Funny things, families

Two decades ago Batemans' future looked very bleak indeed. Today the family brewer and retailer is thriving. The PMA Team meets wholesale MD Stuart Bateman They're funny things, families, aren't they? That's Stuart Bateman's rueful take on the history of Batemans, a business as firmly steeped in the paternalistic traditions of family brewing as any in Britain. It was two whole decades ago that Batemans went through the kind of trauma that is an occasional feature of family brewing. John and Helen Bateman, brother and sister of current and very active chairman George, decided to sell their 60% stake in the business to outside buyers. And for three years, George Bateman fought ­ with the odds massively stacked against him ­ what the family calls the "Battle for Independence". That was, of course, a long time ago. But, even now, the experience, as draining as any in the drama-prone world of family brewing, evokes strong emotions for the Bateman family. "My father still gets emotional about the whole heartache of that time," admits Stuart. "But I also believe it made the company stronger and gave us a much more secure future." That Batemans still exists is little short of a miracle. Stuart, in his early 20s at the time, was so convinced himself that the struggle for independent survival was doomed, that he took a sledgehammer to brewing equipment at one stage. The best offer made for the company was 20% higher than could be afforded by George. It was unlikely that the purchaser's plans for Batemans encompassed the traditions of maximising brewery employment and ensuring tiny Lincolnshire villages retained a pub. Two huge slices of good fortune came to the rescue. The purchaser set about a long process of negotiating the purchase price southwards. Eventually, he negotiated the price so far down it fell back in line with the sum that George Bateman had put on the table. Tired by a three-year wait to sell their shares, George's siblings agreed to sell to him. Even so, the sum of money still meant that a substantial sell-off in the pub estate ­ around 50 of its 100 pubs ­ would be needed once the family had been paid off. Here came the second piece of luck ­ the property boom of the late 1980s came along. Pubs that were worth £40,000 were selling for three or four times that amount. "The property boom was a godsend to us. One pub doing 45 barrels a year sold for £130,000 at auction," remembers Stuart. "It meant we only had to sell around 20 pubs." The struggles of the 1980s at Batemans were a watershed for the company, informing its approach ever since. For a start, the ownership structure of the company was engineered so that it could never be threatened in the same way again. The majority of the shares in Batemans have been placed in trust for Stuart and his sister, Jacquie, who is head of marketing. Says Stuart: "Myself and Jacquie get on well and work closely in the business. But we never want to be in a position where we could endanger the future of the company and what it stands for ­ brewing good-quality cask ales, employment and rural pubs. We have enough shares to affect the future direction of the business, but not enough to trigger a sale. We've both been involved in this decision and it has our full agreement." Operationally, surviving the crisis of the 1980s forced the Bateman family to focus on its strengths ­ cask ale and tenanted pubs. By the late 1980s, the takeover battle had resulted in investment being at a complete standstill for three years. Managed pubs, keg production, in-house bottling and the free-trade business, all fell victim to the need to concentrate on priorities. In 1995, the family recruited a new chief executive, Haydn Biddle, formerly a board director at Scottish & Newcastle. Biddle, who is now god-father to all three of Stuart's children, brought big business rigour, combined with genuine sympathy for the family brewer ethos. Stuart says: "He is a very caring man who completely understood and shared our dream going forward ­ the importance of community pubs and as much local employment as possible." Biddle encouraged the family to departmentalise and full board directors were appointed with responsibility for finance, retail and brewing. And he encouraged Jacquie to set about a corporate branding exercise, ensuring the Batemans name and logo were used on everything from pump clips to paperwork. New investments were judged against a strict 12%-plus return-on-capital criterion. A huge boost for Batemans has been the succession of awards its ales, overseen by former Mansfield brewer Martin Cullimore since 1988, have received in the past 10 or so years. Its Batemans XXXB has won the premium beer category at the Great British Beer Festival on four occasions ­ and was even named supreme champion one year. Its mild and bottled beers have also scooped awards. The company has been a genuine innovator with great-looking bottles, new flavours and seasonal ales. Its Rosey Nosey Christmas brew has become, arguably, the foremost Yuletide beer in the business in the past six or seven years. "Beer is part of the leisure experience," says Stuart. "The danger is taking ourselves a bit too seriously rather than making it fun." Its bottled beers have seen sales jump from nothing to a retail value of £2.5m in four years, enjoying 23% growth last year alone. Barrelage has hit 25,000 barrels and the family plans to expand by 10% a year for the next three years. The introduction of Progressive Beer Duty had the family toying with reducing production to 18,000 barrels to pick up the £120,000 relief on offer. Last week, of course, Gordon Brown doubled the upper threshold to 36,000 barrels and Batemans will have this benefit to re-invest in the business and the brands. "We plan to see substantial growth in the next three years. The Chancellor's decision is absolutely brilliant and we will able to re-invest to take the business forward," he says. The Batemans pub estate, meanwhile, continues to grow, with slightly over 70 pubs now. All tenants are on rolling three-year agreements with rents ­ I feel able to say as a former Batemans tenant at two pubs ­ on the gentle side. And, again from personal experience, Batemans is not the sort of company that will come back seeking a big rent rise after a tenant has managed to make business soar. "Our relationship with tenants is second-to-none," says Stuart. "The family is very close to its tenants. We support their business, we're flexible and we don't charge astronomical rents. We want tenants to be around for the long term and to build their businesses. We don't always appoint the tenant who can afford the inventory because we want the right person to develop the business and be there over a number of years. I believe it's a far-sighted policy." Like many a regional brew, Batemans would love to buy 20 or 30 pubs in a package. Instead, it has mostly been picking up single sites. Spiralling prices for pub freeholds mean that it has been six years since the company was able to pick up a package of pubs ­ it bought 12 from Pubmaster. "When we make an offer ­ always based on the return we need ­ we find the final price paid for a package of pubs tends to be 25% to 30% more," he reports. Stuart thinks the large acquisitive pubcos are paying more for freeholds because they have to deliver growth to shareholders. Batemans, by contrast, can afford to play the patient, long game. "Some of these companies have to show they're growing aggressively. We don't have to demonstrate aggressive growth, we're not looking for an exit. We want to be here in 20 or 30 or 40 years' time." Funny things, families. Rather wonderful, too. Stuart Bateman on­ The takeover battle: "At one stage, the objective was simply to find a white knight: somebody who would wish to continue the brewery, run it as a going concern, keep employment in Wainfleet [the site of the brewery], not asset-strip, keep the pubs going, continue with Batemans cask ales and basically develop the business." His father's determination to save the brewery: "Dad became known as Mr Ah But.