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CLH Digital
Issue 13
Greene King Pledge Donations To BAME Groups Over Slave Trade Links Pub giant Greene King is one of two of Britain’s biggest businesses to announce that they will will donate to projects benefiting ethnic minorities after an academic database highlighted their roles in the slave trade Greene King , along with insurance firm Lloyd’s of London both said they would pay after historical links to slavery were pointed out in a University College London index. Greene King was founded in 1799 by Benjamin Greene, who was one of 47,000 people who benefited from a policy of compensating slave owners when Britain abolished slavery in 1833. When slavery was abolished in the British empire in 1833, the government agreed to pay compensation, and records have revealed that Greene was given the equivalent of about £500,000 at today’s rate when he surrendered rights to plantations in Montserrat and Saint Kitts. He handed over control of his brewery to his son three years later and it was given its current name after a merger in 1887. Speaking earlier this week Nick Mackenzie, Greene King’s chief executive said the company would update the website on Thursday and offered an unqualified apology. He said: “It is inexcusable that one of our founders profited from slavery and argued against its abolition in the 1800s. We don’t have all the answers, so that is why we are taking time to listen and learn from all the voices, including our team members and charity partners, as we strengthen our diversity and inclusion work.” He added that Greene King would make a “substantial investment to benefit the BAME community and support our race diversity in the business as we increase our focus on targeted work in this area.”
UK’s Budget Bonanza Aftermath & Bright Spots in the ‘Virally-Impaired’ Alcohol Industry By Kunal Sawhney, CEO of Kalkine It appeared that the euphoria, which the alcohol industry witnessed through the 2020 budget announcements, proved to be shortlived one with the unprecedented event of Coronavirus driven lockdown. In the Budget, Beer, Cider, Spirits and Wine, all got a bonanza of duty reduction; these duty cuts were expected to result in fall in prices, at least in the off-trade zone (supermarkets and offlicences). The budget measures by the government were required, and there was constant representation from the industry as the nation’s spirits have been among one of the highest most taxed in the world, the UK has the fourth highest spirits duty rate in the EU, out of every £4 almost £3 goes to the Treasury for Tax on Scotch Whisky. However, the extended lockdown and phased easing with hospitality being put at last, added to the woes of the industry. Bars and pubs remaining closed for a long time was even hard to imagine, and it has cost dearly to the alcoholic beverages’ manufacturers apart from the pub and bar operators.
SHIFTS AROUND FOUR KEY ASPECTS: The long phase of the lockdown not only changed the business environment but the perception of consumers as well. It was reported (through various statistics) that around one-third of the consumers drastically reduced their spirits’ consumption since the outbreak of Coronavirus. It is not only the volume which got impacted, but there was a visible shift towards cheaper alcoholic beverages owing to budget constraints, as people turned to be value conscious. If we talk about the sales figures, especially the on-line sales, then in the four weeks to 22 March, just ahead of the lockdown, sales of alcohol were reportedly up by around 22 percent in the grocery channel compared with the same period of the last year. The total sales of wine, beer and spirits surged past the £1.1 billion mark during the same period. However, from the production point of view, the latest data from the Office for National Statistics (ONS) for the period between March 2020 and April 2020, has shown a record fall of 24.8 percent in alcoholic beverages production, stating the clear impact from a fall in demand from the hospitality industry. As a result of the lockdown, the revenue growth of the industry, on the whole, may have taken a hit due to the complete shutdown of the on-trade channels, but still, industry estimates for next couple of years suggest for some recovery as the UK moves to open up in terms of lifting restrictions.
If one talks about performance of related companies listed on London Stock Exchange, the impact can be seen quite predominantly. For instance, Diageo Plc (LON: DGE), one of the biggest Spirits manufacturers has been forced to retract the financial guidance for the year. Now it is expecting full-year profits to go down by £200 million, while the organic net sales are expected to suffer a decline in the range of £225 million and £325 million. With concerns circling around proper functioning of hospitality, it may not be able to divert losses from the on-trade channel (pubs, clubs, bars, restaurants, and hotels) to that of offtrade retailers. The company’s stock price, which ended at GBX 2,725.00 on 15 June 2020, has lost over 14 percent YTD. On the other side of the story, we have pub players like JD Wetherspoon Plc (LON: JDW) that are going all-out in their preparation to ride out of the shutdown, despite being battered in the share market. The company has raised about £141 million through new shares issue with eyes on reopening of pubs. The stock of the company last traded at GBX 1,078.00 on 15 June 2020, having lost around 36 percent YTD.
PARADIGM SHIFT WITH BRIGHT SPOTS It is not that COVID-19 only impacted the scenario in a negative way – the Pandemic brought with itself a thought-provoking aura wherein companies started to look beyond conventional ways of doing business. Highball brands, one of the spirits distributors, came up with a unique, not for profit cocktail delivery service named “Drinks Drop”, in collaboration with some biggest bars. The service was targeted to bring pre-mixed premium cocktails at the doorsteps of the consumers, and its success can be replicated by others, even in the post-Covid era. The British Honey Company, which is into honey and fruit-infused spirits, utilised the opportunity in a more productive way; and after seeking appropriate regulatory permissions, used their excess capacity to produce alcohol sanitiser. It was noticed that the company had already made £500k from sales of its alcohol sanitisers. All in all, alcoholic beverages are in general associated with sociable outings, and a big question mark on the hospitality sector’s operation, even when they are allowed to reopen, is undoubtedly considered to impact growth. However, a change in consumer behaviour & spending, and charted shifts in business models are expected to get the ball rolling with respect to near-term prospects of the industry. At the moment, when the pubs and bars are becoming functional in a step-wise manner, while adhering to the new social distancing norms, with some on-line sales’ boost coming to limelight, market players and investors are still observing the industry moves keeping the precarious condition of the economic landscape and uncertainty on finances in mind.