S&N quiet on brewery's future as profits go flat

Ros Snowdon Deputy City Editor SCOTTISH & Newcastle reported flat 2003 profits yesterday and said it expected consumer confidence to remain weak over the coming year.

The group remained tight-lipped about the future of its Newcastle brewery amid rumours that it will be shut down following last week's controversial decision to close the 150-year old Fountain Brewery in Edinburgh.

S&N has set itself a target of saving 45m a year within three years and the Edinburgh closure will save it around 10m a year.

Yesterday, chief executive Tony Froggatt said it would be possible to reach the 45m savings target without closing another brewery, but it was unable to give any guarantees to its 200 Newcastle workers yesterday.

If Newcastle, which brews Newcastle Brown Ale, is closed down the group would be left with three breweries in Tadcaster, Manchester and Reading.

The John Smith's brewery in Tadcaster, near York, is seen as fairly safe as it is the lowest cost facility in the group and its sulphate-rich water has made it a historic brewing centre.

Tadcaster has one cask line, two keg lines and one canning line and brews John Smith's and Webster's Yorkshire Bitter as well as McEwan's Export, Courage Best, Courage Director's and lager brands Foster's and Kronenbourg 1664.

The Royal Brewery in Manchester is the most productive in terms of pints per worker and The Berkshire Brewery in Reading is by far the group's biggest production centre.

S&N needs to bring its cost base down so it can invest in advertising its leading brands.

Yesterday, the group avoided the thorny question of whether it can continue to call Newcastle Brown Ale by its current name if it is no longer brewed in Newcastle. Over recent years the ale has enjoyed strong growth in the US where it is seen as a heritage beer enjoyed by wealthy young professionals who are willing to pay high prices for it.

Speaking at the annual results yesterday, the group was cautious about the outlook for this year partly because it cannot rely on another long hot summer to boost sales.

"Last summer was an aberration and we are not relying on it happening again. We are budgeting for normal summer weather.

"We are also taking a prudent view on consumer confidence, there is definitely a weakness in some of our markets," said Mr Froggatt.

S&N reported a 1 per cent rise in pre-tax profits to 471m in the 12 months to December 31 and sales rose 17 per cent to 5.5bn.