Scottish and Newcastle

Scottish & Newcastle are based in Edinburgh and recently moved to 28 St Andrew Square, the former head quarters of Scottish Equitable. St Andrew Square is one of the capital's most prestigious business addresses and is home to several banks, insurance companies RBS have their HQ there and Harvey Nichols opened their flagship Scottish store there, close by is Bute House the First Minister's official residence and numerous other businesses and lobby groups have offices within the vicinity.

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S&N's St Andrew Square H.Q.

Scottish & Newcastle

Scottish & Newcastle are one of the worlds leading brewing companies, currently ranked seventh out of the top ten international brewers. S&N are the number one beer sellers in the UK, France and Russia, Baltic countries, Kazukhstan, and India. While in Belgium, Portugal, Finland , Greece and The Ukraine they are the second largest beer seller. S&N are increasing focusing on sales in Asia, which they describe as a 'development market', they also export a considerable volume to the American market. ^[1] S&N own, or have a stake in, over fifty breweries across the globe, producing more than fifty million hectolitres (mhl) per year.

Directly employing 15,000+ workers in europe, 15,000+ in a joint business venture in Eastern Europe, and in Asia 7,000+ staff are employed in investment and JV companies. ^[2]

S&N became part owners (50%)of Baltic Beveredge Holdings (BBH) in 2005 which enabled them to capitalise on the Eastern European and Russian markets; the other 50% of BBH is owned by Carlsberg.

A recent report into the lack of women reaching the board room in business uncovers S&N as one of the worst offenders. Moira Benigson's report, slammed the lack of women on the boards of large companies. S&N, British Associated Foods and RHM have no women on their boards. ^[3]

History

In 1960 a merger between Scottish Brewers Ltd, consisting of Youngers and McEwan breweries, and Newcastle Breweries formed Scottish and Newcastle. Continued expansion, by buying smaller breweries such as Theakstons enabled S&N to become a major national player. In 1995 it purchased Courage from the Australian brewers Fosters and became Scottish Courage. This made S&N the UK's number one beer seller.

In 2000 the expansion of S&N outside of the UK was initiated after further acquisions in Western Europe. By 2002, S&N had sold its Public house portfolio to the Spirit Group, with contracts to look after some 2,000 pubs on behalf of banks and other Pub companies. The deal between S&N and the Spirit Group is means that the pubs are tied to S&N in that all beer products will continue to be purchased from S&N.

S&N describes it's business as 'a major European brewer with a balance of high growth emerging markets and high volume develped markets'^[4]

In February 2005, Scottish & Newcastle and Carlsberg UK embarked on a joint venture; a Technical Services business in the UK. Service Dispence Equipment Limited (SDEL) was formed from the dispense assets of both businesses. This work is now contracted by the joint venture, to a new company Innserve Ltd. Innserve supplies, installs and maintains drinks dispense systems in 98,000 Pubs and bars around the UK.

In 2006, S&N entered into a joint venture with the Swiss based freight company, Kuehne and Nagel to set up a UK drinks distribution company K&N Drinks Logistics. Some 2,000 S&N employees transferred to the new business.

Brands

S&N own three of Europes top selling beer brands, Baltika, Fosters and Kronenberg 1664 France's top selling beer, their brand portfollio also includes John Smiths and Strongbow cider, which are UK market leaders. Portugal's number one selling beer, Sagres, is an S&N product as is Findlands number one, Lapinkulta. Newcastle Brown Ale's sales have declined in the UK, however this is a key product for export to the USA.

Board of Directors

• Tony Froggatt
• Neville Bain
• Brian Stewart
• Angus Grossart
• Erik Hartwall
• Ian McAllister
• Ian Robinson
• Philip Bowman
• Ian McHoul
• Henrik Therman
• John Nicolson
• Brian G Wallace
• John Dunsmore
• Peter Kennerley

Political Connections & Lobbying

S&N like most large corporations participate in a number of political and lobbying activities. Their company web site claims that through membership of the Brewers of Europe Group they contribute to the public debate on alcohol harm reduction strategies and claim to work alongside other global drinks producers in funding the work of the International Centre For Alcohol Policies. Further investigation of the company finds that their political activety and connections go much further than this.

S&N are members of the Business Council for Sustainable Development-UK who are highly active in Scotland and enjoy a close relationship with the Scottish Executive, Scottish Enterprise and The Sustainable Development Commission Scotland. Andrew Bright, head of environment at S&N for six years (until february 2007) is the chairman on the BCSD-UK's Scottish Steering Group of the Business Council for Sustainable Development-UK this position involves a vast amount of networking with other industry leaders and public bodies.

S&N are described as 'corporate partners' in Forum for the Future^[5] and are also actively involved in the Carbon Trust a government funded independent company dedicated to cutting carbon emmissions in the public and private sectors. They favour the method of 'offsetting' and have a number of corporate partners. ^[6]

In terms of trade associations that lobby the government in an attampt to influence poloicy S&N are members of the Portman Group;of which John Dunsmore is a director. The Brewers of Europe and the British Beer and Pub Association which John Dunsmore chairs, The Scottish Beer and Pub Association, and The Association of Licensed Multiple Retailers (ALMR) all can count S&N as members. In the past S&N also provided financial support to the former influential European trade body known as The Amsterdam Group which Sir Brian Stewart represented the firm.

Charitable Donations

Edinburgh University is proud of its 120 year old relationship with Scottish and Newcastle. John Nicolson a board member at S&N sits on the advisory board of Edinburgh University's school of management and economics. S&N are proud to sponsor 12 postgraduate scholarships for Russian students at Edinburgh, half of which are allocated to the school of management ^[7]

Political Donations

A donation to the Conservative Party of £50,000 was reportedly made by S&N in 1997/1998. ^[8] The same arangement is said to have also taken place the year before. No record of donations to any political party appear to exist since at least 2001. ^[9]

Controversies

S&N's interests in Russia are controlled by Baltic Beverages Holdings (BBH) a company owned by S&N and Carlsberg. BBH is Russia's largest brewering group with a 36% market share, Baltika is the largest brewer within the BBH portfolio, who own 74% of its shares.

BBH's plans to consolidate its Russian holdings, by bringing five other breweries into Baltika's ownership would have saved the holdings company around £20 million, this created outrage amongst minority shareholders. Who believe they are paying an inflated price for the other five breweries to the benefit of BBH. The minority shareholders claim that a ballot to decide on BBH's proposed consolidation was 'unethical and perhaps even illegal'. ^[10] Minority investors in Baltika claim the two Western European brewers are using the process to overvalue the acquisitions, thereby “siphoning funds back to heavily indebted parent companies, S&N and Carlsberg, while piling leverage on to Baltika”.A judge accepted the case and set a trial date of 18th August 2005 which was posponed. ^[11]

The basis of the legal action is that under Russian law the interested parties, in this case S&N and Carlsbeg acting through BBH, are not eligable to vote leaving the minority shareholders as the decisionmakers. However, shortly before the ballot took place a company called Hartwall Capital, related to Erik Hartwall 'acquired' 4% of Baltika from BBH, which accounts for 20% of the minority stakes and almost half of the minority vores.

S&N and Carlsberg claim they acted within the law and reject the claims of the minority shareholders.

One of those opposed is Baltika’s former president Taimuraz Bolloev, a personal friend of President Putin, a powerful enemy it would appear. However the Putin has spoken favourably of BBH and the Russian government, concerned with the high death rate and 58 years life expectancy are encouraging Russians to turn to beer as a healthy alternative to the traditional Russian vodka. Incedently BBH's executive vice president Anton Artemier attended school with Putin in ST Petersberg ^[12]

Putin has himself vetoed legislation which would restrict the sale of beer, vodka however has become subject to licencing laws and restrictions have been imposed on the sale of vodka from popular kiosks. Many Russians can not afford to access alcohol from large stores and restuarants and instead use kiosks to buy a wide range of products, including beer. Advertising restrictions on tobacco and spirits has also benefited brewers who can now take the place of the now banned advertisements.

The government is very concerned about illicit alcohol. A large number of deaths have occurred through this poor quality, cheap alcohol. Beer is safe, there is no fake beer on the market. With illicit alcohol there are two downsides – it is dangerous and there is no tax," says John Nicolson, the chairman of Greater Europe and the US at Scottish & Newcastle. ^[13]

Unlike many western energy firms, who fear state interference, BBH are very supportive of the Putin regieme "Mr Putin is bridging the divide between the old and new Russia...he has been very fair in terms of beer regulations" says Tony Froggatt, the chief executive of Scottish & Newcastle. ^[14]

A recent dispute involving S&N and Pricewaterhouse Cooper (PwC), is set to see the two firms in court. An unusual situation has arisen whereby S&N are unhappy with consultancy work undertaken by PwC and are seeking damages on the basis that they were given poor advice by the firm. ^[15]

S&N's UK Subsidiaries

Scottish and Newcastle have, according to the FAME business database, 156 UK Subsisiaries. These injclude a range of businesses directly related to the alcohol industry, such as breweries, hotels and restuarants, catering companies, along with food and soft drinks firms. Other subsidiaries include property companies, travel agents, leisure companies, finance companies and producers of industrial chemicals and dyes.

Notes

1. ^Scottish & Newcastle Web Site Company Profile Accessed Jan 2007
2. ^Scottish & Newcastle Web Site Company Facts Accessed Jan 2007
3. ^ James Hall "All-male boards slammed"The Telegraph November 4th 2006, Accessed Feb 2007
4. ^Scottish & Newcastle Web Site Company History Accessed Jan 2007
5. ^ Forum For Future Web Site Forum For Future Accessed Jan 2007
6. ^ The Carbon Trust Web Site Carbon Trust Accessed Feb 2007
7. ^University of Edinburgh web site University of Edinburgh Feb 21st 2006
8. ^ Powernet Powernet Accessed Jan 2007
9. ^ Electoral Commission Accessed Jan 2007
10. ^ Martin Flanagan "Trouble Brews for S&N" Scotsman July 25th 2005, Accessed Febuary 5th 2007
11. ^ MSK "Scottish and Newcastle Face Criticism Over Business Policies in Russia" Mosnews 26th July 2005, Accessed Feb 2007
12. ^ Martin Flanagan "S&N Find Things Brewing up Nicely in Booming Russia" Scotsman April 15th 2005, Accessed Feb 2007
13. ^ Telegraph "S&N Cuts Through the Red Mist" The Telegraph September 30th 2006, Accessed Feb 2007
14. ^ Telegraph "S&N Cuts Through the Red Mist" The Telegraph 30/09/06 Accessed Feb 2007
15. ^ Nikki Tait & Jenny Wiggins "Brewer Seeks Damages over PwC Advice" Financial Times online January 30th 2007