Conference 2011 Nick Stafford Commercial Director.

Conference 2011

Nick StaffordCommercial Director

SIBA MEMBERS’ INTERFACE:

‘SMI’• Your time is precious, we don’t wish to waste

it• You can not remember how to navigate

every website you visit• How many different passwords do you have

for all your internet/credit card/TV activity?• Everything at one glance• Immediate links to what you select• One click to select/order/print• Control in your business who gets what from

SIBA• Messages to you are automatically prioritised

and deleted when no longer important


‘SMI’• Personalised messages to your company’s

staff• Join the Forum for interactive exchange of

information to help your business• View the various Joint Purchase schemes

which help save you money• See what’s available from SIBA Technical

Services• Access the brewing and legal Helplines• Find in one easy list all the documents you

need to make your business work better


‘SMI’

• And access your orders from the SIBA Direct Delivery Scheme!

Chairman of CouncilTrusteeTrustee

Chief ExecutiveCommercial Director

Non – ExecNon – ExecNon - Exec

SIBA DDS SIBA MS SIBA TS

KEITH BOTT

STEPHEN GOULD

FRANCIS PATTON

JOHN HART

GUY SHEPPARD

CARL BEESON

JULIAN GROCOCKNICK STAFFORD

Brewing Business AwardsPresented during the SIBA Retail Conference in Nov 2010, the Brewing Business Awards are an important vehicle for recognising particular effort and success.

Beer CompetitionsSIBA’s support for the Regional and National Beer Competitions is budgeted to top a staggering £40,000 during 2011 – a major investment to ensure the highest standards of presentation and increase national awareness of the superb quality of local beers.

Support for the GBBFSIBA members’ beers - consistent winners of CAMRA awards - will once again be highly visible at this year’s event, thanks to continued investment in the SIBA Champions’ Bar. Joint sponsors of CAMRA Good Beer Guide 2012.

Joint purchase schemesSIBA staff are working to increase sales and expand the range of bulk purchase schemes, which currently cover items such as beer mats, bar towels and runners, glassware, compostable tumblers and polypins.

Supplier AssociatesSIBA is fortunate to have over 130 supplier associate members, all of whom are extremely keen to work with SIBA brewers. The first Supplier Associates’ Forum was held at the NBC in October 2010.

SIBA Technical ServicesMost visible to SIBA members through its work at Regional and National Beer Competitions, SIBA TS continues to provide quality cask beer dispense for a growing number of customers.

CyclopsA widely-supported industry initiative which has now accredited more than 1200 beers from over 200 brewers. SIBA continues to subsidise the accreditation of members’ beers, and is currently considering joint sponsorship opportunities with Cyclops.

Off TradeMuch thinking and discussions with a variety of partners to work out a sustainable primary consolidation route to market. A particularly exciting project is ExtraOrdinary Ales.

SIBA DDSSIBA’s key commercial venture, a significant route to market for many SIBA brewers, continues to grow volume and turnover, with a sales value of over £10.75m in the year to Sept 2010.

10,750

6

FOUR

Barrels by Pubco

0

5000

10000

15000

20000

25000

30000

2010

Enterprise Inns

Admiral Taverns

Orchid Pub Co

Punch Taverns

WELLS & YOUNGS

Oxford Hotels & Inns Ltd

TCG (Tattershall CastleGroup)

Town & City Pub Co

Foundation Inns

Outlet buying analysis July – September 2010

47%

84%

61%67%

59%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

% of Pubs Buying

Pubs ordering morethan in previousquarter

Deliveries travellingless than 40 miles

Pubs ordering ineach of the last fourquarters

Pubs orderingfortnightly or morefrequently

Pubs buying from 1or 2 brewers only

On Trade Barrels

2826631628

35623

0

5000

10000

15000

20000

25000

30000

35000

40000

2008 2009 2010

On Tradevolume(barrels)

No. of pubs ordering in a year

17341869

2127

0

500

1000

1500

2000

2500

2008 2009 2010

No of pubsordering

Average firkins per pub

65.2

67.69

66.99

63.5

64

64.5

65

65.5

66

66.5

67

67.5

68

2008 2009 2010

Throughput perpub (firkins)

Increasing participation

324

356

373

290

300

310

320

330

340

350

360

370

380

2008 2009 2010

No of Brewers

Top 30 brewers have less share

44.41%

43.31%

40.97%

39.00%

40.00%

41.00%

42.00%

43.00%

44.00%

45.00%

2008 2009 2010

% share of totalDDS sales

Differing fortunes in DDS

18

146

7

177

0

20

40

60

80

100

120

140

160

180

2010

Ceased tradingwith DDSVolumes fell

No change

Volumesincreased

WORLD ECONOMYInflation in emerging markets; China, India, Middle east,

Brazil and Africa. Food shortages and political turmoil forcing up prices.

• China: food inflation went up in January alone by 10%. • Egyptian cotton prices have risen dramatically. • Not to mention oil prices!

Wage increases are being demanded to cover inflation. • Workers in Bangladesh in January went on three day strike, Govt.

doubled their wages and then they rioted – offer did not cover food inflation.

These increases are passed on to us through imports. We import too much.

• Cadburys have reduced the size of the Mars Bar – again. Sugar price from Cote D’Ivoire gone through the roof with political violence

WE CAN’T FEED CURRENT 7 BILLION PEOPLE, HOW ARE WE TO FEED THE EXPECTED 9 BILLION IN 2050?

GOLD is still the best investment

560 BC 2011 AD

ONE OUNCE OF GOLD STILL BUYS 350 LOAVES OF BREAD

Hops and Malt

• “Hop prices have dropped considerably over the last 12 months and are likely to remain stable over the next 12 months.”

• “Global cereal stock shortages in Russia, Canada and Australia have been well documented. Coupled with nature we now have unstable political situations in North Africa spreading to the Middle East which will bring financial market speculation to bear. There is unlikely to be any good news on the barley and malt front in the short to medium term.”

.

Is this your brewery?

• A brewery producing cask ale only• averaging 35 barrels per week (over

50% of SIBA members produce 12 barrels per week or less)

• One transit van and one ‘midi’ van (2nd hand purchase)

• Rent 3500 sq. ft. @ £5• Equivalent four full time staff• Duty: at full PBD relief


• Production materials: Duty, malt, hops, yeast, minerals, finings, processing aids, shives & keystones

• Direct expenses: labour, gas/oil, water, electricity, cleaning, road fuel, courier

• Overheads: rent, rates, marketing, vehicle maintenance, office supplies and equipment, insurances, professional services, bad debts, subscriptions, refuse, travel, bank charges


PRODUCTION

DUTY 104,418 31%

MATERIALS 51,068 15%

DIRECT COSTS

LABOUR 91,536 27%

ENERGY & CLEANING

15,941 5%

ROAD FUEL 9,778 3%

OVERHEADS RENT 17,500 5%

…EVERYTHING ELSE

44,206 13%

TOTAL COSTS

334,452 100%

1820 BARRELS

PER BARREL 183.76

Costs per barrel 183.76

Loans: Capital 5,000

Vehicles (£15k for two, over three years)

Brewing plant (£30k over 10 years)

3,000

Office Equipment (£2k over four years)

500

1000 Casks (@ £16.20 Close Rentals)

16,200

Loans: Interest 2,000

Depreciation (10%) 2,500

Total 29,200

REAL COSTS per barrel

199.80Tax????

FUNDING REQUIREMENT


• Income Tax or Corporation Tax?• What profit should a commercial

enterprise make? Minimim 5%?• Total Costs £334,452 per year• Funding Costs £29,200 per year• Total enterprise costs £363,652 per year• Profit of approx 5% = £20,000• Tax at, say, 20% = £5,000• You can reduce your overdraft by

£15,000!

Is this your brewery?• Enterprise costs are £363,352• Profit is £20,000• Turnover is therefore £383,352• Sales per barrel = £210


• If we wished to play a safer game, then 10% profit or more must be desirable

• Profit is £40,000• Turnover should therefore be £403,452• Sales per barrel = £221


• If we wished to play a safer game, then 10% profit or more must be desirable

• Profit is £40,000• Turnover should therefore be £403,452• Sales per barrel = £221

• Are my assumptions underestimating your real costs? If so, you can not afford to sell for less than £221

• Full duty rate adds £57• Sales price should be £278 per barrel

Price Increases 1991 - 2011

64%

193%

138%

333%

92%

124%

0%

50%

100%

150%

200%

250%

300%

350%

20 year increase

Retail Price Inflation

Price of Pint (IncludingVAT)

Wholesale Price BBL

Discount toDistributor/Pubco

Price brewer receives

Excise Duty


25%

66%

58%

63%

56%40%

0%

10%

20%

30%

40%

50%

60%

70%

10 Year increase



Wholesale Price BBL


Price Brewer receives

Excise Duty

DDS 2001 - 2011

25%

66%

58%

63%

56%40%

49%

38%

53%

0%

10%

20%

30%

40%

50%

60%

70%

10 Year increase


Price of Pint (Including VAT)

Wholesale Price BBL

Discount

Price brewer receives

Excise Duty

SIBA Wholesale Price 4%

Enterprise DDS Discount

Enterprise Inns Price toBrewer

DDS has maintained brewers’ price comparison with industry increases

DDS Wholesale Prices are equivalent to other

brands

240270

£0£50

£100£150£200£250£300£350£400£450

DDS BREWER CENTRALDIST'N

BREWER

Enterprise DDS Discount

Enterprise Inns Price toBrewer

£270 per barrel should be your target minimum price to receive from any customer. Why?

Price maintenance

150

170

190

210

230

250

270

290

2001 2011

SIBA DDS

Local Brewers who were around in 2001 said SIBA DDS was absolute minimum.SIBA DDS has maintained prices with the rest of the industry for 11 years.

Price maintenance

150

170

190

210

230

250

270

290

2001 2011

SIBA DDS

LOCALBREWERS

Local Brewers who were around in 2001 said SIBA DDS was absolute minimum.SIBA DDS has maintained prices with the rest of the industry for 11 years.

BREWERS’ MINIMUM IN 2001

2011 SIBA SURVEY £244

Price maintenance

150

170

190

210

230

250

270

290

2001 2011

SIBA DDS

LOCALBREWERS

£15

£26

TOTAL REDUCTION IN “MINIMUM ACCEPTABLE” PRICE = £41 PER BARREL

Local Brewers who were around in 2001 said SIBA DDS was absolute minimum.SIBA DDS has maintained prices with the rest of the industry for 11 years.However, brewers have ‘given’ away £41 per barrel.

Is this your brewery?• Are my assumptions under estimating your real costs? If so, you can not

afford to sell for less than £221• Full duty rate adds £57• Sales price should be £278 per barrel

150

170

190

210

230

250

270

290

2001 2011

SIBA DDS

LOCALBREWERS

• Are my assumptions underestimating your real costs? If so, you can not afford to sell for less than £221

• Full duty rate adds £57• Sales price should be £278 per barrel

150

170

190

210

230

250

270

290

2001 2011

SIBA DDS

LOCALBREWERS

£41

Back where we were 20 years ago?

Giving away £41 of £57 of PBD leaves £16…….

…….and my estimate of your costs could easily understate your actual costs.

You may not have left any of the PBD benefit.


64%

193%

138%

333%

92%

124%

0%

50%

100%

150%

200%

250%

300%

350%

20 year increase



Wholesale Price BBL


Price to Brewer

Excise Duty

How many brewers are under pricing their beer in the market?

0

50

100

150

200

250

1991 2001 2011

Price toBrewer

Are youselling at£50 perfirkin?

92%

54% !!!!!!!

Pre PBD Post PBD

Not even keeping up with Retail Price inflation – madness??????

64%

193%

138%

333%

54%

124%

0%

50%

100%

150%

200%

250%

300%

350%

20 year increase



Wholesale Price BBL


Price to Brewer

Excise Duty

What is the lowest price a 4% beer is being sold by a brewer?

Survey of 12 brewers: (£270 PER BBL = £67.5 PER FIRKIN)

£72£65, £65

£57£55

£54£53

£50,50,50£45, £45

ALSO BREWERS ARE OFFERING BUY 4,5,6, GET ONE FREE!…and ONE BREWER offering 3 firkins for £100 including VAT !!!!!!!!!!!!

Another brewer in January selling 2 X FIRKINS FOR £49!

One week in February

• Special offer to beat the gloom!• Instead of selling 25 barrels, sell 40

for £12 per barrel less• 60% increase in volume, leads to

32% increase in profit• But profit is only £666 in return for

selling an extra 60 firkins• Telesales, deliveries, casks etc. Is it worth it?

Summary of thoughts

• If my cost assumptions are correct, you can not afford to sell for less than £221

Summary of thoughts


• Brewer’s Survey 2010 shows brewers admitting to selling at £244

Summary of thoughts



• We know brewers are selling at £200 or less!

Summary of thoughts




• If brewers before PBD knew what they were doing, then they, today, would be selling at £278

Summary of thoughts





• The whole industry wholesale price is £270 minimum to the brewer

Summary of thoughts





• The whole industry wholesale price is £270 minimum to the brewer

• EVERY £1 BELOW £278 IS GIVING AWAY “SMALL BREWERS EXCISE RELIEF”

Inflation and…..…saturation

• Diversify to protect your margins

• Buy a pub or two• Everards, Enterprise,

Punch, Admiral

FEB 2011

SIBA DDS and TS

Frequently Asked Questions (and Answers!)

Where can I find an up-to-date list of Enterprise (or any other pubco) pubs on

the DDS scheme?

Where can I find an up-to-date list of Enterprise (or any other pubco) pubs on

the DDS scheme?

Pub lists for each customer can be found under “Documents” on the SMI –

SIBA Members’ Interface.

What happens if I am unable to log in to the SMI?

What happens if I am unable to log in to the SMI?

Should your details not be accepted it may be that we need to reset them. All you need to do is send us an email and

request that we reset your log in details.

When are the available product lists updated and sent to the pubs?

When are the available product lists updated and sent to the pubs?

Products and postcodes are updated monthly. Any amendments must be in by 15th of the

month (unless otherwise informed) to ensure they are active for the following month.

The updated sheets are issued to all pubcos (other than Enterprise) at the end of each

month – Enterprise issue their own mail shots to pubs.

How many beers can I list with the various pubcos?

How many beers can I list with the various pubcos?

You can list as many ales as you wish with all pubcos other than Enterprise Inns. Enterprise

Inns restrict brewers to listing 3 ales per brewer. (Please note that there are some brewers with more than 3 beers listed, due to the fact that they were DDS members before Enterprise

brought in this restriction).

Why can’t I ring SIBA DDS and have to send an email?

Why can’t I ring SIBA DDS and have to send an email?

DDS comprises a small team of 3 office-based staff, dealing with over 1000 pubs weekly, whose main priority is to take calls from

customers and pubcos with queries and or orders they wish to place.

Please e-mail us in the first instance – we check emails every 10 minutes throughout the day.

If we can better answer your query by speaking to you directly, we’ll call you back.

Can brewers contact pubs directly to inform them that their ales are available

through SIBA DDS?

Can brewers contact pubs directly to inform them that their ales are available

through SIBA DDS?

Brewers can contact those pubs that are listed under the “Documents” section on the SMI.

Brewers must not offer licensees free beer or any other incentive, and must ensure that they

do not mislead the licensee on the terms of his/her agreement with their pubco. Please

contact SIBA DDS if in doubt.

Why does DDS allow brewers to use third parties or wholesalers to deliver beer on their behalf?

Why does DDS allow brewers to use third parties or wholesalers to deliver beer on their behalf?

DDS customers choose to limit the radius of deliveries from breweries or not. For example, Punch does,

Enterprise does not. Enterprise specifically requires freedom of movement of beers and, additionally, wish

third party deliveries as it increases choice in areas where there a few breweries.

Enterprise do not allow general wholesalers to act as a haulier - they only wish cask ale specialist wholesalers to do the job. Other pub cos give us their instructions and

DDS applies them. SIBA DDS policy has always been to encourage pubcos to

promote local beers first and foremost, but we can not enforce a restriction on trade on a DDS Customer

Who can report a TS problem or query?

Who can report a TS problem or query?

If the pub is owned by a pub company and receiving supplies via DDS, then the pub must ring SIBA TS directly. In this case, maintenance

costs will be paid by SIBA TS.Where a pub is free trade, a SIBA brewer can nominate them as a customer, by ringing TS

direct on 01765 640950. Costs will need to be paid by the brewer.

Do SIBA TS have to provide Technical Services for every pubco DDS deals with?

Do SIBA TS have to provide Technical Services for every pubco DDS deals with?

No, not all, but if the pubco doesn’t require us to provide dispense equipment support, then we

have to pay a contribution to the pubco or brand owner's costs of that service.

Conference 2011 Nick Stafford Commercial Director.

Documents

Transcript of Conference 2011 Nick Stafford Commercial Director.