Whitbread: routines and resource building on the path from brewer to retailer

Abstract

This study investigates the UK former family firm, Whitbread, and its transformation from traditional brewer to leading leisure retailer comprising two main business lines, Costa Coffee and Premier Inn hotels. An unexpected regulatory intervention in 1989 all but ended the centuries-old vertically integrated model of the UK brewing industry, of which Whitbread was an important member. The major brewers were challenged to find alternative business models and growth trajectories. In the subsequent structural and organizational change of the 1990s and 2000s, Whitbread was the only original brewery group name to survive in the public domain as the others disappeared in industry-wide consolidation. Few observers would have anticipated Whitbread’s endurance, let alone the nature of the Whitbread that emerged from this process. As important to the narrative of a 250-year family legacy founded on socially conscious entrepreneurship and financial prudence, is a rare ability to respond and adapt to changing institutional conditions through continuous experimentation and innovation set against the backdrop of an industry constrained by the dominant logic of maker rather than seller.

Keywords:

• Evolution
• transformation
• path dependency
• routines
• capabilities
• family firms
• legacy

Notes

1. The ‘Beer Orders’ refers to the legislation emanating from the 1989 UK Monopolies and Mergers Commission inquiry, The Supply of Beer: A report on the supply of beer for retail sale in the United Kingdom (Cm 651, 1989). This inquiry made deep-seated recommendations for ending the perceived complex monopoly in the UK beer market, crucially that no brewer should be allowed to own or control an estate of public houses that exceeded 2000 outlets. An earlier inquiry in 1969 into the practices of the ‘Big 6’ national brewer-retailers, Beer: A report on the supply of beer (HC 216, 1969), did not recommend the breaking of the vertical tie.

2. In a comparative analysis of the highly-consolidated US beer market and highly-fragmented German beer industry, Carroll et al. (1993), utilized the model of density-dependent organizational evolution developed by Hannan (1986), to proffer that the number of organizations in a population is governed by the opposing forces of social legitimation and competition.

3. Pinkse and Slade (2004), for example, utilized complex econometric modeling to show the UK competition authority’s decision not to challenge the 1995 merger of Scottish & Newcastle and Courage was correct from a beer pricing perspective.

4. In submission to Parliament under a Price Commission Act 1977 inquiry (HC 110, 12 June 1979), Whitbread noted its strategy in the 1960s was, in common with its major competitors, designed to gain market share by acquiring further tied outlets and free trade accounts (11). It pointed out that investment in the tied estate was ‘part of a carefully constructed package’ (16) and that expansion into the free trade through loans during the 1960s was ‘to protect its position against inroads being made by the other brewers’ (18).

5. The new threshold was set at half of the excess of 2000 outlets to be completed by either disposal or untying by November 1992 (Department of Trade and Industry, Press Release 89/745).

6. LMA/4453/A/01/008, 1317, A-B.

7. Whitbread press release, RNS/7335S, 19 October 2000.

8. Whitbread website (https://www.whitbread.co.uk/about-us/history-of-whitbread.html).

9. For example, the renaming of GMG Brands to Diageo after the 1997 merger of Grand Metropolitan and Guinness (GMG), despite the powerful global brand name of Guinness within the name proposed originally.

10. Member Biographies, The History of Parliament: The House of Commons (1790–1820)

11. There was a strong association with the Martineau family, following a partnership agreement with Samuel II in 1812. This was crucial in saving the business (Redman: 13, 15).

12. Community Archives, Bedford Borough Council.

13. In a Parliamentary debate, Labour MP, Mr Donald Anderson said: ‘In the 1874 election, as a result, Gladstone complained that he had been washed away in gallons of beer’ (Hansard, House of Commons, 15 February 1995).

14. Whitbread had been making donations to the Conservative party since the early 1960s and this was viewed as in the interests of its shareholders (LMA/4453/A/01/008, 1263).

15. For example, a letter of 17 March 1960 from Sir Sydney Nevile to fellow brewers on the Parliamentary Committee, urging ‘a degree of wise statesmanship’ (LMA/4453/A/09/069).

16. Obituary, Financial Times, 26/27 November 1994.

17. Colonel Bill competed in the 1925 and 1926 Grand National as an amateur jockey, riding his own horse.

18. The Telegraph, 10 July 2003.

19. LMA/4453/A/01/008, 1229–1232.

20. This refers to ‘The Financial Aspects of Corporate Governance’, chaired by Sir Adrian Cadbury, and established in the aftermath of several high-profile corporate failures.

21. Sir Michael Angus was described as ‘gregarious’ (The Guardian, 15 April 2010), and ‘verging on bumptious’ (The Telegraph, 21 March 2010).

22. LMA/4453/A/02/001.

23. LMA/4453/A/09/068, letter of 20 April 1961 from Sydney Nevile to the chairman of Beverley Brothers Ltd.

24. Interview with David Thomas, The Guardian, 10 November 2002.

25. LMA/4453/G/05/05/008, Jan 1934. Mrs H W Thomas, chairman Middlesex branch of Women’s True Temperance Committee, was one of two invited dignitaries at the grand reopening of the Rest Hotel, Kenton.

26. LMA/4453/G/05/05/003, Feb 1920.

27. Ibid. December 1921.

28. Ibid. July 1923.

29. LMA/4453/G/05/05/008, July 1933.

30. Ibid. July 1934.

31. LMA/4453/G/01/005 (Adverts 1952–1970, exhibits 17, 118).

32. Quoting the ‘Life and Times of Anthony Wood, Antiquary of Oxford 1632–1695’, Oxford’s famous The Grand Café traces its history to the opening of a coffee house in an old coaching inn called The Angel.

33. A Social History of the Nation’s Favourite Drink, The UK Tea & Infusions Association.

34. The Whitbread Gold Cup was the first major sponsorship of horse racing, and was the longest running British commercial sponsorship event, running from 1957 to 2001. Whitbread sponsored the Badminton horse trials between 1961 and 1991.

35. LMA/4453/A/01/008, 1229. A meeting with Sunderland brewer Vaux to brew lager in Scotland, possibly also in conjunction with Heineken, with an associated bottling and canning facility.

36. LMA/4453/A/01/008, 1264. Whitbread bought the equity of the Coca-Cola Bottling Company (Oxford) Ltd. which held the regional franchise for the bottling and marketing of Coca-Cola and Fanta.

37. LMA/4453/A/01/008, 1365. Whitbread paid £18.4 m for Long John International Ltd. in 1975 and £175 m for Beefeater gin in 1987. After merging the two operations, it sold the amalgamated assets to Allied-Lyons in 1990 for £542 m.

38. LMA/4453/A/01/008, 1247.

39. LMA/4453/N/05/004, details the agreement for the lease of third floor office space following a 1938 plan of alterations. Tenants included Marks & Spencer, and a major City firm of chartered accountants.

40. Management Today, 1 October 2003. Interview with Miles Templeman, former managing director of the Whitbread Beer Company.

41. The Guardian, 26 September 1992.

42. The Independent, 27 December 1995.

43. The Herald, 19 September 1995.

44. Interview with David Thomas, Director, September 2001. David Lloyd was sold a decade later for £925 m. The Guardian, 4 June 2007.

45. The Telegraph, 28 April 2002.

46. The Guardian, 15 March 2005.

47. The first Pizza Hut was opened in the UK in 1982, from which Whitbread grew the chain to 600 outlets before selling its 50% interest to the US brand owner for £112 m in 2006 (The Guardian, 1 August 2006).

48. The bid was referred on grounds that it raised concerns in respect of the market for brewing and on-licence retailing (Department of Trade and Industry, Press Release, P/99/611).

49. The Lawyer, 13 September 1999.

50. Director, September 2001.

51. Interview with David Thomas, The Telegraph, 3 May 2003.

52. Financial Times, 6 May 2004.

53. Whitbread press release, RNS/7335S, 19 October 2000.

54. The Telegraph, 23 October 2010.

55. The Guardian, 10 November 2002.