ScotCo axes Tyne Brewery as production moves to the Fed

by Tony Halstead Scottish Courage is to close its historic Tyne Brewery at Newcastle next spring, the second major closure announced by the company this year. The end for the city-centre Gallowgate site, with the loss of 110 jobs, follows a major review of brewing operations which also sounded the death knell for the Fountain Brewery in Edinburgh three months ago. The company is switching production of its flagship brands across the Tyne to the Federation Brewery at Gateshead, which it has bought for £7.2m ­ a move that safeguards the future of the plant, which has grappled with financial problems for several years. Scottish Courage has also offered a further £16.2m for other Federation assets, most of which are owned by more than 300 working mens' clubs, many of which are said to be angry about a complete lack of consultation over the deal. It was revealed this week that the brewery at Dunston has been sold for just over a third of the £18m it cost to build back in 1979. Scottish Courage has justified its actions pointing out the Tyne Brewery was running at only 70% capacity and closure will save the company £10m a year in running costs. Property experts estimate that the company could reap a cool £50m from the sale of the citycentre site. Production of the famous Newcastle Brown Ale brand, Newcastle Exhibition and McEwan's Scotch will switch to Gateshead, while other beers, including Theakstons, transfer to John Smith's at Tadcaster, north Yorkshire. It means an application will have to be made to the EU for the withdrawal of protected geographical status for Newcastle Brown. The Campaign for Real Ale (Camra) believes brewing the ale away from Newcastle will undermine the brand. "Following the sell-off of Theakstons and closure of Fountain Brewery, S&N is seriously reducing its capacity and restricting its ability to grow. "I think that may leave it in a vulnerable position," said head of campaigns Mike Benner. Chairman and managing director of Scottish Courage John Dunsmore said: "Both breweries have been operating below industry standards of capacity and efficiency, but by joining forces we are able to preserve a home on Tyneside for the continuation of two long and enduring brewing traditions" It is understood that Feder-ation first approached Scottish Courage last summer about a possible sale of the brewery, which was running at only 40% capacity and faced a £7.8m hole in its pension fund. Federation chief exective Geoff Hodgson said: "The Federation Brewery has never been full from the day it opened and we have really struggled over the past two years. "Margins are very thin and the underlying core clubs' business is going backwards every year." Froggatt points the way Scottish & Newcastle chief executive Tony Froggatt has made a number of key decisions since he was appointed on 12 May last year. They include l Closure of the Fountain Brewery in Edinburgh along with the acquisition of Caledonian to save £10m a year. l Closure of Tyne Brewery and acquisition of Northern Clubs Federation Brewery to save £10m. l Merger of Waverley Vintners with Beer Seller. l Pooling of resources with Carlsberg UK to create a new independent cellar servicing company, Serviced Dispense Equipment Limited. l New urgency applied to fixing distribution problems, with on-trade satisfaction levels hitting 72% over Christmas. A tale of two breweries The Tyne Brewery building dates from the 1860s when it was opened by Bells Robson & Co, but was later acquired by John Barras & Co in 1884. In 1890 Barras and other local breweries merged together to form Newcastle Breweries which laid the foundations for the emergence of a company that was to dominate brewing in the region for the next 114 years. The brewery's most famous brand, Newcastle Brown Ale, was launched in 1927 and began winning the first of its many industry awards a year later. Following its gold medal victory at the International Brewers' Exhibition in 1928, the brand's famous Blue Star emblem was launched on its bottle label. In 1960 Newcastle Breweries was taken over by Scottish Brewers to form Scottish & Newcastle Breweries. S&N then acquired the brewing assets of Courage in the early 1990s to form Scottish Courage which still owns the Tyne Brewery site today. The Northern Clubs Federation Brewery was founded in 1919 to help combat beer supply problems in the wake of the First World War. In 1927 Federation acquired the Buchanan Brewery in Newcastle where it continued to prosper largely through its business with hundreds of working mens' clubs across Tyneside, many of which purchased shares in the company. In 1979 a purpose-built brewery was built at Dunston, Gateshead, opening in 1980 at a cost of £18m.