Global worries over Tetley's cask ale

A few weeks ago, walking along Whitehall in London, I dropped into the Red Lion for a beer. The barman served the man ahead of me with a pint of Adnams, then turned the pump clip round to face him: 'Sorry, it's finished, he told me.

I was left with the choice of Tetley's or... Tetley's. It's a long time since I drank a pint of cask Tetley's due to the dominance of the more tasteless nitro-keg Smoothflow version, but I found it delicious.

The rediscovery of how good a pint of Tetley's can be, led on to thoughts of what future awaits the Leeds brewery. Tetley's has been owned by Carlsberg UK since 1992. For most of that time, the group was known as Carlsberg-Tetley but Tetley's disappeared from the flagpole a couple of years ago.

Since then there has been endless speculation about the future of Tetley's Bitter and the other ale brands brewed in Leeds: Tetley's, it should not be forgotten, is the biggest brewer of mild in the country.

Tetley's Bitter, in cask and keg form, is the second-biggest standard ale brand in Britain. Nevertheless, Carlsberg seems to have lost interest in ale. I can't recall a big promotion for the beer, though it does retain a high profile as a result of its links with the England Rugby Union team.

I have suggested more than once that Carlsberg, determined to catch up with its international rivals in the shape of Carling, Stella Artois and Heineken, will concentrate more and more on its lager brands and will sell off Tetley's, either to its Leeds management or to a rival brewer.

Now it seems increasingly likely that major changes will be seen at Carlsberg over the next year, that could result in a merger with Britain's biggest brewer, Scottish & Newcastle.

The two brewing giants already work in harmony as Baltic Beverages Holding, the biggest brewer in Russia, with close to 40% of the market. They have also stripped themselves for action in Britain: not only has Carlsberg unceremoniously dumped Tetley's from its title, but S&N has closed both its Edinburgh and Newcastle breweries to concentrate on production of Kronenbourg.

S&N owns John Smith's, Britain's number-one standard-ale brand. But most of its other ale brands have been hived off to regional brewers. It's clear that, for both Carlsberg and S&N, big-volume lager brands represent the future.

The pressure is on Carlsberg. It is the world's fifth-biggest brewer and is a dominant force in its Danish homeland and other parts of Scandinavia and the Baltic.

But it is struggling to keep up with InBev and Heineken. It needs to expand but it is restrained by its curious constitution. The founder of the brewing dynasty, JC Jacobsen, turned the company into a charitable foundation and five professors now control its board. They know a great deal about art and medicine but are not well versed in business and the needs of a modern brewing group.

Carlsberg is seeking urgent changes to this constitution in a bid to raise cash for expansion by putting some of its shares on the market. This may prove difficult, as Carlsberg is viewed with the kind of awe and respect enjoyed by the British Museum in Britain.

But change has to come, or the group will fall further and further behind its global rivals. A merger with S&N would almost certainly mean hiving off Tetley's, which would sit uneasily alongside John Smith's. Wolverhampton & Dudley has the cash to buy the Leeds brewery, but it would be an uncomfortable fit with Banks's and Marston's.

A management buyout is the most likely option. As they say, watch this space.