Scottish & Newcastle, Britain’s biggest brewer, today signaled a further retreat from the cask ale market by confirming the sale of its historic Courage beers to Wells & Young’s Brewing Company. The Times reported the move this morning.

The deal, under which S&N will retain a minority stake in the 220-year-old Courage business, is the latest in a series of moves as the group has sought to reduce costs and focus its resources on developing international lager brands, such as Kronenbourg 1664 and Baltika.

The acquisition, thought to be worth more than £10 million, is the first for Wells & Young’s since it was formed last year from the merger of the brewing operations of Charles Wells of Bedford and Young & Co’s Brewery of London, which have separate pub businesses.

Under the terms of the deal announced today, a new business - Courage Brands - will be formed to purchase the business, with WYBC holding an 83 per cent equity stake in the new entity and S&N retaining a 17 per cent holding.

Courage Brands will then license the rights to produce, market and sell the Courage portfolio, including Directors and Courage Best, to WYBC for an initial period of seven years.

John Dunsmore, managing director of S&N UK, said: "These new arrangements are part of S&N’s continuous strategy to find the right organisational and ownership solutions for our brand equities."

Young’s, which owns 40 per cent of Wells & Young’s, closed its Ram Brewery in Wandsworth and its ales are now brewed in Bedford. Before deciding to team up with Charles Wells, Young’s considered building a new brewery in Wandsworth and is understood to have discussed possible funding from S&N with a view to assuming production of Courage.

The Courage portfolio will be acquired by a new joint venture company, dubbed Courage Brands, in which Wells & Young’s will take an 83 per cent stake and S&N the balance. Production will shift to Bedford from S&N’s brewery at Tadcaster, which will continue to brew its John Smith’s bitter brand.

Nigel McNally, managing director of Wells & Young’s, said that the Courage portfolio accounted for more than 100,000 barrels a year, taking total annual volume to almost 600,000 barrels.

Mr McNally said: “National brewers have not been very good at handling niche beers. Cask ale needs nurturing and lots of care and attention. It’s a live product and you need to provide retailers with training on how to handle it.”

Mr McNally said that the Courage brand had enjoyed little or no marketing support in recent years and Wells & Young’s intended to address that by investing more than £2 million. He said: “We regard it as a sleeping giant. The decline in volume over the years has largely been down to substitution. Where S&N can, they substitute John Smith’s for Courage, but one of the things that attracted us to it is that they haven’t done anything to damage the brand. Our intention is to reawaken Courage.”

He said that Courage would sit neatly alongside Wells & Young’s premium Bombardier ale and “the more idiosyncratic” Young’s Bitter. It will be offered to tenants of all 260 of Charles Wells’s pubs as well as continuing to be sold through S&N’s existing distribution network of thousands of outlets.

S&N’s decision to sell Courage comes as no surprise, given the gradual cutting back of its exposure to the cask ale market. In 2002, S&N sold the Theakston ale business back to the founding family. Then, in 2004, it sparked controversy by announcing the closure of the Fountain Brewery, in Edinburgh, and the Tyne Brewery in Newcastle. It has moved production of such ales as Newcastle Brown, McEwan’s, Younger’s and Tartan Special to smaller breweries in which it has taken an equity stake.

A history of change

1787 Courage & Co founded in London by John Courage at the Anchor Brewhouse near Tower Bridge

1797 becomes Courage & Donaldson

1888 operates as Courage

1955 merges with Barclay Perkins, based at the nearby Anchor Brewery

1960 merges with Simonds brewery of Reading, becoming Courage, Barclay, Simmonds & Co, later reverts to Courage

1972 Courage is taken over by Imperial Tobacco

1981 Anchor Brewery is closed

1986 Imperial Tobacco is acquired by Hanson Trust

1990 Hanson sells Courage to Elders IXL, which renames itself Foster’s Brewing Group and merges Courage with GrandMet’s brewing arm.

1995 Scottish & Newcastle acquires Courage, and dubs the brewing business Scottish Courage

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