How do family businesses survive and thrive in the modern drinks industry?

By Rob Brown

- Last updated on GMT

Punching above their weight: the foundation of the on-trade is based on family businesses
Punching above their weight: the foundation of the on-trade is based on family businesses
It’s not all about the huge multinational companies when it comes to brewing and pubs – family-run businesses are the base of this great trade and they are more than capable of taking on the big guns

The drinks business is a land of giants. Britain’s biggest pubco, Ei Group, owns about 5,000 of the country’s 48,000-plus pubs. Star Pubs & Bars, the leased pub business of the world’s second biggest brewer Heineken, owns around 2,700. Mitchells & Butlers has just shy of 1,800.

But family businesses are the foundation of the hospitality sector, delivering more than £72bn to the economy each year (Source: UKHospitality), and 60% of that comes from family-owned companies, says Institute for Family Business (IFB) director general Elizabeth Bagger.

“Family businesses in the hospitality industry turn over £43bn a year and employ well over a million people,” says Bagger. “They’re our economy’s backbone and the heart of our communities. The families behind great pubs really understand their customers.”

But all operators – large or small, publicly or privately owned – are facing the same challenges. Punters are drinking less, pubs are closing at an alarming rate and inflation and the rising beer duty, business rates and the national living wage are squeezing profits for all.

Backlash provides opportunity

So how can family businesses not just survive but thrive in this land of giants? Is there anything about their ownership structure that gives them an advantage? And what examples are there of innovative family businesses in the trade?

The backlash against big corporations fermented by the craft brewers suggests there is a real opportunity for independent family players, particularly in light of a 2017 study by Edelman that found consumer trust in family companies is significantly higher than it is for businesses in general (75% v 59%).

There’s an abundance of family businesses, new and old, that are capitalising on the trust consumers have for products that are made by passionate individuals that can demonstrate true provenance, heritage and craft.

Take Dunnet Bay Distillery, the business behind the Rock Rose Gin and Holy Grass Vodka brands set up by husband and wife Martin and Claire Murray back in 2014 on the north coast of Scotland. It now exports Rock Rose Gin as far afield as the US.

“When we started, the plan was to simply create two jobs for myself and my wife, but the business has just exploded since then,” explains Murray. “We now employ 16 people in a village of 300. Every recipe we produce is created by us, every bottle is filled by us and we use locally sourced botanicals as much as possible. It’s really struck a chord with people.”

Of course, ownership structure can only ever be a contributor to performance. Murray puts his success down to product quality, the opening of the North Coast 500, a tourist route that TV motoring show host Jeremy Clarkson has called ‘the best drive in the world’ passes the distillery’s doors, and the gin boom, but says the autonomy of being a family business has been a factor.

Smart families use their heritage and independence to cultivate a certain romance about their businesses. “No other brewery has a story quite like ours – it resonates with people,” says Jo Theakston, sales and marketing director at the Black Sheep Brewery, which his father Paul founded in 1992 after walking out on family business Theakston Brewery in 1987.

The split was the culmination of a fractious few years at ­Theakston, which came to a head when Scottish & Newcastle (S&N) took a controlling stake in the business and shifted production of best-seller Theakston Best Bitter out of its spiritual home Masham, where the company had been brewing since 1827, to Tyneside.

“It was the beginning of the craft beer story,” adds ­Theakston, whose brother Rob is now managing director at Black Sheep, which is owned by 1,000 shareholders, with the family controlling the largest share, of 15% (Paul’s cousins took back control of ­Theakston Brewery in 2003).

“Cask beer was having a tough time in that period in terms of quality and there was a lot of keg stuff like John Smith’s out there. Dad has beer in his blood, and he wanted to bring quality and flavour back to cask.

“It was pitched as a David and Goliath story. ­ at was dad’s idea. He always wanted to keep it in Masham (where S&N, then Britain’s biggest brewer, was making beer) because as a family we have been here for 500 years. We have a huge sense of responsibility to the community and we employ about 100 people at the brewery and visitor centre.”

Family brewers (1)

In the following two decades, cask beer enjoyed a dazzling revival. But fashions come and go, and the rise of craft keg beers has since helped take the wind out of cask’s sails. ­This has called for innovation from cask brewers, many of which are family owned.

Thwaites director of Pubs and Brewing Andrew Buchanan says: “A regional brewer is small enough to care and big enough to matter.

“Generally, we know all of our tenants and build solid relationships with all of them – some have been with us for generations, for up to 50 years through a number of members of the same family.

“­The heritage, longevity and family values that are core to family brewers like ours give people the confidence and reassurance to take a long-term approach to their business, knowing they are with a supportive, sustainable and attractive business partner.”

“You don’t get to be a 180-year-old family business without being able to move with the times,” says Oliver Robinson, managing director (beer division) at Robinsons Brewery, the Stockport business founded by his great, great, great grandfather Frederic in 1838. His cousin, William, is managing director of Robinsons’ pub division, and the business is owned by the family.

“Trooper, which we developed with [rock music band] Iron Maiden, has been a real success. We have just launched Helles lager and a stout to compete in the new craft keg market and compensate for some of the losses we are seeing in the cask market. We’ve launched Dizzy Blonde in chilled casks to try and stop people migrating from cask to lager in the warm weather.”

Examples abound. Shepherd Neame – a PLC that still has Neame family board members who are hands-on in the running of the business – brews US craft lager Samuel Adams at its Faversham brewery and launched craft keg spin-off brand Bear Island last year.

Black Sheep has launched craft brand My Generation Beer Co and an eponymous session pale ale to tap the keg trend. It’s also embarked on the ambitious 5 Barrels Project, which has seen it launch beers that sound more like desserts, such as Raspberry & White Chocolate Milkshake IPA and Peanut Brittle Imperial Stout.

Who makes the beer?

Authenticity is crucial for many drinkers in this age of craft beer. And, in light of Edelman’s findings, many drinkers may be more likely to trust family brewers’ craft offerings than those of the multinationals, such as Diageo’s Hop House 13 or Heineken’s Maltsmiths. Last year, SIBA (The Society of Independent Brewers) said drinkers deserved to know if a craft beer had been made by a multinational.

Punters don’t just care about who made what they’re buying. “People really care about who they’re buying from – they recognise the difference between managed and family-run pubs,” says Vicki Almond, director of Almond Family Pubs, a family-owned business that operates six pubs in Cheshire and Greater Manchester. Three are leased from Robinsons.

“Family pubs are essential to the community. There are many benefits to being family-owned. Me, my dad and my brother make decisions over lunch. I’d assume with larger companies the decision-making process is slower because you have to go to the board.

“Our staff retention is above average. Many of our managers say they like working in a family business and knowing the owners. We have an excellent relationship with Robinsons built on trust and sustainability. There’s a great history between our families. My dad used to work with the former chairman Peter and my brother and I know William very well.”

It’s a familiar story. All of the family businesses we spoke to for this article described a less corporate, more personal way of doing business is often based on the ethos and personality of the company’s founder.

Personality is a valuable commodity in a market dominated by big business, so it’s crucial families distinguish themselves from the competition. “We’re trying to create brands that are local heroes and are clearly differentiated,” says Alex Salussolia, MD of the Foundation Group, owner of pub and restaurant operator Glendola Leisure and Carlton Hotel Group.

Salussolia points to Bar & Beef, a Glasgow restaurant specialising in gin (it has more than 120) and quality steaks, and the 10 four-star hotels in the Carlton portfolio as proof of how the company is differentiating itself. The business, founded by Alex’s father Peter 45 years ago, now turns over £80m a year and has net tangible assets of £100m.

“The growth has been a combination of acquisitions and building businesses from the ground up,” he adds.

“Our focus is generational. When we develop concepts and look at sites we are looking at it for the long term. We don’t have an exit strategy or a refinancing event to worry about in the next five years.

“When you wake up in our hotels, you know what country you’re in. It isn’t just another Marriot or whatever. It’s so important that we bring our personality and culture into our hotels, brewpubs, artisanal coffee houses, etc. Our mission comes from my father: to create the very best, unique hospitality experiences tailored to their market places.”

Meanwhile, Independent Family Brewers of Britain (IFBB) chairman Rick Bailey reveals: “Family brewers have the vision and patience to make very large investments and try new things with the confidence that they are deploying long-term capital – this allows us to take risks and invest ahead of the market in all sorts of areas, and not just limited to pub concepts, but also support services, IT infrastructure and training.

“As a family brewer, we are not overburdened with layers of management – the ability to reach high up into the management and ownership of the business makes for fast and agile decision making. It helps create very dynamic businesses.

“If you are looking for a partner that is straight forward, experienced and reliable – family brewers have it in spades.”

Another key consideration for any family business is the issue of succession planning, a crucial issue if the accumulation of a family’s reputation and wealth is to continue to be maintained through the generations.

“In family businesses, succession planning is a constant consideration,” says William Robinson. “You have to keep an open mind. You can’t become transfixed and you can’t force the next generation to go into the family business. That could be bad for them and bad for the company as well.”

And, ultimately, 60% of the hospitality industry too.

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