Family brewer and pubco Charles Wells hit the headlines last year after declaring the sale of its brewery and several high-profile brands to Marston’s for £55m. The company has kept quiet since then as plans for the future were formed. But the radio silence has now broken.
This month, Charles Wells announced a new 30,000hl brewery in Bedford, which will be built at a cost of £13m with the aim of putting Charles Wells back on the brewing scene with a bang.
Speaking to The Morning Advertiser over the phone about the new brewery and the future of the business, Peter Wells, formerly the managing director of UK pubs before a promotion to commercial director in 2015, says bosses took a long hard look at what they wanted for the future.
“When we sold the brewery,” he explains, “we looked at the options to go down the road of becoming like [former brewco] Young’s and just become a pubco. But brewing is a key part of our business and there’s an opportunity for us to deliver new, interesting and exciting beers.”
We did have a strong portfolio of brands but in order to boost them and be competitive, we had to invest a lot of money
Planning to build a small brewery after selling a huge 1m hectolitre facility raises a few questions about Charles Wells’s motives, as well as the stability of the business at the time. But Wells says there was nothing untoward about the decision to sell, explaining market conditions and the fact its brands needed investment made it an unrealistic path to continue on if the company was to grow.
“We did have a strong portfolio of brands but in order to boost them and be competitive, we had to invest a lot of money in the marketing and it was at a time when there was a lot of competition from new breweries, which were introducing up to 10 beers to the market a year,” says Wells.
Bigger players had the economy of scale, which Charles Wells was lacking and therefore couldn’t offer pubs the same prices for their beers they were receiving from others. “We were looking around [to sell] and Paul Wells (chairman and former CEO) knows the guys at Marston’s and we felt there were clear synergies between the two businesses.”
It was agreed Marston’s was a safe pair of hands for the beer brands Charles Wells had grown. Peter and the team, including CEO Justin Phillimore, who was promoted into the role from brewery MD in 2015, believed the team and the beers would be treated well under Marston’s rule.
Few roles cut
Few roles have been cut since the two businesses were integrated; 53 functions were made redundant in August 2017 and a further 35 to 45 staff at Charles Wells’s former Eagle Brewery have entered into a consultation, pending a significant investment at Marston’s Burton-on-Trent brewery.
Things, though, had to change for Charles Wells. Moving to a smaller brewery, Wells believes, will give the company more control over its brews and the ability to produce a higher quantity of innovative beers that will be pushed out across its 186 leased and tenanted pubs and 23 managed.
“The key thing for the new brewery is runs will be much smaller, so we can be more flexible and deliver popular beer styles and create new ones,” he says. “We want to ensure our pubs have as much choice as possible and our brewery is for them, to give them a point of difference from competing pubs.”
When it is built, Wells claims it will be the UK’s most modern brewery, which he is proud to say. Head brewer Ian Jones spent 20 years in South Africa setting up craft facilities there and was also the man behind Camden’s brewery. “He is fundamental to our plans and has lots of experience in setting up new breweries like this.”
We feel like it’s a new start with the brewery but also there’s a real sense of excitement that we have the opportunity to invest more in our pubs
It should not be taken lightly, Charles Wells’s move is a bold one. It is the brewing world’s equivalent of downsizing a home. Brands formerly owned and produced by the Eagle Brewery included Bombardier, Courage, McEwan’s as well as the UK distribution rights to Estrella Damm, Kirin Lager, Erdinger and Founders.
The business was a bit of a beer world whopper and “had massive success with the likes of Estrella, which a lot of effort and focus went into driving it forward”, says Wells. “But we got to the point where it needed somebody with access to a bigger market of pubs and more resources to support the brand further.”
Selling has left the company with a lot of cash in the bank, which is to be spent on the pubs in the estate. A considerable £3.4m was pumped into the pubs last year and a further £2.5m has been set aside this year.
Though Charles Wells continues to be serious about beer and has decided against becoming “just a pubco”, the commercial director makes it clear the pub trade is a big focus for the company now and in the future.
“We feel like it’s a new start with the brewery but also there’s a real sense of excitement that we have the opportunity to invest more in our pubs,” he says. “Part of our strategy is to buy freeholds where we can and we’re in a privileged position because, through the sale of our brewery, we’ve got the funds to go out and buy new pubs.”
Brands shutting venues
Recent pressures in the hospitality sector, such as casual-dining brands shutting down venues due to financial pressures, leads Wells to reassert the business’s acquisition strategy, where there is a clear focus on owning property outright. “But we are happy to buy into some leased sites and are talking to our friends at the likes of Punch to see if they have sites that suit us.”
That said, there is a clear sense Wells and his team would be the ones in control when it comes to lease agreements, “because we are very clear about what our leases must entail and the rent implications – both have to be on an even keel”.
Over the past few years, the business hasn’t really been in the market to take on a considerable proportion of new sites, says Wells. However, it is now in the position to acquire new venues or to enter the right kind of lease agreements. “We very much got back into the market [to buy pubs] and we’ve got a couple of offers on the table at the moment for tenanted and leased sites.”
It is Wells’s ambition to grow the tenanted and leased estate from 186 this year to more than 200 in the next five years, he says. However, there is more excitement around the managed sites, which operate under the Pizza, Pots and Pints, and Apostrophe brands.
“A lot of the Pizza, Pots and Pints sites are in backstreet areas and are there for people to discover almost by accident. We’re looking to acquire as many venues for these as we can lay our hands on, and that’s a key part of our [growth] strategy,” says Wells. In July last year, the brewco acquired its fourth venue in the chain and has doubled the estate within two years.
Meanwhile, the Apostrophe brand, which also has four venues, developed when Charles Wells took a stake in Little Gems late last year. The two companies signed heads of terms to run a combination of the two brands.
“Apostrophe Pubs are bigger and are based around fresh food and we ideally want to find sites with rooms. We recently invested £1.8m into the chain and have a few more sites in the pipeline,” Wells says. Plans for the future will see Charles Wells aim to have at least 50 sites in its managed estate by 2025, he adds.
That’s not to forget the seven sites operational in France, including the latest opening of the Victoria in Lyon. There are also plans to grow the French estate, which operates under the tagline of ‘Charles Wells France – an English pub company’.
Bosses may have kept radio silence for almost a year, but Charles Wells knows exactly what to say when it is time to speak. With the new brewery set to open by late summer 2019 and a heft of new pubs in the pipeline, it wouldn’t be a surprise if the brewco kept its head down over the next 12 months before resurfacing with another cracking tale to tell.