Whitbread and Company PLC

Brewery, Chiswell Street
London EC1Y 4SD
England
01-606 4455

Public Company
Incorporated: July 24, 1889
Employees: 21,866
Sales: £1.533 billion (US$2.253 billion)
Market Value: £1.164 billion (US$1.711 billion)
Stock Index: London

Whitbread is one of the most prestigious of London’s older breweries; it will celebrate its 250th anniversary in 1992. Its history closely parallels that of the Whitbread family, which has retained continuous control of the company since 1742. Since that date, Whitbread has also maintained its headquarters on Chiswell Street in central London.

Samuel Whitbread, at the age of 14, was sent to London by his mother in 1734 to become an apprentice to a brewer. Whitbread, raised as a Puritan, proved to be an extremely hard worker. Six years after coming to London, he established his own brewery with a £2000 inheritance and additional underwriting from John Howard, the renowned prison reformer. As the brewery became successful, Howard’s investment became more lucrative—it even led to a reciprocation of financial support by Whitbread for Howard’s reform movement.

By 1750 Whitbread had acquired an additional brewery located on Chiswell Street. At this time there were over 50 breweries in London, but, despite intense competition, the Whitbread brewery expanded rapidly. By 1760 its annual output had reached 64,000 barrels, second only to Calvert and Company.

Whitbread was enthusiastic about new brewing methods. He employed several well-known engineers who helped to improve the quality and increase the production volume of the company’s stout and porter (a sweeter, weaker stout).

The Whitbread family had a long history of involvement in English politics. Samuel Whitbread’s forefathers fought with Oliver Cromwell’s Roundheads during the English Civil War and later developed a connection with the Bedfordshire preacher and author John Bunyan. Samuel Whitbread himself was elected to Parliament in 1768 as a representative of Bedford. His son, Samuel II, succeeded him in Parliament in 1790, and Whitbread descendants served in Parliament almost continuously until 1910.

Samuel Whitbread died in 1796. Samuel II assumed control of the brewery, but was so preoccupied with Parliament that by 1799 he was compelled to take on a partner. The partnership, however, was short-lived. The brewery entered into seven more partnerships over the next 70 years, only two of which were successful. Most notably, Whitbread’s 1812 partnership with the Martineau and Bland brewery resulted in a full merger of the two companies’ brewing operations. The Martineau and Bland facility at Lambeth, however, was later closed down and its equipment was moved to Chiswell Street.

During the early 19th century the bulk of Whitbread’s business was conducted with “free houses,” public houses—or pubs—neither owned by, nor bound to sell only the products of one brewer. These pubs numbered several hundred, and their business remained fairly stable. But when the Drury Lane Theatre burned down in 1809, Samuel II saw an opportunity to profit from its renovation. He led a committee to restore the theatre, invested heavily in the project, and persuaded several friends to join him. The venture yielded only a small dividend when the theatre was reopened, and cost Whitbread the friendship of many of his fellow investors. In Parliament, Whitbread opposed the resumption of war with Napoleon, a position which made him even more unpopular. In July, of 1815, shortly after Waterloo, Samuel Whitbread II committed suicide.

Whitbread’s sons, William Henry and Samuel Charles, inherited their father’s interest in the brewery. Whitbread family control, however, had been greatly diminished by the company’s nine partners. It was not until 1819 that the Whitbread brothers were able to re-establish direct family control over the operation. The number of partners was reduced, and the brewery remained under Whitbread control for many years.

In 1834 Whitbread introduced ale to its product line. The ale gained immediate popularity and resulted in a substantial increase in turnover for the brewery. Whitbread expanded even more dramatically after 1869, when the family established its last partnership.

During the 1880’s, a sudden and significant decline in demand for beer caused many “free houses” to sell their leases to breweries (and thereby become “tied houses”). Breweries such as Whitbread, which had established numerous tied houses, were forced to extend loans to public house operators so that they could remain in business. The capital required to purchase free house leases and to extend loans could only be satisfied by the public through share flotations. Therefore, when Whitbread’s partnership agreement expired in 1889, the partners decided to transform the brewery into a public company.

An attempt by brewers to raise the profitability of tied houses by reducing beer prices backfired; their tenants competed on price and went even further into debt. A recession in 1900 forced Whitbread to write down the value of its tied house properties—a move which may have saved the company. Demand for beer recovered steadily and permitted Whitbread to increase its production every year from 1899 to 1912. Accordingly, the value of tied houses recovered as they became profitable. Just prior to World War I, however, the government raised its license duty on tied houses, rendering many of them financial liabilities. Whitbread stopped buying tied houses, and instead concentrated on expanding its bottled beer trade.

While Whitbread weathered this difficult period virtually intact, many competitors were forced to close. Whitbread’s ability to survive was attributed to three factors: the maintenance of a harmonious relationship between the brewer and the publican (public house operator), sustaining a good public image of the brand, and keeping influence in government.

Francis Pelham Whitbread, the director of the brewery at the time, devoted his energies to maintaining a stable atmosphere for profitable brewing; as chairman of the Brewers Society, he promoted better brewer-vendor relations. Later, as chairman and treasurer of the politically active National Trade Defence Association, he lobbied against the temperance movement in Parliament. After World War I he played a major role in the formation of policies within the brewing industry, and was particularly opposed to the proliferation of tied houses.

During the interwar period Whitbread took over the Jude Hanbury brewery. As its situation with vendors remained unsettled, Whitbread concentrated further on the expansion of bottled beer sales. Whitbread beer had become available throughout the world. Francis Whitbread, however, became increasingly divorced from the everyday operation of the brewery; his position as a spokesman for the industry and his dedication to philanthropic activities occupied most of his time.

On December 29, 1940, German incendiary bombs landed in five separate areas of the brewery. Each of the fires was put out by the company fire brigade, with the exception of a malt fire which, like burning coal dust, is very difficult to extinguish. It was finally doused a week later. Damage to the brewery and the surrounding area was great. Nevertheless, Whitbread resumed brewing almost immediately.

Francis Pelham Whitbread died in 1941. His leadership of the brewery was highly conservative—especially when compared to the policies of his successors. Francis was in many ways a popular figurehead for the company. Much of the actual burden of management fell on the shoulders of Samuel Howard Whitbread, who served with the company from 1915 until his death in 1944. William Henry Whitbread assumed leadership of the company that year, but was forced to postpone his plans for the rehabilitation of the brewery until after the war.

Though the war ended less than a year later, the British economy continued to suffer from after-effects for many years. Conditions were so grave that Whitbread was unable to begin its modernization until 1950. At that time Whitbread undertook a sweeping rationalization program which included the concentration of human resources and retooling of machinery.

Other smaller breweries were in less stable condition, and many were threatened with bankruptcy. Whitbread, however, offered an amalgamation scheme to these breweries. Under this formula, called the “Whitbread Umbrella,” failing breweries agreed to coordinate their operations and distribution networks with Whitbread. Many of these arrangements resulted in Whitbread’s eventual acquisition of the smaller brewers. In the period from 1951 to 1970 Whitbread took over 26 breweries and expanded its number of tied houses from less than 100 to 10,000.

Some of the breweries acquired by Whitbread were large well-established companies. Beginning with the Dutton brewery in 1964, Whitbread took over Rhymney in 1966, Threlfall and Fremlin in 1967, Strong in 1968, and Brickwood in 1971. These additions to Whitbread also gave the company greater geographical coverage—Threl-fall’s was located in the northwest port of Liverpool, and Brickwood’s was in Portsmouth, on the south coast.

The 1970’s were characterized as a period of streamlining for Whitbread. The company disposed of many of its marginally profitable or outdated operations—even the Chiswell Street brewery was closed in 1976. Still, Whitbread suffered from the after-effects of a serious economic recession during the mid-1970’s, and the company came very close to bankruptcy. A gradual economic recovery led to improvements in the market which greatly strengthened Whitbread’s financial position.

However, as popular demand shifted from ale to lager, total beer consumption began to fall. Whitbread started to de-emphasize certain brewing assets and instead invested heavily in restaurants (including a large Pizza Hut franchise), discos, and other more diverse interests. Today Whitbread derives only slightly more than 50% of its profits from brewing.

William Henry Whitbread, who turned 87 in 1987, gave up day-to-day control of the company during the 1970’s. The current managing director is Samuel Whitbread (a fifth generation descendant of the company’s founder). Under his leadership, Whitbread has continued to add new product lines, mainly in the areas of soft drinks, wines, spirits, and food. Whitbread has even negotiated British brewing rights for severl imported beers. But as long as demand for beer remains in a downward trend, Whitbread may be able to compensate for earnings losses in brewing with profits derived from its other operations.

Principal Subsidiaries

Long John International Ltd.; Stowells of Chelsea Ltd.; Whitbread North America Inc. (USA); Langenbach GmbH (West Germany); Kaltenberg Bauerei GmbH (West Germany); Highland Distillers Corp. of California; Whitbread International Trading Ltd.; Calvet S.A. (France).