Greene King sells the Old Speckled Hen at Spain’s Damm in a great heat of alcohol

After more than a quarter of a century pouring the Old Speckled Hen down the throats of British consumers, Greene King has decided enough is enough.

A Suffolk pub group has agreed to sell its flagship store ale to Damm UK, the British brewery arm of the Spanish family behind Estrella Damm, in a deal that effectively ends its commercial ambitions.

The price has not been disclosed, but the strategic message is high. The Old Speckled Hen, which Greene King has owned since acquiring Morland Brewery in 1999, accounts for more than half of the company’s over-the-counter sales, with volumes flowing to Tesco, Sainsbury’s, Asda and the independents rather than across the bar. By handing over the brand to Damm, CEO Nick Mackenzie acknowledges that the pub beer scene is no longer a battleground.

“This has been a long-term decision,” Mackenzie told The Times, pointing to the structural challenges facing cask ale and the wider beer category. Selling through pubs, restaurants and bars, he added, “is where our long-term strategy is focused”.

Why the Spanish brewer was a natural consumer

For Damm, the deal is a logical next step in the UK which begins in 2023, when it takes over the Charles Wells brewery in Bedford. The site, rebranded Damm Eagle Brewery, has since been the focus of a £70m investment plan designed to make it the company’s flagship outside of Spain, as The Grocer reported when the upgraded facility opened last autumn. Wrapping up Old Speckled Hen, along with Old Golden Hen, Old Crafty Hen and Old Hen’s sister brands, in that effort gives Damm a valuable British cask name to keep up with its lager sales, and the volume to keep its new lines popular.

The Hen family brewery is set to move from Greene King’s Westgate Brewery in Bury St Edmunds to Bedford in June next year. Importantly for drinkers, the beers will still hit Greene King’s 1,600 locations and supermarket shelves once the transition is complete, according to The Morning Advertiser, which first detailed the extensive brewing reset.

Strong alcohol model, led by trade

The job sits within a major reshaping of the Greene King brand. The group is pouring £40m into a new, smaller brewery on the outskirts of Bury St Edmunds, next to a new distribution depot. From next year it will only produce its core portfolio to the trade, Greene King IPA, Abbot Ale and the new Hazy Day, on site, replacing Westgate Brewery in the city centre. Belhaven Brewery in Dunbar, East Lothian, is affected by the changes.

“We’re showing the size of the new brewery to reflect the market we’re working in now, and the market has changed a lot,” Mackenzie said. “We believe we can control what we can control by focusing on our beers in our brewpubs.”

That talk will go down well with the brewery staff. Greene King declined to put a number of jobs at risk, but consultations began on Tuesday. The new plant is designed to be efficient and require fewer hands. In an industry already navigating a brutal economy, the UK is set to lose 100 breweries by 2024 alone, as Business Matters reported in its growing review of the brewing industry’s deficit, another sign that regression, not expansion, is the order of the day.

The off-trade reverses the context

The decision to move away from supermarkets is surprising, given how much power the big brewers had spent on shelf history. But the statistics have changed. Off-trade beer is a highly promotional, low-end game dominated by global lagers, while cask ale, once a staple, has been slowly retreating as drinkers gravitate towards lagers, world beers and other low-and-nothing alternatives.

For Greene King, which still pulls pints of competition for its legacy, the math is easier than ever: a barrel sold in a pub that it owns earns more than the same barrel fighting for promotional space in many grocery stores. The Old Speckled Hen commercial illustrates that concept.

A comprehensive reset under hong kong ownership

The earthquake is the latest step in a sweeping rethink of the business under Hong Kong owner CK Asset Holdings, which bought Greene King for £4.6bn in 2019 in a deal led by billionaire Li Ka-shing. Last year the group posted profits of £2.53bn but fell to a pre-tax loss of £23.4m, with net debt, excluding lease liabilities, running at around £2bn and annual servicing costs of around £95m.

In March, Greene King confirmed it would sell 150 owned pubs and convert a further 150 into rental properties as part of a renewed housing strategy. Coupled with the decline of alcohol and the abandonment of the Spotted Old Hen, the image of the group is shedding what it doesn’t need and investing heavily in what it sees as water-controlled, controlled restaurants where it controls the customer, the menu and the margin.

“For us, this is about how we future-proof the broader business and how we implement our model,” Mackenzie said.

What it means for Beverages for SMEs and tour operators

For independent brewers and small pub operators, the results cut both ways. The exit of the heritage cask brand from Greene King’s in-house portfolio frees up almost half of the pump line’s attention and could give regional cask producers a slightly better image to supermarket buyers. Equally, Damm’s decision to support high-quality British ale has fueled international demand for UK-brewed products, and cemented Bedford’s reputation as a serious brewer.

However, the simple truth is that one of the country’s best-known cask ales is now under foreign ownership because its British parent has decided that supermarkets are not where its future lies. In an industry still struggling with input costs, business rates and a reduction in discretionary spending, that’s as strategic a strategy as the sector has felt in a long time.