Tennent’s gives ale market its best shot

Will drinkers raise a glass to the brewer’s new draught beer, asks Kristy Dorsey

AT FIRST blush, the new men in charge of Glasgow’s historic Wellpark Brewery appear to have little more in common than the lager for which their company is best known and the traditional ale market they’re aiming to break into.

Tennent Caledonian’s youthful commercial managing director Steve Annand has teamed up with industry veteran John Gilligan to launch Caledonia Best, the company’s first new product in more than a decade.

Annand, 34, and 59-year-old Gilligan, managing director of sales, have unveiled the 3.2 per cent draught ale with the aim of grabbing a share of the Scottish on-trade market from a raft of rivals in a relatively small but lively sector.

Domestic expecatations are in turn forecast to pave the way to international success as the lucrative export market beckons.

At a launch event, held last week at the Lighthouse, off Glasgow’s Buchanan Street, young assistants dressed in t-shirts emblazoned with the new brand’s logo, served a curious late breakfast of scones, eggs, rolls and, of course, the new beer. The message, as with the pair in the driving seat, was based on a blend of the old and the new.

“We have a long history in brewing ales, and, if you go back some years, we have a strong track record in exporting,” says Annand, referring to the heyday of the 1950s when up to one-third of the brewer’s production was sold abroad.

“Caledonia Best is for the domestic market, and also, as we move forward, for exports. Tennent’s Lager is Scotland’s favourite pint, and we are going to be sure that we continue to invest in the domestic market, but to go forward we have got to look at exports.”

It’s a logical strategy, given the challenges that are reshaping the Scottish market, and the pub trade in particular.

A report commissioned this year by Molson Coors found that during the five years to 2009, alcohol sales through the Scottish on-trade fell by 14 per cent, including a 16 per cent slump in beer sales. The decline in on-site consumption and the resulting closure of hundreds of pubs has since continued, the report states, with the smoking ban, increased taxes, higher costs and economic recession taking their toll. This turmoil has left the industry struggling for new areas of growth. For a business the size of Tennent Caledonian – which today exports just a tiny fraction of its total production, mainly to popular holiday destinations and Scottish expat communities – boosting overseas sales is a good bet.

Tennent’s recently went on sale in Australia and Canada, and is due to enter the US market early next year. Ireland’s C&C Group, parent company of the Glasgow brewer, has suggested that exports to other European countries could follow thereafter.

This is being built on Tennent’s strong domestic position, where it accounts for nearly three-quarters of the Scottish lager market. Before Caledonia Best can achieve its overseas potential, Gilligan says it too must become established at home. “The domestic market for me is going to be the priority,” he says. “The export market is a bonus.”

The competition at home will be tough, however, as the growing popularity of craft and cask ales has made this one of the few growing categories in a market amid overall decline.

According to the latest Cask Ale Report 2010/11, the sector in Scotland is currently expanding at a rate of 31 per cent. Though this growth is from a relatively small base – cask accounts for about 15 per cent of total beer volumes in Scottish pubs – it has grabbed the industry’s attention.

Patrick Browne, head of the Scottish arm of the British Beer & Pub Association, says consumers have been increasingly drawn to the category through a desire for higher quality, locally sourced goods.

“It is the premiumisation issue,” Browne says. “Everyone is trying to tap into the feel-good factor of buying something that is a bit special.”

Setting out its results this month, Scotland’s biggest landlord, Punch Taverns, said it would concentrate on providing more cask ales north of the Border as a “point of difference” with the supermarkets that have been widely blamed for hastening the demise of pubs via cheap alcohol offers.

New brewers have been able to thrive in such a climate, with the likes of Edinburgh-based Innis & Gunn reporting sales growth of more than 60 per cent so far this year. Fraserburgh’s BrewDog, which courted controversy this year by producing the world’s strongest beer, has claimed growth of more than 200 per cent in 2011 alone.

Meanwhile, McEwan’s and Younger’s are set for a second lease on life under new owners Wells & Young’s, which bought the Scottish beer brands this month from Heineken UK for an undisclosed sum. Nigel McNally, managing director of Bedford-based Wells & Young’s, has promised to “reinvigorate” these ales by bringing them back on cask while also spreading their reach into other parts of the UK.

The powerhouse of Scottish ales, however, remains Greene King subsidiary Belhaven with an estimated 36 per cent share of on-trade sales. Caledonian Brewing Company – part of Heineken UK and makers of Deuchars IPA – also retains a loyal following. These two will likely prove the most formidable opposition to Caledonia Best, whose name mimics elements from each of these rivals.

Annand, however, dismisses any suggestions that this could lead to confusion, as the trademarked lion logo includes the Wellpark Brewery name.

“People will know from that that it’s part of the Tennent’s range,” he says. “And besides, I think consumers are sophisticated enough to know where their beer comes from.”

One unique aspect of Caledonia Best is the fact that every pint will be made solely with Scottish barley, which could prove a key selling point as drinkers increasingly consider issues such as sustainability and provenance. As part of a new partnership with its barley suppliers, the company has established a fund to support both brewing and farming with a 5p donation from every pint of Caledonia Best sold for the first six months.

Tennent Caledonian will also be able to leverage its existing network of customer relationships as the new ale rolls out. The company has 2,300 direct customers, with Tennent’s Lager served in seven out of every ten pubs in Scotland.

Paul Waterson, chief executive of the Scottish Licensed Trade Association, says the new brew should fare well. In addition to benefiting Tennent Caledonian, a fresh brand could boost the on-trade sector, as pubs are the only place where ales can be stored and poured properly.

“It is very exciting for us, because for years we watched as one by one the brewers closed down or merged or were taken over, and we were left with less and less choice,” Waterson says. “The fact that they are prepared to invest in draft beers at this time shows faith in this industry.”