Wolves pays £3.2m to scrap lager deal
Dropping a deal to stock Harp lager in all its pubs has cost Wolverhampton & Dudley Breweries a whopping £3.2m.
The money was paid over to Harp owner Diageo to buy out W&DB's contractual obligation to sell Harp in all its managed pubs. W&DB brews the Irish lager for Diageo, but earlier this year took the decision to reduce marketing support for the brand and allow licensees to sell Carlsberg instead.
A company spokesman said: "Harp was never our lead lager, but we had an arrangement to feature it prominently." The payment to Diageo was to compensate the brand giant for W&DB's reduced support for the brand. However, its licensees still have the option to stock the Irish brand if they choose.
The payment was revealed as W&DB updated the City on progress before entering its pre-result close period. Having taken the hit, the company said it expects its revamped lager offer to boost profits by around £1m a year from now on.
The company said the good summer weather had contributed to satisfactory trading in the second half, with the Pathfinder Pubs managed division seeing a total like-for-like sales increase of 5.2 per cent across June, July and August. Across the year to September 20, total like-for-like sales were 3.6 per cent up.
The Union Pub Company tenanted division saw like-for-likes increase by 4.1 per cent across the summer, and by 2.7 per cent for the year.
W&DB said it faces continued pressure from rising employee and regulatory costs, including the increase in the minimum wage, and estimates the cost of implementing licensing reform next year at £1.5m.
Chief executive Ralph Findlay said: "We continue to achieve good results in a very competitive market, reflecting our focus on running high quality, freehold community pubs and our strong, value-based offer to consumers.
He added: "In responding to the challenges facing our industry, we derive real advantages from operating three distinct pub and brand businesses. I am confident that our proven strategy, high quality assets and local expertise will enable us to continue delivering value for our shareholders."
