Charles Wells shows its true international class

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With an international chain of pubs, licences for Japanese, Jamaican and Mexican lagers, and stakes in top music venues, Charles Wells is a family...

With an international chain of pubs, licences for Japanese, Jamaican and Mexican lagers, and stakes in top music venues, Charles Wells is a family brewer with a difference.

While it continues to run an estate of traditional tenanted and managed pubs and brew award-winning cask ales, it has successfully developed into niche markets.

Over the past two years, it has kept its head down while it underwent a restructuring of the business, but it is now ready to raise its profile again.

It made a good start this month when it announced the acquisition of Allied Domecq's chain of 28 franchised John Bull pubs for an undisclosed sum, believed to be about £10m.

The English themed outlets are scattered across Italy, Sweden, the Czech Republic, Russia and Poland, aimed at locals rather than British tourists.

They are "tastefully" decorated with British bric-a-brac and sell John Bull ale, which Charles Wells bought as part of the deal.

It may seem an odd venture for a 124-year-old Bedford ale brewer that is still run and controlled by its founder's descendants, but Charles Wells was the first would-be buyer that Allied Domecq approached.

The Bedford company has been establishing a unique role in international markets and now exports about a quarter of its output to 30 countries, which earned it a Queen's Award for Export two years ago.

It has also helped licensees in Italy, Spain and France to open more than 40 outlets branded under the Charles Wells name and selling its beers.

It exploits continental markets where bottled English ales have the same profile among younger people as premium packaged lager in the UK.

The acquisition of John Bull takes Charles Wells into Eastern Europe, which it hopes to exploit by opening further outlets. It also gives it the international John Bull beer brand, previously produced by Carlsberg-Tetley, which will be rolled out further worldwide.

Commercial director Nigel McNally said: "We want to build on the John Bull franchise and take it into other towns in cities in countries where it is already operating, as well as into new countries.

"We were interested in them because we already have a presence in Europe and this gave us an opportunity to take our portfolio into Eastern Europe."

The outlets will also stock Charles Wells' traditional ales, supporting its export sales drive to find new markets in Europe and further afield.

In the UK it has been focusing marketing spend on its session bitter Eagle (ABV 3.6 per cent), which has been backed by television advertising in the Anglia region, and premium ale Bombardier (ABV 4.3 per cent).

Both have achieved impressive growth in the off-trade, while Bombardier has become a national brand, boosted by marketing that links it with St George and the English flag.

But Charles Wells is no stranger to style bars and young persons venues. It has been building volumes for its licensed lagers, owning the Europe-wide rights to Jamaica's Red Stripe and Japan's Kirin and the UK rights to Mexican brand Corona Extra.

Managing director Paul Wells said: "These premium brands form a portfolio for the style-conscious bars in major urban areas and, although competition is fierce, we have made good headway this year."

It has tapped into this market within its pub estate, opening its second stylish modern pub, Bar Citrus, before Christmas, taking it into Waterloo in central London.

It is a refined version of a concept opened in Bedford a year ago, although Wells stresses that it is "a different type of pub rather than a café-bar or a brasserie".

Other unusual parts of the business include a joint venture running bar-restaurant RK Stanley in London's West End, a stylish reworking of an American diner, specialising in real ale and sausages.

The outlet has not been quite the success that was hoped for but Wells said it was improving.

Another disappointment has been a major new pub, Cox's Yard on a leisure development in Stratford-upon-Avon, Warwickshire, which suffered from a slow start and high building costs but is now "gradually improving".

It has also set up the Beer Courier, a distributor which has depots in Manchester and London to supply style bars and young persons venues.

To gain high-profile sales point for its style lagers, the family brewer is involved in another joint venture, the McKenzie Group, which runs top British music venues, the Brixton Academy in South London and the Shepherd's Bush Empire in West London.

But the world of rock stars and young people's venues is only a small part of the business.

Charles Wells continues to expand and develop its estate of 208 tenanted pubs and 45 managed houses, which are focused north of London up to the East Midlands.

Last year it invested in its managed estate, such as a £500,000 refurbishment of the historic George in Brixworth, Northamptonshire, and smaller projects to improve the Territorial in Huntingdon, Cambridgeshire and the Headlands in Northampton.

But it continues to be a firm believer in tenancies, such as last year's opening of the Orchid in Bedford, which serves Thai food next to real ales.

The traditional three-year tenancy has formed the backbone of this part of the business, but Wells said a new assignable lease was being developed to offer entrepreneurs longer-term, more flexible agreements of 10 years or more.

He said the brewer now viewed its tenants as more like freetrade customers, "allowing business partners to build some asset value into their operation".

The pub estate has been the focus of the restructuring of the business over the past two years. About 32 less profitable tenanted pubs were sold following 1998's disposal of five inns to Old English Inns for £4m.

Wells said: "The hotel market was changing and we didn't have enough critical mass. We wanted to concentrate on what we were doing well."

This led to restructuring of the managed house division's head office team, which now focuses on developing larger community pubs and outlets with good food.

Wells said: "We remain committed to the core of 208 tenanted pubs and wish to add to this number when the right pubs become available.

"The sale of the less profitable tenanted pubs freed up capital to be spent on our core remaining pubs and we have accelerated spending."

On the production side, Charles Wells has shifted out of producing own-label beers for retail chains so it can focus on branded ales and lagers.

This, combined with the shake-up in the pub estate, has turned around a downward trend in annual pre-tax profits, which had slipped from £6.4m in 1991 to just over £2m in 1996 and 1997.

Disposing of pubs and brewing contracts still means turnover for the year to October 2 was down compared with previous years, hitting £73.7m, but annual profits edged back up to £3.22m after hitting a low of £1.52m in 1998.

Wells said: "We've had to go through a major strategic review and are now making a good start in turning around the profit performance of the company."

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