The Woolworths-owned ALH Group has sold its taps to CUB and Lion in unprecedented nationwide deals, bucking the prevailing trend of pubs exiting restrictive tap contracts.
Until now, ALH’s approach to draught beer has been somewhat piecemeal in nature, with individual venues allowed some flexibility to choose the products that best suit their customers.
Industry sources suggest the new structure gives the two big brewers a combined 90 per cent share of draught beer pourage in ALH’s 330-plus venues, with the split varying in each state.
For the vast majority of ALH’s venues, which are gaming-focused pubs on the eastern seaboard, there will be little change to the beer offer.
But change has been drastic in its venues that have developed strong reputations for supporting independent breweries, such as Melbourne’s Young & Jackson.
Y&J’s website declares its pride in “showcasing Victoria’s best craft breweries with a selection of seasonal brews, limited releases, unique brews and one-off batches on tap”.
But the pub’s current tap list indicates that 16 of its draught beers were switched over to CUB and Lion products earlier this week.
Patrons want mainstream: ALH
ALH recently underwent a periodic review of its draught beer offering, spokesman David Curry told Australian Brews News.
He confirmed the review resulted in the big brewers gaining taps, but declined to comment on the specifics of the agreements.
Curry said that any axed brands have suffered that fate simply because they were not meeting their volume requirements.
ALH remains a “free house”, he declared, with patrons ultimately deciding what goes on tap in its venues.
Curry said ALH must adapt to meet the market, which is constantly changing. In the case of Young & Jackson, there is now a major competitor venue in Garden State Hotel, the 840-person Flinders Lane pub that opened earlier this year.
He suggested Garden State had been attracting more Melbourne CBD patrons because of its superior mainstream beer offering, which includes the copper tanks of “brewery fresh” Carlton Draught.
Relics return at Y&J
However, a cursory review of Garden State’s deluxe fitout and its abundance of contemporary drinking and dining options, suggest other reasons punters would be lured from the comparatively dated Y&J.
ALH’s claim that the relegation of brands was related to their performance has also been widely disputed by industry sources.
And it’s difficult to see how the publican could be confident that sales of the newly introduced beers will outstrip what they have replaced.
Several of the CUB products introduced at Y&J this week are largely unproven (Wild Yak, Carlton Pale and Bonamy’s Cider).
Others such as Matilda Bay’s Dogbolter and Carlton Black have largely disappeared from the market for the very reason that they were not selling at any volume.
Moving to a scenario where 90 per cent of taps are locked up, giving individual licensees little control over the beer offer in their venues, is surely the antithesis of a “free house”.
Several employees at key beer venues have reportedly left their jobs over the shake-up.
ALH’s motivation for selling off its taps looks more likely to be related to its recent financial performance and changes at both management and board levels.
The 2015-16 financial year saw ALH’s like-for-like earnings decline six per cent on the prior year, despite comparable sales growth of one per cent.
Gross margin in its hotels declined by 26 basis points over the period, which Woolworths attributed to “a change in mix towards lower margin bar and food sales”.
As the year drew to a close in June, former Woolworths chief executive Roger Corbett returned to the ALH board as chairman, shortly after Endeavour Drinks Group boss, Martin Smith, also became a director.
Simultaneously, ALH’s national operations manager Steve Howarth was made redundant, with his role since undertaken on a dual basis by CEO Bruce Mathieson Jr.
And in August, Mario Volpe – who left ALH in 2004 and spent the intervening years at Foster’s and most recently, Coles-owned Spirit Hotels – rejoined the group as commercial manager, giving him national responsibility for food and beverage merchandising.
ALH ‘progressing well’
With earnings flailing and increased scrutiny on the entire Woolworths group following the Masters hardware debacle, ALH’s new management appear to have brought a more hard-nosed approach to the business.
At Woolworths Group’s AGM on November 24, CEO Brad Banducci told investors that the strategy is already working.
“The joint venture in ALH is progressing well with a new board, a stronger discipline around capital management and a clear strategy for growth,” he said.
But the publican’s cost-focused, commoditised approach to beer is surely a boon for its city-based competitors who are genuinely customer-led in curating their beer list.
The incentives on offer from the duelling majors were undoubtedly generous. Time will tell whether they were worth it.