Pints, pubs and the pandemic
The four magnificent shire horses lovingly cared for in the stables at Daniel Thwaites’ idyllic rural headquarters highlight the importance of heritage to the 214-year-old Lancashire family business.
While Gunner, Wainwright, Ribble and Drummer are a direct link to the brewer’s past and the days beer barrels were delivered to public houses by horse power, executive chairman Rick Bailey keeps his focus firmly on the future.
That includes guiding the business out of the Covid-19 pandemic, which has caused so much pain for the hospitality industry and putting it back on the path to growth.
The major impact of the pandemic and the lockdowns and restrictions it sparked was laid bare in Thwaites’ 2021 annual accounts. Turnover was down 67 per cent on the previous year at £32.2m.
The business recorded an operating loss of £9.4m, compared with operating profit of £12.6m in the figures to March 31, 2020, which also included a negative Covid-19 impact of £2.5m.
Thwaites also provided more than £3.2m of direct financial support to its estate of around 225 tenanted pubs that it has built up over two centuries. The business, founded when George III was on the throne, also has a small number of managed pubs and inns and 10 hotels and spas from Cumbria to the south coast.
In total the pandemic has cost the company approximately £24m and as Rick spelled out in his statement: “These results would have been significantly worse were it not for the financial support the government and the Treasury have provided during the recent crisis.”
We have had to consider really carefully where Thwaites sits within each of its markets and where we wanted to take it in the future
Today Thwaites supports more than 5,000 jobs, both directly in its managed houses and indirectly through its tenanted pub estate.
Rick says that despite the Covid challenges, the business was unable to trade without some form of restriction for a single day during the year, it managed to avoid losing large numbers of people and has now started to create new roles.
He says of the pandemic: “It has challenged us as a business to think about how we do things. It’s been a very powerful exercise. Anything like this, forces you to get on the front foot and make decisions that hopefully lead to a stronger business in the long term.”
Rick is a champion of the tenanted pub model, saying its strength was there for all to see during the pandemic and, as communities began to return to some form of normality, he believes that customers’ expectations and how they want to engage with the hospitality sector in future will become clearer.
He adds: “The businesses that will succeed will be those that have not put their heads in the sand, those that have confronted it head on and thought about trying to deliver what the customer wants.”
Change and challenge is familiar to Thwaites. In the past decade it has moved from the centre of Blackburn, the town that was its home since 1807, and into its new £8m offices and craft brewery in Mellor Brook, which opened in 2018.
Three years earlier, it sold the major part of its beer business to the pub group Marston’s in a £25.1m deal. The acquisition included two premium ales, Wainwright and Lancaster Bomber.
Rick, who is part of the controlling Yerburgh family through marriage, talks about constantly working to make the business “match fit for the future”. He says change was needed as the business’ markets began to shift and alter.
He explains: “We have had to consider really carefully where Thwaites sits within each of its markets and where we wanted to take it in the future. That required us to go through quite a lot of change.
“We had to ‘dislocate’ the business. It is a word I like because it really does describe what we have done.
“We dislocated whole sections of the business, looked at it in a lot of detail and put it together again. Some sections we have kept and invested in, some we have stopped doing altogether and some we have sold.”
He describes the exercise as an “enormous cultural change” for teams across the business and the importance of workers understanding the restructuring and repositioning for the future.
And he says the support from family shareholders, given in the knowledge the work was making it more sustainable for that future, was also vital to the process.
Rick adds: “The business is completely different today. We are not doing some of the stuff we were, particularly in the beer market.
“We have refocused on running our own properties and making our own beers for those properties. This will generate robust and sustainable employment and will mean the business is in a strong position to be here in another 100 years.”
He describes the new offices and brewery as a strong signal of Thwaites’ intent, adding: “When we closed the Blackburn brewery it was the seventh biggest in the UK. It would have been easy not to build a new brewery, we could have bought our beer from elsewhere, but we are proud of our award-winning beers and rightly so.”
Today the craft brewery at Mellor Brook produces 6,000-7,000 barrels of its beers every year. The Campaign for Real Ale (CAMRA), which celebrates its 50-year anniversary this year, has recently awarded Thwaites a ‘Golden Award’, recognising the brewer’s long-standing commitment to excellence.
Returning his focus to the pandemic, Rick says: “We are reeling from a few body shocks, the whole industry is. But we’re busy repairing the damage at our water line and are well advanced in that.”
Over the 10 years before Covid struck, the business had invested £150m, mostly in the north of England. Acquisitions and developments were put on hold when the pandemic took hold.
However, investment is back on the agenda. Next year there are major plans to revamp its Langdale Chase hotel, which overlooks Windermere. Rick says: “It will be a five-star hotel and we are really excited by that. There has been lots of investment in the area, which has produced some lovely boutique hotels. We’re taking it to another level.”
He also reveals that Thwaites is adding to its portfolio, with the purchase of the Red Lion, a 16th century pub in the heart of Wharfedale, announced the day before our interview. He describes it as “an incredible property” and predicts there will be more opportunities for acquisitions post-Covid.
Rick, 47, who grew up in Essex and has a background in the City, starting his career at KPMG, says: “The Red Lion is a good example of how we’re looking to grow our pub estate, both managed and tenanted, and develop properties further.
“But we are also extremely mindful of the challenges that the next year will bring as the support the government has given us on VAT and business rates is withdrawn.
“Now we have the rising spectre of a dysfunctional labour market, which the government seems to want to perpetuate. There are just not enough people for us to employ front of house, in our kitchens, the story is the same across the industry. We’ve also got the spectre of rising inflation, and the cost of energy.”
He would like to see a much-overdue review of business rates and for the government to embrace a lower VAT rate for the hospitality sector. He also talks of the need for a transition period when it comes to immigration to help it overcome its labour challenges.
He says: “There has been a growing realisation from the government about the role that pubs play in their local communities. We should remember that community pubs are the biggest social outreach programme in the country, delivered free by landlords and landladies up and down the land.
“The pub industry is a massive generator of employment and revenue for the government. Pubs need to be nurtured. They are precious assets that need to be looked after.”
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