COMMENT: Greene King - one for the road
UK brewer Greene King has announced strong 2004 results.
The pub chain and brewing group Greene King has managed to avoid the effects of a decline in beer consumption in pubs, posting significantly stronger 2004 results than most of its rivals. Storm clouds are on the horizon however, as a controversial relaxation of the licensing laws may yet have a perverse negative impact on on-trade players.
Greene King manufactures traditional real ales or bitters such as Greene King IPA, Old Speckled Hen and Abbot Ale and owns over two thousand pubs throughout the UK. Sales of Old Speckled Hen grew by 6% in the past year, while sales of Abbot Ale increased by 5% over the same period, in part due to increased sales of beer in pubs during the Christmas season.
Greene King is also now reaping the rewards of its August 2004 takeover of the 432-strong chain of Laurel pubs in a deal worth £654m. According to the company, the integration of its newly acquired pubs is proceeding ahead of schedule.
The brewing sector in the UK has suffered of late from a fall in going out occasions and concerns regarding the possible introduction of a smoking ban in pubs and bars. Furthermore, media controversy surrounding the possible relaxation of licensing laws, which could in theory lead to 24 hour drinking, has provided little positive publicity for the industry.
While a relaxation of UK licensing laws should lead to an increase in sales for brewers and pub owners, there has been much debate that such a move could trigger an epidemic of binge drinking, with the associated costs of additional policing having to be picked up somewhere. Any increase in drink-related injuries could also lead to yet more bad publicity and thus heighten the existing clamor for tighter regulation of the on-trade.
Greene King has done well to produce such robust results in what has been a tough market of late. It must now look to adjust its strategy for an industry that is evolving, both in consumer attitudes and regulation. The company would do well to focus on securing its core customer base at a time of considerable uncertainty, and over the longer term the group looks well set for further growth.
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