Bass PLC

Bass PLC

20 North Audley Street
London W1Y 1WEF
England
0171-409-1919
Fax: 0171-409-8502

Public Company
Incorporated: 1967 as Bass Charrington Ltd.
Employees: 90,000
Sales: £4.54 billion (US$7.22 billion) (1995)
Stock Exchanges: London Brussels Amsterdam
SICs: 2082 Malt Beverages; 2086 Bottled & Canned Soft Drinks & Carbonated Waters; 5812 Eating Places; 7011 Hotels & Motels; 7999 Amusement & Recreation Services, Not Elsewhere Classified

Born in a brewery. Bass PLC has grown into a diversified leisure-oriented group of companies operating in rive main areas; brewing, restaurants and pubs, entertainment and gambling, hotels, and soft drinks. Bass is the largest brewer in England with the top two beer brands: Carling Black Label and Tennent’s Lager; operates more than 2,400 pubs and such restaurants as Toby and Harvester; runs 800 retail betting shops in the United Kingdom, Ireland, and Jersey; owns or franchises more than 2,000 hotels in more than 60 countries under the Holiday Inn, Crown Plaza, and Holiday Inn Express brands; and runs the second leading soft drink maker in England, Britvic Soft Drinks. This diversity—largely engineered during the latter decades of the 20th century—is a new development for Bass, which for most of its history focused on breweries and pubs.

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 2,000 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— who had 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’s 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’s 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’s 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 hoys were employed at the breweries.

In the same year that Lord Burton ineorporated 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’s chairman.

During the next decades Bass’s 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 1920s 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, including the purchase of a wine and spirit operation, further changes in the industry occurred that were at odds with Bass’s 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’s market position.

Bass’s continuing reliance on the free trade system became increasingly anachronistic. But it was not only changing social attitudes and industrv trends that contributed to Bass’s declininn sales in the postwar years; the economic conditions of the early 1930s 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 nonbusiness 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 long-time Bass executive, assumed the title of chairman. Like Gretton’s, his management style was conservative. Yet between the late 1940s and the late 1950s Bass’s net profits increased by 123 percent. 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’s 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 lost 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’s 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’s typist. While Ball recognized the need to modernize by hiring professional managers. Bass’s 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 completed. 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 & Gretton merged with Mitchells & Butler in 1961.

At virtually the same time, another industry merger occurred that would play an important role in Bass’s 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 CharriniUon functioned in manv 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.

By the late 1960s, however, 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’s 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, Mitchells & Butler.

Bass Charrington Ltd. 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 1980s the newly renamed Bass PLC had registered an 18 percent 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’s 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 percent to profits. Bass remained one of the least diversified of the major brewers.

In the late 1980s, however, Bass’s leisure activities assumed a greater role in the company. The hotel division, through its Coral and Crest subsidiaries, enjoyed healthy financial gains. Indeed, Crest became 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. Two years later, Bass dramatically increased its hotel holdings when it acquired the full Holiday Inn chain from Holiday Corporation in 1989 for $2.23 billion. Bass gained 55 company-owned Holiday Inn hotels, the Holiday Inn brand name, and franchise rights to the more than 1,400 Holiday Inn hotels that were franchised or based on joint ventures. The remainder of Holiday Corporation—which included Embassy Suites, Hampton Inns, and Homewood Suites properties and Harrah’s casinos—was spun off to shareholders as Promus Companies Inc.

The initial years under Bass were difficult ones for Holiday Inn. Founded in Memphis in 1952 and named after the film Holiday Inn, the chain grew rapidly in the United States, mainly along the burgeoning highways of the 1950s and 1960s. By the time of its acquisition by Bass, Holiday Inns could be found in nearly 50 countries, but were beginning to show their age back home in America. Holiday Inn had built its empire in the middle of the lodging market, attracting both business customers and vacationers. As its properties aged and its service declined, the chain was being squeezed by a drop-off in business customers dissatisfied with the service and travelers not willing to pay rates that had crept higher and were ever more uncompetitive given the rise of newer, cut-rate chains such as Hampton Inn. To counter these trends, Bass in 1990 initiated a $1 billion renovation of the Holiday Inn chain to be completed over the course of several years. Bass also began to expand its top-of-the-line Crowne Plaza hotels to gain market share on the high end, while it simultaneously launched its own cut-rate chain called Holiday Inn Express in 1991 to win back budget-conscious customers. By 1995 Bass had more than doubled the number of Crowne Plaza properties to more than 100, while Holiday Inn Express reached the 350 mark. Another part of Bass’s strategy was to aggressively expand all three of the chains outside North America, concentrating primarily on Europe and the Asia/Pacific region. During 1995, the number of countries with Holiday Inn properties exceeded 60 and the total number of Bass lodging properties passed 2,000. Finally, Bass in 1992 invested $60 million in technology upgrades, including a new Holiday Inn Reservation Optimization system to improve its reservations capability.

None of these moves paid off immediately, however, and the Holiday Inn division dragged down Bass’s overall operating results with decreases in profits for the hotel operations in 1991 and 1992. Meanwhile, evidence of Bass’s displeasure with its acquisition became evident from a 1992 lawsuit it filed against Promus. The suit alleged that Promus had intentionally withheld important information from Bass during the acquisitions negotiations, thus inflating the price Bass paid. Wishing to free itself from the suit in order to move forward with a split of the company, Promus settled with Bass in 1995 without admitting guilt and agreed to pay $49 million. While the suit was being contested, Holiday Inn seemed to turn the corner with an 18 percent increase in profits in 1993, followed by more modest four and 2.4 percent profit increases in 1994 and 1995.

The turnaround in lodging came just in time as Bass experienced difficulties in its brewery unit in the 1990s stemming from a decline in beer drinking in England. Beer sales for Bass declined 0.8 percent in 1994, then fell 5.1 percent in 1995. With the English beer market soft, Bass continued to expand its soft drinks holdings with the 1995 acquisition of Robinsons Soft Drinks from Reckitt & Colman pie for £103 million. The leisure retailing sector was bolstered through the purchase in 1995 of 78 Harvester pub restaurants and the Harvester brand from Forte Plc for £165 million. The brewery sector was not left out of the 1995 spending spree, however, as Bass increased its holdings in the Czech Republic with the purchase of majority stakes in the Czech brewing companies Vratislavice A.S. and Ostravar A.S., and established a joint venture in China—the world’s second-largest beer market—with the Ginsber Beer Group.

The mid-1980s to the mid-1990s was a period of enormous change for Bass with its systematic program of diversification into related and complementary areas of the leisure industry. By 1995, brewing accounted for only 32 percent of total profits, with taverns at 23 percent, entertainment/gambling at 21 percent, hotels at 13 percent, and soft drinks at 11 percent. Bass hoped that the diversity of these holdings would protect it from downturns in any one sector, such as it was experiencing in brewing. Bass’s increasing geographic diversity also boded well for the firm’s future.

Principal Subsidiaries

Barcrest Limited; Bass Beers Worldwide Limited; Bass Brewers Limited; Bass Developments Limited; Bass Holdings Limited; Bass Investments PLC; Bass Leisure Activities Limited; Bass Leisure Entertainments Limited; Bass Leisure Group Limited; Bass Leisure Limited; Bass Overseas Holdings Limited; Bass Taverns Limited; BLMS Limited; Britannia Soft Drinks Limited (50%); Britvic Soft Drinks Limited (90%); Coral Racing Limited; Gala Leisure Limited; Robinsons Soft Drinks Limited; Toby Restaurants Limited; Société Viticole de Chateau Lascombes SA (France; 97.5%); White Shield Insurance Company Limited (Gibraltar); Bass International Holdings NV (Netherlands); Bass America Inc. (U.S.); Holiday Corporation (U.S.); Holiday Inns Franchising Inc. (U.S.); Holiday Inns, Inc. (U.S.).

Principal Divisions

Bass Brewers; Bass Leisure; Bass Taverns; Britvic Soft Drinks; Holiday Inn Worldwide.

Further Reading

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

Clark. Jack J.. “Holiday Inn: New Rooms in the Inn.” Cornell Hotel & Restaurant Administration Quarterly, October 1993. p. 59.

DeMarco. Edward. “Holiday Inn’s Profits Surged in ‘94. Helping Bass.” Atlanta Business Chronicle, February 24. 1995. p. 18B.

Hawkins. Chuck, Mark Maremont. and Alice Cuneo. “Bass Can’t Get Comfortable at Holiday Inns.” Business Week, March 2, 1992, p. 42.

Rowe. Megan. “Holiday Inn: From Fat and Sassy to Lean and Mean.” Lodging Hospitality, July 1992. pp. 24-26.

—updated by David E. Salamie