countries (Axelrod, 1984). The peer-led network will facilitate cooperation between regional brewers without the need for a central authority. Cooperation does not require trust as mutual reciprocity and the threat of ostracism can be enough to discourage people from defecting. It is self-policing, and there would therefore be no need for Adnams to step in as mediator.

The key factor to cooperation is that the participants know they will be dealing with each other again and again, and so are discouraged to misbehave. Working within the existing structure of BrewFIT means Adnams will not have to police cooperation and therefore investment in any additional time and expenses will be kept to a minimum.

Sustainable Consumption: ‘I will if you will’ A report by the National Consumer Council and Sustainable Development Commission (Sustainable Consumption Roundtable, 2006) discusses the ‘good life’. That is, a life where everyone – individuals, business and government – shares responsibility for moving forward to a sustainable future. It is based on progress towards a more sustainable world, which depends on finding ways to allow people to work in collaboration. It cannot just be down to government to regulate our behaviour; there needs to be commitment from everyone.

The focus should be on creating frameworks for supporting collective progress. This was identified by both consumers and businesses in the above report, and was encapsulated in the phrase, ‘I will if you will’. Businesses will become more responsible if consumers do the same; and vice versa. Cooperation and thinking together also can help build space for more mandatory policies to tackle the most difficult issues. Consumers and business have more leverage and a louder voice as a group than they do individually, and they can work together to push government for policy changes.

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The report (Sustainable Consumption Roundtable, 2006) indicates business leaders are keen to act towards becoming more sustainable, but cannot do it in isolation or without the support of a business case. The peer group network for regional brewers addresses such a need as it provides a framework for supporting collective progress. It encourages businesses to work together on certain issues, rather than seeing each other purely as competitors.

The network allows easy access to business cases that demonstrate cost savings, carbon savings, greater efficiency (and building brand reputation). Case studies on good environmental performance – such as Adnams’ – will give others the confidence to make positive changes as they have proof that it can be done.

Reciprocity: According to anthropologist Alan Fiske (RSA - The Stuff of Thought: Language as a window into human nature. , 2010), there are three major human relationship types: dominance, communality, and reciprocity. Each prescribes a distinct way of distributing resources. Reciprocity is characterised by having mutual knowledge. The difference between mutual knowledge and individual knowledge has profound consequences.

An example, given by Pinker (RSA - The Stuff of Thought: Language as a window into human nature. , 2010), is that mutual knowledge has triggered political revolutions simply by people gathering in a public square. People in their own homes may know they loathe the dictator, but they do not know that others loathe him too. Once people assemble in a place where everyone can see everyone else, they soon know that everyone else loathes the dictator and that gives them the collective power to challenge the authority of the dictator.

Such an example is reinforced by the power of social media in spurring the recent revolution in Egypt and Tunisia. It provided a platform for people to hear, understand, and share opinions in opposition to the political system, and helped stimulate transformation. Social networks give people the confidence to know that they are not alone in their views and that they can facilitate change. We believe the peer network will provide the same sort of support and leverage for regional brewers to green their supply chain.

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Divergent Thinking: Divergent thinking is the ability to see lots of possible answers to the question. It emerged from Edward De Bono’s work on lateral thinking (RSA - Changing Paradigms. , 2010). It is the opposite of thinking in a linear or convergent way. This provided inspiration for the project as it prompted us to think not just of each individual environmental problem as part of the supply chain, and the potential solutions for each and the stages with which to get there. Instead, we broadened our thinking to encompass wider issues, which allow for a more holistic solution.

It was realised that businesses’ main barriers to improving environmental performance – a lack of information, time, money, motivation, and inspiration – could be overcome by providing a mechanism for sharing ideas, case studies, and contacts. The barriers should not be seen as individual issues to be addressed, nor should the solutions to each be separated. Instead, sharing environmental practice through the BrewFIT network allows for all these obstacles to be minimised simply through effective communication and collaboration. Sir Ken Robinson (international advisor on education in the arts) believes copying leads towards collaboration and most great learning happens in groups: “Collaboration is the stuff of growth” (RSA - Changing Paradigms. , 2010).

These theories inform and support our recommendations of the support network through BrewFIT an d the communications literature. The approach we have chosen to incentivise Adnams’ supply chain is based on changing behaviour through sharing ideas and encouraging participation. Adnams has limited bargaining power with large suppliers’ such as Carlsberg, which means the company must avoid an aggressive approach to altering the large brewers’ behaviour. Therefore, a collaborative relationship with fellow regional brewers (Fulller’s, Marston’s and Greenwich Meantime) is much more appropriate. The existing platform of BrewFIT can be built upon to include the sharing of environmental practice.

Areas of Further Research: To meet Adnams’ requirements, we narrowed our focus to a specific section of the company’s supply chain: Regional brewers. There are areas of further research that also would drive economic, environmental, and social improvements within Adnams’ supply change. They include: 

Measuring Compliance: The ‘Rewards’ section of our recommendations relies on companies monitoring each other’s environment systems. We haven’t included specific mechanisms to measure compliance as that would involve a long-term restructuring of the regional brewers’

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network. To institutionalize cooperation, however, more work is needed to understand how compliance can be measured, monitored, and used as a benchmark across the regional sector. That could be undertaken through (water, energy, waste) efficiency management systems, as well as the sharing of IT infrastructure, dependent on competition restrictions. 

Including Social Issues: Our work focused on ‘greening’ Adnams’ supply chain, and didn’t extend to the company’s social impact (eg: responsible drinking, etc). While Adnams has longstanding policies to engage its customers on social issues, the company could extend this approach across its supply chain. Social implications, such as local unemployment and underage drinking, are concerns for Adnams’ suppliers. Work to address potential problems could mitigate reputational risks for Adnams, and improve the company’s relationships with suppliers.

Expanding to Entire Supply Chain: Due to Adnams’ relative size compared to multinational drinks companies, our project has centred on engagement with regional brewers where the company can have a short-term, effective impact. As the sectors’ strength and bargaining power grows (through sharing best practice, for example), Adnams and other regional brewers can undertake market research on ways to engage with larger companies within the drinks industry. That has the opportunity to expand Adnams’ environmental best practice across its entire supply chain – from regional brewers to multinational food and drinks companies

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Appendices Communications Literature:

Open Letter to Regional Brewers: We have a great opportunity. Regional brewers have the potential to dominate the UK beer market and build a resilience that will see our companies grow in an uncertain future. Because we face significant threats from craft brewers, multinational drinks companies and increasing pressures on our margins we have an imperative to act for our future survival. Because we create great beers, respect the communities we live in and have the foresight to see what’s coming we have the means to grow, prosper and out-compete. The price of fossil fuels is going to rise, affecting the cost of manufacturing and distributing every pint we brew. Increased overheads, transport and storage costs will be felt at the same time as raw materials/commodity prices rise (due to industrialised farming’s dependence on hydrocarbons and the uncertainty of yields brought about by climate change). As the cost of living rises in the UK and

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increasing health concerns and punitive policies erode our market, the next ten years potentially present a ‘perfect storm’ of increased costs, uncertain supply and decreased sales. Adnams thinks that, together, regional brewers are best place to make the most of these challenges. We can offer customers great drinks, exceptional service through tied-estates and a quality that the micro-brewers cannot emulate. However, we face a real challenge keeping costs down and improving the efficiency of our supply chains to stay competitive with the larger companies. At Adnams we know we are one of many and that it’s hard for one company to tackle these issues alone. That’s why we think cooperation between regional brewers is the key to securing our future and a strong market share for us all. A rich heritage is something we all share, our breweries are embedded in their communities, our beers are loved in their home regions and across this (great) country. Our customers, employees, communities and owners are all relying on us to make the most of the challenges ahead. Adnams believes that by working together we can thrive (and bring great beer to the next generation). If regional brewers come together to improve the efficiency and security of our shared supply chain, we can ensure our current and future needs are met in a way that increases and protects our competitive advantage. Sustainability is not about being good for goodness sake. Sustainability is about saying ‘we’ve been here for fifty, one hundred or several hundred years and we’re going to do business as if we intend to be here for hundreds more’. There are efficiency savings we can all achieve, waste we can eliminate and many ways to build resilience into our businesses. In short, there’s money to be made and money to be saved. There are lots of examples of good practice around and Adnams has had its experiments with green technology, but we are coming to you with a question rather than all the answers. That question is ‘what should our future look like?’ For the reasons we outlined the future could be tough but, to steal a famous advertising slogan, we think ‘the future’s bright the future’s green!’ Adnams is proposing that regional brewers work together by defining a common vision of sustainability for our industry so that all our partners and suppliers know what we want from them. By speaking as one voice we can provide direction and clarity that serves our business needs and builds a stronger sector. By sharing our ideas, experience and knowledge we can make the advances we need without baring the full costs of acting individually. Not only will this strengthen our operations and reduce our costs, the return on our reputation would be considerable. We are all keen to encourage the next generation to enjoy real beer responsibly and issues of social and environmental performance are strong concerns for our future customers.

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In many ways we are, of course, competitors. However, by acting as collaborators we can enhance the reputation of darker beers as a whole and grow the total market share we have to divide between us. While this is innovative, cooperation between us is not new. We already have BrewFIT, among others, and we think this is a great place to start developing our collective vision and sharing experience. Adnams plans to engage its suppliers through the BiTC Mayday network and would like to invite you all to join so that we can make the most of this existing forum. These are the first steps that we would like to put forward as a recommendation. We hope that it will lead to a stronger future for us all.

Adnams’ Best Practice (Recommendations): Low-cost, Short-Term Wins: 

Adnams has a company-wide recycling scheme, which includes paper, packaging, electrical equipment, vehicle batteries and tyres, mobile phones and glass (75% of Adnams’ waste is recycled rather than put landfill).

The cooking oil from Adnams’ hotel kitchens is recycled and converted into biodiesel and spent grains is used as pig and cattle feed.

At Adnams’ Crown Hotel, rather than harmful patio heaters, employees sourced recycled wool blankets to wrap around chilly al-fresco diners.

In 2009, Adnams set a challenge – Carbon Combat -- that pitched two hotels against each other to reduce gas and electricity over a month. They saved 8 tonnes of CO 2 and £1,000 throughout the month.

Adnams has achieved ISO14001 accreditation.

Awards: The Carbon Trust Innovator of the Year 2007, The GoodCorporation Ethical Business Award in 2007, BITC’s Eco-efficiency award in 2008.

Adnams is asked to speak at a number of conferences and events, which is an excellent vehicle for promoting the Adnams brand and developing brand advocates.

Long-term Investment Wins: 

Redevelopment of distribution centre and brewery: In 2006, Adnams designed and built an eco-distribution centre, which has reduced our fuel consumption by over 50% per annum. It uses 58% less gas and 67% less electricity per square metre compared to the old warehouse. The centre cost a 15% more than a traditional building, and will take 10-12 years to payback the investment. The building’s sedum roof promotes biodiversity and sequesters up to 80

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tonnes of carbon per year. It was one of the first industrial buildings to attain a BREEAM ‘excellent’ rating. In 2008, Adnams opened an energy-efficient brewery, which recovers 100% of the heat from each brew to reheat the next. It has reduced the amount of gas needed during the brewing process by 30%. The investment has improved its water efficiency: It now takes 3.2 pints of water to make a pint of beer, compared to an industry norm of 5 pints. 

Installation of anaerobic digester: Adnams worked with Cambridge-based Bio Group to build a £2.75 million anaerobic digester next to its eco-distribution warehouse. The facility opened in 2010, and generates up to 4.8 million kilowatt-hours per year (enough electricity to heat 235 homes). The plant consists of three digesters that can break down up to 12,500 tonnes of organic waste each year. In the near future, the anaerobic digester will produce enough renewable gas to power the Adnams brewery and run its fleet of lorries, while still leaving up to 60% of the output for injection into the National Grid.

Launch of East Green carbon neutral beer: In 2008, Adnams launched East Green, the UK’s first carbon neutral beer, which was distributed exclusively by Tesco nationwide. The company’s reputation as a environmentally-friendly brewer led to this commercial relationship, and resulted in a guaranteed national distribution. Every stage in the development of East Green -- from the growing of the hops to the packaging -- was designed to minimise its carbon emissions. The remaining carbon, which equates to less than 1p per bottl e, was offset with Climate Care. Like all other Adnams beers, East Green is packaged in a new lightweight bottle, which has reduced Adnams CO 2 emissions by over 415 tonnes a year. East Green’s launch resulted in the equivalent advertising spend of £500,000, and prompted CNN to broadcast live from our brewery and distribution centre for two days during its environment week.

French Vineyard -- financial and environmental payback: Adnams’ wine-buyers worked with Château Cluzan to invest in the vineyards’ infrastructure, and health and safety equipment. The company offered the wine-maker a long-term contact to help guarantee the investment. The Adnams’ wine team seeks out small-scale producers: Over 25% of the company’s wine is now either organic or biodynamic.

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Potential Rewards (Recommendations): Training: Suppliers: 

Provide workshops through BrewFIT and the BITC MayDay Network to explain Adnams’ winwin examples (sell business case by ‘speaking business’) and how others can follow suit. Include regional brewers’ chairman and board members to create a wide consensus around environmental best practice.

Offer fellow brewers Adnams’ knowledge and/or experience in undertaking green projects. This could be led through BrewFIT meetings, the BITC MayDay Network, a stand-alone Web Site.

Undertake energy-efficiency driver training (and potentially invest in GPS-oriented logistics software, depending on pushback from drivers). Look at specific high-traffic regions (eg: Norwich) to create mechanisms that tighten customer ordering behaviour without denting perceived customer service.

Customers: 

Educate tenants/pub groups about recycling and waste best practice beyond current mechanisms.

Offer workshops on reading meters, installing energy efficient technology (e.g: lightbulbs), and offer concrete examples of what other tenants that have done (e.g: monthly electricity bill reduced from £2000+ to £750). Work with energy consultants to undertake work at neutral cost. can be included who do this t no additional cost)

Knowledge-Sharing: Suppliers: 

Share delivery between brewers by extending current reverse logistics system across BrewFIT network, dependent on competition restrictions.

Partner with NGOs and/or Trade Body (eg: CarbonTrust, BrewFIT, etc) to share best practice (eg: anaerobic digester, green warehouse). Use Adnams’ hosting meeting in early 2012 to outline what can be done through communications literature.

Form partnerships with other brewers to provide economies of scale to buy organic ingredients (goal: all regional beer is organic). Adnams must check with competition lawyers to ensure it doesn’t colluded with other brewers on price.

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Create capacities for local farmers to grow organically or bio-dynamically. Create market stability by buying regularly from them, and ask farmers to become certificated, and provide financial and/or capacity support.

Coordinate with other brewers to establish standard bottle design (and potentially combine resources on R&D projects, dependent on competition restrictions). Expand bottle design to wine (or borrow from existing industry standard).

Customers: 

Promote best practice across pub chain, as well as link similar-minded tenants with local counterparts on other brewers’ tied estates, potentially through BrewFIT or CAMRA.

Create league table of tied estate tenants, based on energy use (or similar quantifiable measurement that can be normalized) and other environmental KPIs. Potentially expand across regional brewer network, which could open up new sponsorship and marketing opportuniti es.

Discount/Gift/Promotion Suppliers: 

Improve payment lead-time: Environmental improvements = shorter pay period).

Promote other brewer’s products in tied estate: Collaborative agreement to encourage green practices).

Give preferential treatment on contracts to those who fulfill green promises and/or make energy efficiency improvements, dependent on competition restrictions (eg: longer-term contracts or a lower wholesale price).

Promote regional brewers through ‘Supplier of the Year’ competition and/or quarterly award for environmental best practice.

Customers: 

Offer product promotions, discounts, ‘green nights’ (on typically slow evenings) for customers that sign-up to the BITC MayDay Network and/or invest in green projects.

Provide soft-loans or access to companies (eg: Carbon Trust) that offer soft-loans/grants for energy efficiency (Adnams’ employees could volunteer with their experience). Partner with energy service companies at a minimal cost.

Institutionalize environmental audits across tied estate on a quarterly or yearly basis. Partner with energy service companies to keep process cost neutral. (Move from doing it when new tenant takes over to quarterly/yearly activity across all tenants -- Institutionalize process).

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Finance/Investment: Suppliers: 

Partner with NGOs/energy service companies/Government Bodies to finance energy efficiency improvements.

Collaborate on regional basis to buy waste-to-energy facilities (and other capital-intensive infrastructure – e.g: eco-trucks) that wouldn’t make financial sense otherwise. Use the current infrastructure to reduce waste from going to landfill (to avoid rising landfill taxes).

Join forces on R&D projects (dependent on competition restrictions) related to ‘green products’ (e.g: bottles, kegs, barrels, etc).

Customers: 

Make small loans available for initial easy-wins (eg: metering, insulation) to get tenants interested in going green.

Partner with NGOs/energy service companies/Government Bodies to finance energy efficiency improvements.

Competition Law: EU Competition Law is a law that promotes or maintains market competition by regulating anticompetitive conduct. Competition Act 1998: aim is to create a regulatory framework that is tough on those that seek to restrain competition whilst allowing those who compete fairly the opportunity to survive. Key aspects of legislation: 

Anti-competitive agreements, cartels and abuses of a dominant position are unlawful from the outset.

Businesses which are found to be in breach of the prohibitions are liable to financial penalties of up to 10% of UK annual turnover.

Gives those competitors and customers who have been economically harmed as a result of proven anti-competitive behaviour the power to seek damages from the Competition Appeals Tribunal.

Gives the Director of the Office of Fair Trading (OFT) significant powers to actively root out anti-competitive behaviour.

Anti-competitive Agreements: prohibits agreements, arrangements and concerted business practices which appreciably prevent, restrict or distort competition (or have intention of doing so) and which

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affect trade in the UK or EU. Verbal and informal ‘gentlemen’s agreements’ are equally capable of being found to be anti-competitive as formal, written agreements.

Types of arrangements which are generally prohibited: 

Those which directly or indirectly fix purchase or selling prices, or any other trading condition (e.g. discounts, rebates).

Those which control or limit production, markets, technical development or investment.

Agreements which share markets or sources of supply.

Those which apply dissimilar conditions to similar transactions, placing other trading parties at a disadvantage.

Exemption: An agreement may be individually exempted on the grounds that its restrictions of competition are outweighed by its beneficial effects.

Achieving Compliance: For any company, it is vitally important to promote an understanding amongst employees as to what type of behaviour is and is not permissible under competition law.

One practical way to promote an understanding of competition law amongst employees is for a company to devise and actively implement a competition compliance policy that is specifically tailored to that company. Not only does this minimise the risk of being non-compliant in the first place, but if a company is investigated for anti-competitive behaviour, evidence of a competition compliance policy may be taken into account by the OFT and EU could lead to a reduction in fine.

Likely to be illegal (example): if a group of retailers agree between themselves to impose a charge for a particular service from a certain date than it is likely to be in breach of competition law.

Likely to be legal (example): if each retailer made their decision independently and there were no agreements between them.

Department for Business Enterprise and Regulatory Reform (BERR) warn against promoting or facilitating the exchange of information on commercially sensitive competition matters that should otherwise be determined individually by the players in the market.

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Encouraging companies to adopt agreements or behaviours for the purpose of achieving a wider objective may expose them to the risk of enforcement action by the OFT. Businesses should fully consider the competition implications of any agreements they are asked to make.

Best Practice Across Industries: Themes

Case Studies

Supply Chain Management

No. of Cases 17

Anglia Water

1) Verify Scheme (accreditation framework for suppliers and contractors working in the Utility sector) resulted in energy savings of £125,000 pa, reduced its annual lime consumption by £128,000; £90,000 in fuel usage due to reduced cost and transit distances for contractors 1

1

ARCO

1) Suppliers’ performance was measured and managed through management tools and extensive auditing processing; Arco joined Ethical Trading Initiative (code of practice) 2; 2) Supplier collaborative planning: 20% reduction in overall deliveries and 26% reduction in journey miles 2

2

Bettys & Taylors

Cadburys

Diageo

Lend Lease

1) Cost-Modelling matrix - A tool to understand the full cost of production and the profits a farmer needs to invest in his family farm and workforce3; 2) Taylors coffee buyers are qualified social auditors, accredited by the Ethical Trading Initiative. All audit reports are submitted on to the SEDEX system (Supplier Ethical Data Exchange)3; 3) It offers suppliers forward contracts and pre-finances crops;give farmers the stability and the confidence to plan ahead, invest in their crops and provide sustainable and high quality crops 3 1) The Cadbury Cocoa Partnership was established in 2008 to invest £45 million over ten years - 10,000 farmers in 100 communities invested in directly; 55,000 farmers in 1,300 communities invested in through Fairtrade; Farmer bonuses, farm equipment and training delivered, resulting in a doubling of productivity and income for some farmers 4 1) Partnering with Suppliers’ is their supplier standards policy document which must be adhered to by suppliers. Sedex (Suppliers Ethical Data Exchange) is used to confirm suppliers are maintaining adequate standards 5 1) Created a supplier assessment system that can be seen by all companies (buyers) reducing the need for multiple audits and questionnaires 6; 2) A peer-based steering group was created across the industry to ensure buy-in from suppliers and competitors and was led by Lend Lease’s head of procurement 6;

3

1

1

3

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3) Worked with the FSC to help 10 key suppliers to gain accreditation6

Marriot

PepsiCo

United Utilities

Waitrose

1) “Cleaner Production Private Sector Partnership” working with World Environment Centre in Costa Rica who train SME suppliers to improve efficiencies in their facilities leading to increased productivity and competitiveness and decreased environmental impact7; 2) Aiming for price neutral products that reduce energy and resource consumption, decrease waste and increase waste diversion7 1) ReCon (Resource Conservation Outreach) is their best practice sharing programme 8 1) Focused on 12 areas (3 social/9 environmental); Environmental areas: Materials, Waste to Landfill, Hazardous Waste, Biodiversity, Emissions to Water, Energy, Carbon, Emissions to Air, Water Use; Social areas: Fair Treatment, Labour Standards, Employment; - Procurement officers received coaching on 12 focus areas; Suppliers were supported through leadership, guidance, training, and workshops; Resulted in £6 million in savings9 1) Provides LEAF(Linking Environment & Farming) accreditation (shown on packaging) for farmers. Farmers have to provide reliable information on where food comes from, how it has been produced, and what it contains 10; 2) Policy of using British suppliers whenever possible - Creation of ‘Small Producers Charter’ to provide advice/support for small-scale farmers that are interested in supplying multiple retailers, but who are unable to support a whole store network10

Energy Efficiency B&Q Heineken

United Biscuits

1

1

2

4 1) Creation of performance league tables, both within its own stores and with suppliers, to compare energy site use - energy reduction led to a combined £1.3 million saving 11

1

1) Installation of a new refrigeration plant decreased electricity consumption from 8.73 to 8.00 KWH 12 1) Monitoring energy use at each office and publishing the figures every four weeks so that all employees can keep a track of their progress against targets 13 2) 64,746 tonnes of carbon saved by making factory operations more efficient 13

Water Efficiency Diageo

2

1 2 5

1) New barrel washers and recycling techniques have saved 3,800 cubic metres of water a year5

1

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Pepsi

Sierra Nevada Brewing Company (US) United Biscuits

1) They clean bottles with purified air rather than rinsing them with water8; 2) They are using advanced filtration systems to recycle and reuse around 80% of processed water used in production. In 2009 they saved more than 12 billion litres of water through eco-efficient improvements within their operations 8 1) Reduced water wastage by a two-step anaerobic and aerobic treatment plant for purifying water produced from its brewing operations 14 1) Monitoring Water use at each office and publishing the figures every four weeks so that all employees can keep a track of their progress against targets 13

Use of Renewable Energy/Energy through Waste 1) Bio-Energy Recovery System uses nutrient-rich wastewater from the brewing process to create and capture a renewable Annheuser Busch fuel which provides up to 15% of the fuel for 10 of their breweries 15 1) Solar panels in bottling facilities16; 2) Biodiesel for energy use16; 3) Wind power generation technologies for energy use Coke (Biodiesel and Wind power combined provide more than 15% of its energy use)16 1) Bioenergy plant diverts spent grain and wastewater to make their site largely self-sufficient in electricity5; 2) Solid waste Diageo previously destined for landfill is sent to a waste-to-energy plant and used to generate electricity keeping around 250 tonnes of waste out of landfill each year5 1) Commissioned biomass plants representing one of the largest Heineken single investments in renewable technology by a non-utility company in the UK12 New Belgium 1) Uses wind power for the brewing process 14; 2) Treats waste Brewing water from brewing. The methane produced during waste water Company processing is used to power the plant14 1) Quaker is using the power of the oat to power a local university in Iowa 8; 2) They have an anaerobic wastewater PepsiCo treatment plant which saves them more than 5,500 MWH of electricity a year8; 3) Solar lighting8; 4) Wind turbines 8; 5) Lighting motion sensors 8 1) Uses fuel cells to generate energy for the brewing process 14; Sierra Nevada 2) They also use a heat and carbon dioxide (CO2) recovery Brewing system, where the CO2 generated during the fermentation Company (US) process is used later for bottling beer14; 3) They capture methane generated from the digestor of the fuel boilers 14

2

1

1

18 1

3

2

1

2

5

3

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United Biscuits

1) Runs its lorries on biodiesel made from waste vegetable oil from its snacks factories 13

Responsible Drinking/Serving

Carlsberg

Diageo

Heineken

5 1) Committed and proactive member of the 'Portman Group' (self regulatory body) which delivers a code of practice on responsible drinking 18 2) They also partner with 'Drinkaware Trust' which delivers educational guidance on responsible drinking 18 1) Launched a national rollout of a campaign to promote responsible drinking to nearly one million students across the UK delivering both unit guidance and responsible drinking tips in a visual and creative way5; 2) Over 2,000 bartenders trained through the Diageo-funded scheme in Kenya and the Johnnie Walker School in Soeul, Korea has graduated 7,000 bartenders since it was founded 14 years ago. Programmes have also been established in Brazil, Nigeria, Scotland, Seychelles and Thailand 5 1) 'Cool@Work' is a programme that seeks to fully embed responsibility in the marketing and sales activities of their top brands 12

Recycling Anheuser-Busch Coke New Belgium Brewing Company Packaging Reduction and Innovation

Amcor

Coors

Owens Illinois

1

2

2

1 4

1) Recycle leftover grain from the brewing process and use it for cattle feed; 2) Recycle aluminium beverage containers 15

2

1) Recycled aluminium cans 16 1) Treats waste water from brewing. The sludge is sent to a neighboring plant that converts it into high-protein aqua-farm food14

1 1

9 1) Bind-Ox(patented technology ) - a material that prevents oxygen from reaching the beer and offers a shelf life of six to 15 months thus increased the possibility of using PET packaging for beer - adopted by Anheuser-Busch InBev in 2005 to launch its Beck's Gold brand14 1) 13% lighter weight bottles - replacing the label with embossing got rid of the need for a broad panel 14 1) Light weight ‘lean green’ wine bottles launched in Australia 2009. Product created using embossing technology - Reduced materials by 25%, energy by 20%, water by 4,720 Klitres, CO2 emissions 1,130 tons 14; 2) 5 layered PET bottles with 2 layers of SureShield (a patented material) improving visual appeal of PET bottles - introduced by Heineken in Europe and Miller Brewing in the US14

1

1

2

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PepsiCo

Thomas Hussey (Graduate University of Technology, Sydney )

United Bisuits

1) Implemented use of oxodegradable packaging for Stila baked snacks that reduces waste by degrading when exposed to air8; 2) Bags made from plant-based renewable materials which are fully compostable8; 3) Light weight bottles containing 50% less plastic than their 2002 bottle- saving £75m of plastic per year8 1) 'Beer-in-a-box' - The design comprises solely of a box and a tap, ensuring minimal use of packaging material, and low cost. The collapsible design of the keg helps maintain CO2 pressure (imperative for storing carbonated beverages), while also preventing the ingress of oxygen to retain its flavor. The reduced weight and size of the product allows up to 70% more beer to be transported per pallet, thus reducing costs and enhancing transport efficiencies. Also, the package can be easily disassembled for disposal and recycling14 1) Compared to 2003 figures 15,870 tonnes of carbon have been saved by reductions in packaging13

Transportation (including Load Sharing) ARCO Coke

United Biscuits

PepsiCo Fairtrade/Organi c

1

1) Joint logistics project delivered 20% sales increase, improved customer service, reduced stockholding from six to two weeks 2 1) Hybrid-electric trucks use 30% less fuel and 30% less emissions16 1) Pooling of transport arrangements with suppliers, customers and competitors - reduction of vehicle mileage by 9 million miles in four years; direct saving of £13.7million in vehicle and fuel costs in 4 yrs; additional £1.3million of transport revenue per annum;drivers’ time costs; 15,000 tonnes carbon saved from reducing transport mileage 13; 2) Runs its lorries on biodiesel made from waste vegetable oil from its snacks factories 13

1 1

2

1 1) Manufacturing plants in India collect rainwater from roofs to use for rejuvenating surrounding aquifers 8

Community Programs Cadburys

1

4

Rainwater Harvesting Pepsi

3

1 2

1) The Cadbury Cocoa Partnership was established in 2008 to invest £45 million over ten years - Community projects delivered focusing on water, sanitation and health4 1) They partner with NGOs in water stressed regions to help install irrigation systems, improve sanitation programmes and construct community cisterns in India 8

1

1

4

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Butte Creek Brewing Company Eel River Brewing Company (US) Westerham Brewery Company Wells Young's Brewing Company

1) Butte Creek Brewing Organic Pilsner - launched in Mexico in 2009; brewed from organic Pilsner malt and whole leaf hops 14 1) Brewer of certified organic Açai Berry Wheat Ale in the Mexican market in 2010. This wheat ale is brewed with organic acai berries procured from Brazil. The ale is brewed following ethical production practices, the power supplied is 100% biomass renewable energy14 1) William Wilberforce Freedom Ale - Made with fairtrade Demerara sugar procured from the Malawi plantation in southeast Africa 14 1) Wells' Banana Bread Beer - released in the UK in 2009; The company uses fairtrade bananas for the flavor14

1

1

1

1

1

(Anglian Water Group - Corporate Responsibility in the supply chain - Business in the Community, 2010); 2 (Arco’s Ethical Supply Chain - Business in the Community, 2010); 3 (Bettys & Taylors of Harrogate - Sustainable Coffee Sourcing Programme - Business in the Community, 2010); 4 (Cadbury's Fairly Traded Cocoa - Highly Commended 2010 - Business in the Community, 2010); 5 (Diageo, 2009); 6 (Lend Lease Sustainability, 2010); 7 (Marriot Corporate Social Responsibility, 2010 ); 8 (PepsiCo Corporate Governance, 2010); 9 (United Utilities – a comprehensive approach to corporate responsibility - Business in the Community, 2010); 10 (Waitrose, 2006); 11 (Environment & Ethics - B&Q Corporate, 2010); 12 (Enjoy Heineken Responsibly, 2010 ); 13 (United Biscuits - Achieving Sustainability - Business in the Community, 2010); 14(Key Note, 2010); 15 (Anheuser-Busch - Environment, 2010); 16 (Environment : Global Warming : Recycling : Sustainability - Coca-Cola GB, 2010); 18 (Welcome to Carlsberg, 2010) Secondary Research Overview: Keynote Market Research Report: Breweries & Beer Market Report, 2008 Short-term Trends/Policies: • Higher duties on alcohol: 8 pence per litre. • ‘Alcohol tax escalator’: Increasing duty 2 percentage points above inflation each year. • Smoking ban: Need to wait till the end of the decade to see if smokers will tough it out and continue to leave their drinks at the bar. • CAMRA (Campaign for Real Ale) blame the smoking ban for the alarming rate at which public hoses closing down. • Competition from cider and beer: New tastes as a new generation of drinkers who grew up on alchopops and have a sweeter taste. • Extraordinary weather: Different tastes that this brings.

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• CAMRA ‘take it to the top Campaign’ a campaign to reduce large heads on beer after government legislation failed. Members agree to top up to the rim on request. Long-term trends: • Beer plays a central role to life in the UK. • Pubs play a central role to life in the UK. • Dramatic collapse of the market is not likely. • Government unlikely to allow a merger of the four largest companies as it would mean they would have a 32% share of the market. • Regional mergers are a possibility. They would create larger tied pub estates and marketing brands outside their original regional e.g. Fuller, London Pride, Green King, IPA. • Future difficult for smaller beer brands who don’t have the marketing campaigns and distribution to support them (mainly dark beers). • Need to persuade young drinkers to try dark beers. Beer market • 2007 prediction for 2010: 4,750 mlitres and £18,500 • 2007 prediction for 2012: 4,500 mlitres £18,000 Threats & policies • Anti-alcohol lobby. • Potential anti-obesity policy. • Growth of general health awareness. • Government changes: ‘Safe Sensible Social’ campaign - clear goals & actions to promote sensible drinking. NHS review of spending on alcohol problems, Sharpened criminal justice system on alcohol • Changes in GDP, inflation and employment. • Price increases: Likely if England adopts the Scotland’s proposal to clamp down on al cohol discounting with new policy.. This could be an opportunity to raise the value of the market. • BBPA (British Beer & Pub Association) Only 2% of licences issued under the 2003 act have been for 24 hour licensing. On average opening times have changed only 20 mins. • BBPA recorded the sharpest year-on-year decline since 1948 with 4 falls in 5 years. A decline of 6% in alcohol consumption in 2009 and a decline of 13% since 2004. Consumption – British Beer & Pub Association • Consumption is generally aligned with population size. • The UK has the 5th largest global consumption per capita in the world (2005) 91 lpc. • Consumption is lowest in poor countries. • Consumption lower in countries with developed vinicultures e.g. France and Italy.

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• Cultural influences also effect consumption e.g. acceptability for women to drink, drink of choice with meals. • UK market is a good illustration of a trend towards globalisation and world-brewing. In the 1990s foreign multinationals made up less than 25% of the market. In 2002 they made up 60% of the market. With the acquisition of Scottish & Newcastle in 2008 that became 85%. Keynote Market Research Report: Innovations in Healthier Alcoholic Drinks, 2010 Trends – western countries • Consumption of alcohol has fallen in Europe since it’s peak in 1975 – this has been linked to the growth of health awareness. • Beer, cider and flavoured alcoholic drinks have declined as they are increasingly viewed as being unhealthy. Wine is seen as healthier. • Spirits are seen as healthier then beer as they are lower calorie. • 2/3 of Europeans are regular drinkers (have had a drink within 30 days of the survey). • Growth of low alcohol and imitation beers – often to avoid taxes. • New products: Soya bean based, Barley added, Wheat spirits. • New infused beers – aimed at the health conscious and younger markets e.g. Asali Japanese ginger infused beer. • Government and public concern about perceived binge drinking. Binge Drinking tackling projects • Aims: Moderate consumption, Reduce binge drinking, Reduce drink driving. • Responsible campaigns: -

Bacardi: ‘Champions Drink Responsibly’ 2008

-

Diagio: Drinking responsibly

-

Heiniken: ‘Enjoy Heiniken Responsibly’ 2003, ‘Know the signs’ 2009

-

Pernod Ricard: ‘Accept responsibility’ 2007

-

SAB Miller: ‘The talking alcohol’

-

Absolut: ‘Recognise the moment’ 2009

Keynote Market Research Report: Innovations in Ethical Alcohol (Beer) 2010 Packaging: • Owens Illinois light weight ‘lean green’ wine bottles launched in Australia 2009. Product created using embossing technology. Outcome: Reduced materials by 25%, energy by 20%, 4water by 4,720 Klitres, CO2 emissions 1,130 tons. • Coors 13% lighter weight bottles. Replacing the label with embossing got rid of the need for a broad panel.

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• PET beer packaging gained momentum in 2003,when the German government levied a €0.25–0.50 deposit fee on beer sold in single use containers. One major impact of this regulation was the decision by discount retailers in Germany to restrict beverage packaging in one material with PET being considered the most suitable material among all the available alternatives. This decision was undertaken to simplify management of the deposit scheme. In addition, this legislation also made brewers reconsider PET for their packaging requirements. • Multi-layer plastic beer bottles, produced by Owens-Illinois reduce the visual appeal problem of PET. The plastic bottles has five layers of PET and two middle layers of SureShield (a patented material of Owens-Illinois), and were introduced by Heineken in Europe and Miller Brewing in the US in 1998, in order to differentiate their products in a competitive marketplace. • Amcor's patented technology Bind-Ox, a material that prevents oxygen from reaching the beer and offers a shelf life of six to 15 months has increased the possibility of using PET packaging for beer. This was adopted by Anheuser-Busch InBev in 2005 to launch its Beck's Gold brand. • 'Beer-in-a-box', designed by Thomas Hussey (University of Technology, Sydney graduate) in 2010. The design comprises solely of a box and a tap, ensuring minimal use of packaging material, and low cost. The collapsible design of the keg helps maintain CO2 pressure (imperative for storing carbonated beverages), while also preventing the ingress of oxygen to retain its flavor. The reduced weight and size of the product allows up to 70% more beer to be transported per pallet, thus reducing costs and enhancing transport efficiencies. Also, the package can be easily disassembled for disposal and recycling. Organic: • Butte Creek Brewing Organic Pilsner, manufactured by Butte Creek Brewing Company launched in Mexico in 2009. Contains 4.5% ABV, and is brewed from organic Pilsner malt and whole leaf hops. • Eel River Brewing Company, US-based organic brewer of certified organic Açai Berry Wheat Ale in the Mexican market in 2010. This wheat ale is brewed with organic acai berries procured from Brazil. The ale is brewed following ethical production practices, the power supplied is 100% bio-mass renewable energy. The brewery is equipped with a waste water pretreatment facility. Fairtrade: • William Wilberforce Freedom Ale, manufactured by Westerham Brewery Company in 2007. Made with fair-trade Demerara sugar procured from the Malawi plantation in southeast Africa (sugar is more than 20% of the dry weight ingredients). • Wells' Banana Bread Beer, released in the UK in 2009. The company uses fair-trade bananas for the flavor, and contains 5.2% ABV. Ethical Brewing:

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• California-based Sierra Nevada Brewing Company uses fuel cells to generate energy for the brewing process. They also use a heat and carbon dioxide (CO2) recovery system, where the CO2 generated during the fermentation process is used later for bottling beer. To reduce water wastage, they installed a two-step anaerobic and aerobic treatment plant for purifying water produced from its brewing operations. They also capture methane generated from the digester of the to fuel boilers. • The New Belgium Brewing Company in Colorado uses wind power for the brewing process and treat waste water form brewing. The methane produced during waste water processing is used to power the plant, and the sludge is sent to a neighboring plant that converts it into high-protein aqua-farm food. • Adnams East Green Carbon Neutral beer, manufactured by Sole Bay Brewery, in 2008. The beer is made from locally sourced barley, grown and malted in East Anglia, and English Boadicea hops procured from Suffolk. It is brewed in a facility with an installed energy recovery system that recycles all the steam produced during the brewing process to heat the brewery. Ethical Consumption Trends: • Ethical consumption is gaining ground with consumers in developed countries, such as the US and the UK. • Demand for organic beer is increasing as consumers think it tastes better and also carries the perception that more care has gone into making of the product. • The trend of consuming organically produced beer is strong in Western European countries, (esp Germany & UK). • Legislation in Europe makes it mandatory for manufacturers to disclose additives (e.g. pesticides used in the cultivation of ingredients) for organic products. • Beyond organic and fair-trade to sustainable production methods e.g. renewable energy for brewing and bio diesel trucks for delivery. • Consumers are more inclined to consume ethically produced products due to: Health concerns & desire to pursue healthier lifestyle; Higher interest in the provenance of the food and; Ability to afford fair-trade and organic produce. Packaging trends: • Environmentally-friendly packaging, consumers are now also interested in determining the origin of the food and drink that they consume. • Different alcohol consumption trends have lead to non traditional alcohol packaging. Growing outdoor consumption (picnics, festivals, travelling, camping, outdoor activities). Wine now in plastic bottles etc. • Trend of change from glass packaging to PET (polyethylene Tenphthalate). • Due to its ease of recycling, glass has been the leader in packaging material in beer, accounting for

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51.4% of innovative launches made in the global beer market in 2009. • PET packaging is slowly gaining acceptance in the beer industry due to technological advancements, which have helped mitigate problems related to its barrier properties. Carlton & United Breweries launched PET packaging for beer in 1996, followed by Miller Brewing Company in 1998. • Brewers are replacing glass with aluminum and PET for the convenience market, as these materials are sustainable (recyclable, reusable and lightweight) and they have a cost advantage over glass. • With the rise in single person households and smaller living spaces, comes a higher demand for efficient and compact storage solutions such as fridge packs for beer. Health trends • Beer fortified with minerals, fibre and vitamins (2006-09). • Adding flavour for a new market. Keynote, Public houses, 2010 Trends & Threats • In 2010, the UK has an estimated 55,000 pubs, generating an annual turnover of £15.4bn. • The number of pubs in business has fallen by 4,000 since 2005 — part of a long-term trend — and turnover has also declined in the short term. • The current recession has had an impact on pubs, there are deeper, long-term negative influences, including the rise of ‘take-home’ drinking (fuelled by cheap supermarket alcohol) and the ban on smoking in pubs. • There are too many small, ‘wet-led’ pubs relying on selling alcohol (mainly beer): these are closing down, while the ‘dry-led’ pub-restaurants serving meals are thriving. • The proportion of average UK pub turnover accounted for by food continues to rise each year. • The demand for entertainment in pubs is also growing (karaoke, DJs, quiz nights, live sports, Sky TV). • The UK’s 17,000 ‘free houses’ or independent pubs sum up the appeal of the pub to both the entrepreneurial publican and the customer looking for traditional qualities: good beer (preferably real ale), friendly service and a ‘cosy’ home-from-home feel. • Key Note forecasts that the number of pubs will continue to decline between 2010 and 2014, but a post-recession recovery is predicted for turnover. • Social developments have affected the role of the pub and its market. .These include: the changing roles of men and women, and changes in family life; experience of life abroad through ho lidays (appreciation of wine, foreign food, etc.); and the emphasis on eating, rather than just drinking alcohol, on a trip away from home that involves the pub. • Meals, packet snacks and non-alcoholic drinks now account for an estimated 27% of the average pub’s turnover — a figure that has risen from 9% in 1990 and which continued to increase in the first

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decade of the 21st century. • Over the same period, alcohol’s contribution to turnover fell from 88% to 70%. Other products make a minor contribution (3%); this traditionally consisted of fruit-machine and tobacco income but it has broadened out to include charges for entertainment and, for larger pubs, accommodation income. • The most common usage of the pub is for a drink in the evening: this involves more than 3 million people, or 6.6% of the adult population of Great Britain, on more than one night each week. Mintel Report – Pub visiting UK Sept, 2010 Who’s innovating? • Bar Boosters – pooling of ideas to gain new revenue streams. • Wine served in the on-trade gets an upgrade. • Beer festivals create new occasions to visit the pub. • New ‘pub’ openings take a different perspective. • Loungers to open casual dining and drinking concept. • Revival of the authentic station pub experience. IPPR – The social value of community pubs, 2009 The situation: • Community pubs are one of Britain’s oldest and most popular social institutions. However, they are currently under pressure, with 39 pubs now closing every week. Their numbers have been falling gradually for decades, but closure rates have accelerated in the last two years. • Alcohol consumption tends to rise and fall with economic prosperity and the recent downturn in the economy has affected pub incomes. • Many of the old industrial and village communities surrounding local pubs have changed out of all recognition, reducing the number of devoted pub regulars in some areas. • Tastes and lifestyles have changed. More people drink wine and fewer beer, the mainstay of most pub income. • The pub has faced competition from alternative leisure pursuits, such as restaurants and the cinema. • There has been a significant rise in the number of people drinking at home, rather than in pubs and bars. • Beer prices have gone up in pubs and bars much faster than in shops and supermarkets. • Supermarket discounts are one of the major factors in falling pub incomes. • Major legislative changes have imposed significant additional costs to beer. • There is evidence that tenants of some of the large pub companies are finding it hard to compete because of the higher prices they are paying for their tied beer. • There is a lack of transparency in the way some pub companies calculate their rents.

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Adnams Consultancy Project