Exclusive: Heineken to sell the Caledonian Brewery?

Last week, it was widely reported that the Managing Director of the Caledonian Brewing Company was to step down, after twenty years with Edinburgh’s oldest brewery. Stephen Crawley worked his way up from a sales role to MD in eight years, and spent the subsequent twelve in charge of one of Scotland’s largest beer-making concerns* – through a period most managerial types would describe as ‘challenging’. Under his tenure, the Caley were bought out by Scottish & Newcastle (in 2004), with S&N then subsequently being acquired by Heineken four years later, for £7.8bn. Despite these top-level transitions, the Caley is still there, still putting out the beers (for various markets), and still shipping across the world.

*as well as being on the board at Harviestoun, as non-executive director – a position I’m not sure if he will retain

Plenty of websites reported the fact that Mr Crawley was leaving, but few postulated any reasons as to why. The press release stated a successor is being sought, and was stacked with the usual platitudes – “the right time to let someone else take the reigns”, “the real heroes [are] the beers and the brewery”, “it is business as usual in all respects”. I’ve no reason to think it isn’t – people at the top move on, others are appointed or promoted to take over. It’s the nature of business, conducted in all those usual respects. However, this statement has arrived on the background of a rumour I’ve heard circulating in the Edinburgh beer scene over the recent past, which puts the announcement in a very different context.

I’ve heard it said, more than once, that Heineken are considering selling the Caledonian.

Now, this is just the word on the street, as delivered by the beery equivalent of Johnny the Shoeshine boy – but is the departure of Stephen Crawley the first action of this? Heineken are fighting, tooth and nail, for an increased share of the international lager market. As the world’s third-largest mega-brewery, they are scrapping with ABInBev and SABMiller for an increased share of the global fizz-pie. Although the ‘Western’ lager market is in decline, due in part to what has been dryly described as ‘weak consumer sentiment’, markets in the rest of the world are growing; particularly in South America (Heineken up 5% in 2012) and SE Asia (where they purchased Asia Pacific Breweries last year).

Yet there’s a problem – despite the progression of their brands in developing markets, Heineken are still in trouble. Back in February 2012 CEO Jean-François van Boxmeer announced a two year, 500m Euro savings plan, with the outlook for Europe (which still constitutes nearly half Heineken’s earnings) quoted as being “not superb”. At this time, when buying up other markets is one of the only ways, seemingly, to make a profit (their Latin American growth was boosted by purchasing the brewing arm of Mexican giant FEMSA), what future does Heineken have for a traditional, and quirkily historic, cask ale brewery?

I spoke to an industry insider, who confirmed that Heineken have only a single focus. “They are divesting themselves of anything that holds them back in the global fight with ABInBev and Molson Coors,” they told me. “They just don’t understand the craft market.” Now, leaving aside the point of whether the Caledonian are a ‘craft’ brewery or not – the other C-Word is a subject that has been discussed ad nauseum recently – Heineken have closed 47 breweries and malting plants in the last ten years, according to analysts UBS AG. At the start of this year, they cut the abv of John Smith’s Extra Smooth from 3.8% to 3.6%, and raised the price at the same time. Although the Caley denied Deuchars was set to follow, this points-shaving has become rife amongst the macros, and symbolic of the new cost-cutting practice.

Heineken acquired the Caledonian Brewing Company as part of the wholesale purchase of S&N in 2008. Was the real prize, though, S&N’s 1300 pubs? The SNPC (now re-branded as Star Pubs and Bars) and the contracts to supply Wells & Youngs with McEwans beers, must be bringing in a large chunk of the cash at Slateford – even if, as the insider I spoke to put it “churning out McEwans is no cause for innovation.” Having visited the Caley and talked with the people there, they are adamant that Heineken are supportive and proud of their open-copper production process – and I’ve no doubt that this is true – but if the Dutch corporation is committed to cost-reduction and looking to developing markets, are the rumours that they are looking for a buyer for CBC substantial?

If it eventually comes to pass, being disgorged by Heineken may not turn out to be a bad thing, assuming a buyer can be found, of course. The Caledonian has been here before – they were saved by a management buyout in 1987, and have also come back from devastating fire back in 1994. Resilience is ingrained in the distinctive red brickwork. If Heineken cherrypick Star Pubs and Bars, and cut the Caley loose, it could be the chance to regroup, use the visitor facilities that have been put into the Slateford site, and start a new chapter. There is a precedent, just up the road, in the shape of Harviestoun, who were jettisoned (ironically enough) when Heineken took over S&N in 2008, and have since gone from strength to strength under their own steam.

Time will tell, of course, as to whether the rumours of Heineken wanting to sell the Caley are true, and whether the departure of Stephen Crawley really was the first action in the Caledonian becoming independent, once again.

In writing this article, I put the rumour directly to Heineken, and received an extremely polite and rapid response for their head of communications that ‘we have no plans to sell the Caley’