Windsor and Eton Brewery – Waitrose, outsourcing and three cheers for the Government!

Last week we featured our trip to the Windsor and Eton Brewery (WEB), and explained the importance of hops. Hope you all did your homework and found a local stockist of their excellent beers too ...

My conversation with Will Calvert of WEB brought up a couple of other interesting supply chain issues. The first was around the sales side of the business, and it was good to hear that Waitrose, the supermarket chain (part of the employee owned John Lewis group), who make a big thing of their support to small, local firms in their supply chain, really do live up to that billing.

“They’re great to deal with” Calvert explained. “they’re really flexible about expanding the range of products or shops stocking the product if sales are going well. It is a real pleasure doing business with them”.

He had also recently been in discussion with one of the very largest UK supermarket groups. “They were also very pleasant, and they would take our product. But they have an expectation of price points, and a minimum number of shops that we would have to supply to. Frankly, we just couldn’t see a way of making any money out of it, although the exposure would be nice” he said.

So Waitrose are getting both a marketing benefit in terms of their customer proposition, which seems to be founded in real behaviours, and getting the advantage of products that their competitors don’t stock. A great example of how creative procurement and supply chain management can bring value way beyond a simple focus on price.

The other major supply chain issue that Calvert identified is at the other end of his process from hops buying  – bottling the beer. WEB outsource bottling, which is the sensible step for any start-up brewer. But it is a major cost element in his process now, and he is facing the sort of decisions many larger companies face. Is outsourcing the right approach? Should we look at bringing the process in-house? What investment would be needed for that ? How quickly might it pay back?

Then there is the choice of outsourced service provider. As always, there is a balance between quality and price to be made. A good relationship with the provider helps, particularly for smaller firms who simply can’t afford the time and money implications of hassle with a key supplier. But the cost element is significant enough that it can’t be relationship at any price.

The final insight from WEB was on the tax side and its relationship to supply and demand, and indeed market creation. Governments often explain that they can’t intervene in markets, and true free marketeers would suggest that they shouldn’t. But there’s a great example in the UK brewing industry of where an intervention has had a major and almost wholly good effect on a market.

I didn't know that small breweries pay less duty (tax) on a barrel of beer than larger.  We are talking pretty small – the tax rises once you get to a £1million annual turnover. But this gives breweries such as WEB an important leg-up during their early days in competition with the mega-breweries. And that has been a huge help to the micro-brewery population, leading (in part at least) to the amazing growth in small breweries over the last few years in the UK.

That in turn has generated additional employment in the UK, a whole new export industry of bottled craft beers, and arguably a better consumer experience with a much wider range of excellent drinks to sample. So next time anyone tells you that government market intervention never works – there’s an impressive counter example!

Thanks again to the guys at WEB, good luck for the future, and remember – if you see their products, do try them*. You won’t regret it.

*I should just confirm that no payment, not even any free beer, was involved in the writing of these articles!

And here's a short film by Oli Clubb.

 

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