Published on March 5th, 2014 | by Alastair Gilmour0
Thirst for a jar o’ ale
After a couple of years stuttering financially, one of the region’s best-loved breweries is back on track. Alastair Gilmour reports
Breweries make beer, pubs sell beer, and customers drink beer. When customers get a liking for a particular brewery’s beers they go back to that pub and ask for more. It isn’t a difficult theory to grasp. Brewery owners realised aeons ago that if they owned their own pubs they could sell more of their own beer to their own loyal customers. Business – and profit – would grow. QED.
But what if the brewery was prevented from buying the pubs it thought fitted their business by banks who refused to lend them money? One answer is that production would have to stand still when everyone – bar the person behind the office desk – could see the advantages.
Roughly, that’s what has been happening to Jarrow Brewery over the past couple of years. Short on traditional routes to finance for retail expansion and with lengthening fees over a plan to move their brewing plant to St Andrews Church in Hebburn – a project that collapsed through residents’ objections and planning issues – put the whole business in jeopardy.
The demand for Jarrow beers such as Rivet Catcher and Westoe IPA has never been in doubt – ask anybody – but brewery owners Jess and Alison McConnell realised that high street bankers’ lack of vision would have to be replaced by more creative ways of sourcing finance.
And the future of lending doesn’t seem very much brighter with the likes of Lloyds Banking Group set to cut 560 jobs in its small business division.
Step in to the gap local commercial finance expert Paul Minnikin and Paul Thompson from York-based Acorn Commercial Finance. Together they have formed JB Finance, based at Jarrow Brewery’s impressive new production facility at Bede Industrial Estate on South Tyneside.
And yes, they put an impressive package together for that particular project and before that, the purchase of the award-winning Isis in Sunderland which was yet another pub that high street banks saw no future in.
Paul Minnikin said: “We’re involved in every type of commercial funding and with Jarrow Brewery we looked at every type of financing there is. Now we’ve done this (he gestures round the huge stainless steel fermenters in the brewery) and created employment in the area.
“We were talking to bankers in the City of London recently and they were really impressed with what we had to say. After that we went with them to a pub in Soho that had Jarrow Rivet Catcher on the bar. How good is that?”
JB Finance looks to work around the so-called big four banks to get credit flowing to small companies with innovative approaches such as crowd funding where basically investors can choose the rate of interest they require and which companies their money should be channelled towards.
Paul Thompson said: “I’ve been in this sector for 17 years, working mainly with pub chains. We see so many viable pubs struggle to be funded traditionally through the banks. To get money from them you have to have three years’ profitable accounts – and often that’s not going to happen.
“At JB Finance we’ve got lenders who want to lend for pubs, restaurants and hotels – in fact for any commercial finance. We make sure all the channels pull together to make it work. We’re looking to put life back into the trade.”
This could take the form of loans and mortgages for purchasing a business for sale, leasehold or freehold and even for opening up a closed unit – which The Isis in Sunderland was before it sailed away on its continuous award-winning trip. Or it could be for smaller needs; equipment, vehicles or simply cashflow.
Jess McConnell said: “Through both Paul’s contacts we have developed niche ways to get through it all and we’re now making great progress. Production at the brewery is also ahead of forecast which I’m very happy with.”
The confidence now wafting around Jarrow Brewery is such that the company has bought the Jarrow Crusader pub in the town and a tenant is being sought for The Magnesia Bank in North Shields where there’s undoubtedly a terrific opportunity.
A share issue announced late last year now has the green light from the Enterprise Investment Scheme (EIS), so that particular venture is very much alive.
“We have had lots of interest in the share issue and we had to wait until we got EIS registration before proceeding and we’re now 100% ready to go,” says Jess.
“We’re hoping to raise £1m during 2014 in four tranches, so anybody at all can contact us with expressions of interest. We have had applications for shares from small investors who are simply fans of the brewery right through to people in The City.”
Other developments at Jarrow Brewery include the appointment of Mike Berriman as sales and marketing manager – a man with enormous experience in similar roles with Vaux Brewery, Federation, Cameron’s and Daleside.
“It’s great to be involved with Jarrow Brewery,” he said. “As ever, quality of liquid is the prime driver and we’ve worked hard at getting the consistency right. There’s so much promise here.”