Bass Plc

Bass Plc

30 Portland Place
London WIN 3DF
England
01-637-5499

Public Company
Incorporated: August 17, 1967 as Bass Charrington Ltd.
Employees: 71,207
Sales: £2.41 billion (US$3.45 billion)
Market Value: £3.25 billion (US$4.77 billion)
Stock Index: London Brussels Amsterdam

Employees of Bass once proclaimed that they worked for the best firm within the British brewing industry. While many of these employees would still say that this adequately describes the company’s beer, they would probably also admit that in the recent past the company has suffered from some myopic management policies. Yet, when the industry trend toward consolidation fostered the growth of large national companies, Bass emerged as an industry leader. Today, in addition to brewing, the company manages diverse holdings in growing international markets.

The founding of Bass & Company dates back to 1777 in the ancient town of Burton-on-Trent in Staffordshire. Although monks had been brewing beer in this town since the twelfth century, it was William Bass who laid the foundation for securing Burton’s status as the focal point of Britain’s brewing activities. William Bass inhabited the house next to the gateway of his brewery; it was here that his son and grandson, both future company leaders, were born. By 1791 Michael Bass, William’s son, was actively engaged in his father’s business.

By the turn of the century the increased volume of brewing, now 2000 barrels per year, compelled the family to expand the High Street brewery to twice its original size. In 1821 the company became one of the first brewers to export ale to India after discovering that it was a suitable product for warm climates. Thus was born the “East India Pale Ale” which many other brewers soon imitated.

Michael Thomas Bass, William’s grandson, assumed control of the brewery in 1827 when brewing capacity had reached nearly 10,000 barrels per year. By 1837 the company was known by the name of Bass, Ratcliffe & Gretton, after two fellow businessmen, John Gretton and Richard Ratcliffe, formed a partnership with Bass. The expansion of the railways greatly benefited the growing business; Burton ales, transported across the nation, became widely recognized as premier brands. With Bass’ output surpassing 140,000 barrels a year by 1853, a second brewery was needed. By 1860 volume had increased threefold; a third brewery was constructed.

Michael Thomas Bass, became not only an important figure in the industry but also a widely recognized civic leader. He financed the construction of several churches, recreation facilities, and a public library. Moreover, he served in Parliament for 33 years as a member for Derby.

By 1876 Bass was recognized; it was now Britain’s largest brewing company. Its bottled ale was so popular that the company was forced to become the first firm in England to make use of the Trade Marks Registration Act of 1875 to protect its red pyramid trademark. A few years prior to Michael Bass’ death in 1884, the business was organized as a private limited company. The old brewery on the High Street was renovated, but now the Bass empire covered 145 acres of land, the largest ale and bitter beer brewery in the world.

In 1888, under the leadership of Michael Bass’ eldest son, Michael A. Bass, later Lord Burton, the company was incorporated as Bass, Ratcliffe & Gretton Ltd. with a share capital of £2.7 million. Output neared one million barrels a year; more than 2,500 men and boys were employed at the breweries.

In the same year that Lord Burton incorporated the company, Gretton’s son, John Gretton Jr., joined the firm. After assuming control of the malting department in 1893, Gretton went on to join the board of directors. Gretton also served as a Conservative MP between 1895 and 1943. Among his many political causes, Gretton opposed the Licensing Bill of 1908 and trade restrictions on the brewing industry during World War I. Upon Lord Burton’s death in 1908, Gretton assumed the title of Bass’ chairman.

During the next decades Bass’ management, unlike that of many competitors, adhered to the free trade system whereby the company relied on small traders to bottle and stock its products. Increasingly, the more common practice for British brewers was to run their own “public houses” as outlets to retail their beer. Bass did own a few public houses, but preferred to depend on the continuing national popularity of its brands to achieve expansion. As long as Bass remained in such high demand, the retailing could be left to the free trade customers. While competitors chose to invest money in the improvement of their public houses, Gretton ignored the trend and neglected his properties.

During World War I overall consumption of beer decreased. The brewing industry (through taxation) was used by the government as a source of income. This led to an increase in the price of beer. The advent of radio, cinema, and other modern leisure activities drew patrons away from the public houses. These changes in social attitudes gave further impetus to the brewers to improve their properties. Public houses were increasingly converted to comfortable places where customers could enjoy an evening of food, drink, and conversation.

Yet Gretton chose to continue rejecting the general trend toward improved public houses. Instead, his company spent the decade of the 1920’s acquiring several other breweries. In 1926 Bass purchased control of Worthington & Company Ltd., a long-established competitor also located in Burton-on-Trent. The Worthington label, like that of Bass, enjoyed a national reputation. This acquisition, however, did not lead to the kind of merger common in today’s market; Worthington remained virtually an autonomous operation.

While Bass continued making acquisitions that included the purchase of a wine and spirit operation, further changes in the industry occurred which were at odds with Bass’ traditional approach. The small but growing firm of Mitchells & Butler not only set an industry example by improving its public house properties, but also led a trend in initiating a policy of direct brewery management. Formerly most brewery-owned houses were run by tenants who were given a free hand to operate the business. Mitchells & Butler imposed new regulations on the tenant managers; it compelled them to sell more of the firm’s own beer rather than national brands such as Bass and Worthington. This policy ensured higher earnings and therefore a greater return on their investment. Such actions undercut Bass’ market position.

Bass’ continuing reliance on the free trade system became increasingly anachronistic. However, it was not only changing social attitudes and industry trends that contributed to Bass’ declining sales in the postwar years; the economic conditions of the early 1930’s created further obstacles. As a result of worldwide depression, factories shut down and unemployment increased, and Bass was forced to cut back production.

Gretton had become preoccupied with his non-business activities. He was deeply involved in political life, a vocal advocate of conservative causes. Bass management was not entirely asleep, however. When awareness of hygiene and quality drew consumers to pasteurized and bottled products, Bass capitalized on the trend: it introduced its “Blue Triangle” brand in 1934. Sales of this bottled version of the older “Red Triangle” grew steadily.

After Gretton died in 1947, Arthur Manners, a longtime Bass executive, assumed the title of chairman. Like Gretton’s, his management style was conservative. Yet between the late 1940’s and the late 1950’s Bass’ net profits increased by 123%. Expansion took the form of share acquisitions in the equity of fellow brewers. Bass acquired holdings in William Hancock & Company and Wenlock Brewery Company.

Over the next few years, however, Bass’ failure to adopt a more modern business approach helped to create competition that previously did not exist. Because of the “tied house” system, Bass beer was lost in popularity to more aggressively marketed national brands and regionally brewed pale ales. The company refused to update its pricing system or adjust to changing public tastes toward milder beers. Even Bass’ holdings in other companies were mismanaged; integration was nonexistent and redundant operations put a strain on profits. Although Bass operated an extensive trading network, controlled 17 subsidiaries across the United Kingdom, and still manufactured a venerated beer, a major change was in order.

When Arthur Manners retired as chairman in 1952, his position was filled by C.A. Ball, a 65-year-old executive who had started his career as Manners’ typist. While Ball recognized the need to modernize by hiring professional managers, Bass’ decline had progressed too far. Ball died in 1959 and was succeeded by the nearly 70-year-old Sir James Grigg, a former cabinet minister under Churchill. Grigg’s first action as chairman was to find a suitable merger to help the company solve growing financial difficulties.

H. Alan Walker, the dynamic chief executive director of Mitchells & Butler, approached Grigg, and an agreement was soon finalized. Walker had built Mitchells & Butler into one of the most efficient and financially successful breweries in the industry. By closing down unprofitable operations, by modernizing marketing and production, and by acquiring other breweries, he had significantly improved the company’s performance. Yet Walker’s company was not large enough to protect itself against any potential takeover bid; he was looking for a merger of his own choosing. Bass, Ratcliffe and Gretton merged with Mitchells & Butler in 1961.

At virtually the same time, another industry merger occurred that would play an important role in Bass’ future. In 1962 Charrington & Company Ltd., a London brewery whose history dates back to 1766, merged with United Breweries, the brewers of the national brands of Carling Lager and Jubilee Stout. While Charrington functioned in many ways as a family concern, United was a new consortium of medium-sized brewers from various parts of the United Kingdom.

The formation of Charrington United Breweries created a well-balanced national company with strong ties to London and an established distribution network across the United Kingdom. Almost the exact same thing could be said of the Bass, Mitchells & Butler merger. With Walker assuming the title of chief executive and Grigg maintaining his position as chairman, the management began a program of rationalization to integrate and modernize the companies’ operations.

However, by the late 1960’s the management of both newly formed companies recognized the unfulfilled potential in their firms’ performance. While Charrington United Breweries controlled a variety of regional brands, the company lacked a premium draught beer such as Bass or Worthington. Bass, Mitchells & Butler, lacked a spirit and soft drinks business as successful as that of Charrington United Breweries’ Canada Dry subsidiary. Although the mergers improved the two companies’ national distribution networks, areas of weakness existed for both firms. In 1967 a new merger was arranged between Charrington United Breweries and Bass, Mitchell’s & Butler.

The Bass Charrington company was an immediate success. The easy integration process was followed by years of effort to improve market position. This improvement slowed for a short time between 1973 and 1974 as a result of rising inflation and economic recession. By 1975, however, company performance once again improved, and Bass Charrington began to garner the benefits from its investments and expansion.

By the early 1980’s the newly renamed Bass plc had registered an 18% increase in its earnings. Under the leadership of chairman Derek Palmar, Bass now managed more pubs in the United Kingdom than any other industry competitor. Furthermore, the company successfully capitalized on the growing market for lager. Yet in many ways Bass maintained its conservative management policies. A “Bass package” of regional ales continued to be distributed by the free trade system. Similarly, Bass’ property improvements, while generous, were more concerned with promoting family establishments than catering to younger clients. A program of diversification led Bass to create a leisure division. While mostly profitable, their subsidiaries, which included a hotel business and betting shops, contributed less than 20% to profits. Bass remained one of the least diversified of the major brewers.

Recently, however, Bass’ leisure activities have assumed a greater role in the company. The hotel division, through its Coral and Crest subsidiaries, has enjoyed healthy financial gains. Crest is now one of the fastest growing British companies in Europe.

In May 1987 Bass announced an agreement with the U.S.-based Holiday Corporation to purchase eight European Holiday Inn hotels for £152 million. With its other leisure holdings, Bass hopes its non-brewing interests will now account for 25% of total profits. The company’s current formula for combining well-chosen acquisitions with the traditional business of brewing premium beer has proven a success.

Principal Subsidiaries

Bass Investments Public Limited Co.; Bass Holdings Limited; Bass European Holdings NV; Bass Continental Finance NV; Bass UK Limited; Bass Mitchells & Butler Limited; Bass North Limited; Bass Wales & West Limited; Charrington and Company Limited; Tennent Caledonian Breweries Limited; Bass Ireland Limited; Bass Brewing Limited; Bass Mailings Ltd.; Bass Off Licences Ltd.; Bass & Tennent Sales Ltd.; Bass Horizon Hotels Ltd.; Bass Leisure Ltd.; Coral Racing Ltd.; Bass Hotels & Holidays Ltd.; Coral Social Clubs Ltd.; Britannia Soft Drinks Limited; Hedges & Butler Limited; Alexis Lichine et Cie SA; Bass Export Limited; Bass Computer Services Ltd.; Chandos Insurance Co. Ltd.; White Shield Insurance Co. Ltd.

Further Reading

Bass: The Story of the World’s Most Famous Ale, Burton-on-Trent, Bass, 1927.