Allied-Lyons Plc

views updated

Allied-Lyons Plc

Allied House
156 St. John Street
London EC1P 1AR
England
(01) 253-9911

Public Company
Incorporated: April 13, 1961 as Ind Coope Tetley Ansell
Ltd.
Employees: 70,301
Sales: £3.643 billion (US$5.356 billion)
Market Value: £3.01 billion (US$4.425 billion)
Stock Index: London Brussels Amsterdam

Allied-Lyons is the largest beverage company outside the United States and fourth largest in the world. Although its operations are centered around the production of beer and wine, Allied-Lyons also operate retail shops, ice cream parlours, and hotels. The company was formed in 1961 when three breweries, all of them in existence for more than 100 years, merged to form Allied Breweries.

Allied Breweries’ earliest predecessor was an outdoor brewhouse built by Edward Ind as an extension of the Star Inn in Romford, Essex, which he had purchased in 1799. Appreciated by both travelers and the local population, the Ind ales grew steadily in popularity. In 1845 the Ind Brewery merged with the Coope Brewery, operated by the brothers George and Octavius Coope. Together the two companies established the Ind Coope Brewery in 1856 at Burton-upon-Trent, the beer capital of England. Over the next one hundred years, Ind Coope ales remained dominant brands throughout southern England.

The second brewery group was founded in 1822 when Joshua Tetley purchased the brewing operations of William Sykes. Located in Leeds, the Tetley brewery went on to produce a variety of beers that gained great popularity in northern England. The third brewery was that of Joseph Ansell, a “maltster” and hops merchant who established the Ansell Brewery in 1881; it soon gained a reputation for its mild ale in Birmingham and throughout the Midlands.

During the 19th century, and into this century as well, beer drinkers in England tended to identify strongly with beers that were locally produced. Ind Coope, Tetley, and Ansell each grew within its own region of influence, competing with each other in only a limited number of areas. Despite strong brand loyalty on the part of the public, that situation has now greatly changed. The gradual demise, since World War II, of the “tied house” system (in which pubs agreed to serve only the products of one brewery) brought greater competition to the English brewing industry, intensified in the 1940’s and 1950’s with the introduction by the breweries of more efficient distribution networks. These factors helped to change the economics of beer production; only larger companies could experience greater growth.

In order to achieve a larger and more profitable scale of operation, Joshua Tetley and Son merged with Walker Cain in 1960 to form a new company called Tetley Walker. The following year the directors of Ind Coope, Tetley Walker, and Ansell agreed to merge their operations, and on 13 April 1961 they formed Ind Coope Tetley Ansell Ltd. Each company could now take advantage of the others’ regional establishments; as well, each company was now dedicated to the common goal of increasing total sales for the group. The company’s name was changed on 1 March 1963 to Allied Breweries Ltd.

The amalgamation was successful in strengthening the collective profitability of the original companies and in making their brands available in new markets throughout Great Britain. Indeed, Allied Breweries’ success was so great that management was able to make a strategic acquisition in 1968, that of the wine and spirits conglomerate SVPW.

Like Allied Breweries, SVPW was itself an amalgamation, formed in 1961 when three alcoholic beverage companies—Whiteways, Vine Products, and Showerings— were merged. Whiteways of Whipple was founded in 1903 by Henry Whiteway; the company produced a popular alcoholic apple cider called Cydrax. Vine Products, a vintner established in Fulham by Alexander Mitzotakis in 1905, produced a popular variety of sherries and sparkling wines. Showerings was founded in 1953 by Francis Showering; it was known for a sparkling perry (a fermented beverage made from pears) called Babycham.

As a result of its acquisition SVPW (later called Allied Vintners), Allied Breweries gained a dominant position in the British beverage market. The companies that together made up Allied Breweries continued to operate separately as associated companies, and Allied spent much of the 1970’s consolidating and refining its new organizational structure as well as evaluating its marketing strategies. Those strategies were successful, and as a result management could consider diversifying the company’s operations.

In 1978 Allied Breweries made an offer for J. Lyons and Company, which owned Tetley Tea and the Baskin-Rob-bins ice cream shops. Some financial observers considered the take-over to be ill-advised; Allied Breweries, they noted, had not yet achieved a strong enough position in the marketplace to consider taking over so large a company as Lyons (1978 sales: £788 million). Allied felt differently. Because of consistently poor performance, Lyons was significantly undervalued. With proper management, Lyons could be transformed into a much more profitable company—and Allied believed it could provide the necessary expertise. In August of 1978 Allied Breweries sold its share of the Trust Houses Forte hotel and restaurant group for £48 million; a week later Allied bought Lyons for £60 million.

As were Allied Breweries’ other subsidiaries, J. Lyons and Company was at first administrated as a separate company (it was not until October 1981 that the combined company adopted the name Allied-Lyons). Yet, as older members of the Lyons board retired, they were replaced by talented managers from Allied who applied new business methods and strategies. And in 1982 Sir Derrick Holden-Brown, an accountant by training and head of the Allied beer division, was elected chairman of Allied-Lyons.

Sir Derrick became chairman at a time when Allied-Lyons was initiating a plan to expand overseas. A new division, Allied Overseas Trading Ltd., was established to promote exports to franchises on five continents. Over the next two years changes were also made in the organization of several companies in the spirits division. In 1984 R. N. Coate, and its sister company William Gaymer and Son (which makes Gaymer’s Olde English Cyder) merged with Showerings. In June of 1986 Vine Products merged with Whiteways to form Vine Products and Whiteways Ltd. That same year the Victoria Wine Company, a retail chain with 960 outlets, was transferred from the wine and spirits group to the beer division. Allied-Lyons was now both a more aggressive and a more efficient company.

In late 1985 the Australian brewery and finance conglomerate Elders IXL announced its intention to take over Allied-Lyons for £1.68 billion. A few months later, in a separate takeover battle, Gulf Canada (controlled by the Reichmann family of Canada) attempted to take control of the Canadian beverage firm of Hiram Walker. Hiram Walker agreed to sell its liquor division, Gooderham and Worts, to Allied-Lyons for C$2.64 billion, thus providing Walker with sufficient cash to thwart the Reichmanns. Other takeover problems in Australia forced Elders to turn its attention away from Allied-Lyons and eventually to rescind its bid. Meanwhile, the Reichmanns succeeded in acquiring Hiram Walker, but they then refused to honor that company’s agreement to sell its liquor division to Allied-Lyons. This agreement was highly important to Allied-Lyons: it provided the company with the means to establish itself as an important presence in North America, something it had long desired. Sir Derrick produced a copy of the contract; he claimed it bound the Reichmanns to comply. Before the matter had gone to litigation, Allied-Lyons reached a second agreement with the Reichmanns: the sale was permitted on the condition that 49% was sold back to Gulf Canada. Thus Allied-Lyons ended up with 51% of Hiram Walker-Gooderham and Worts, which it purchased for C$831 million. The remaining interest in Hiram Walker was acquired by Allied-Lyons late in 1987 in a deal worth C$1.3 billion, and which transferred a 10% share in Allied-Lyons to a company controlled by the Reichmanns.

Allied-Lyons has now emerged as one of the most important beverage companies in the world. It has been organized into three divisions: brewing; wine, spirits, and soft drinks; and food. The brewing group produces a variety of beers, including Skol, Tetley Bitter and Mild, Long Life, Löwenbräu, Oranjeboom, Ansell’s Bitter and Mild, and John Bull Bitter. The wine, spirits, and soft drinks group is responsible for producing Harvey’s Bristol Cream, Teacher’s Scotch, Babycham, and Cockburn, a popular port. The foods group, created in 1978, sells Tetley Tea (no relation to Tetley beer), Lyons coffee, Hales cakes, Maryland biscuits, and Lyons Maid ice cream. Allied-Lyons’ Embassy hotels unit is also managed by the foods group. The company’s most successful foreign operations are the Hiram Walker-Gooderham and Worts business in Canada and the Baskin-Robbins ice cream shops, located mainly in the United States.

Principal Subsidiaries

Allied Breweries Ltd.; Allied Vintners Ltd.; J. Lyons & Company Ltd.; Allied-Lyons Investments Ltd.; Allied-Lyons Overseas Ltd.; Financiering Maatschappij d’Oranjeboom BV (Netherlands).