DRINKING UP TIME AT THE FOUNTAIN brewery

Sunday Herald, The, Feb 22, 2004

WHY did Scottish & Newcastle single out its Fountain brewery in the west of Edinburgh for closure?

Traditionally, companies that are downsizing tend to close down plants that are furthest away from their heartland first, if for no other reason than to win the continued support of their domestic clientele.

S&N, however, had no such qualms it seems and was unafraid of courting controversy in its home city. The company's UK brewing arm, Scottish Courage, has cited overcapacity, higher costs, lower productivity and distance from its English markets as reasons for its decision to shut down Fountain, which will be decommissioned with the loss of 170 jobs by the year end.

One key reason is the amount Scottish Courage is having to pay for its water, and some sources have suggested this was in fact a key reason for the decision to end years of tradition and cease brewing at Fountain.

Last week the company admitted that it pays three times as much for water in Scotland than it does at its Berkshire Brewery in the more affluent southeast of England. A spokesman said: "We pay 37p per hectolitre brewed at Fountain, compared to 12p at the Berkshire Brewery."

Problems over water costs go back a long way. Back in January 2001 Scottish Courage attacked the Scottish water authorities for attempting to slap a ten-fold increase on its water charges. Even at that stage, insiders warned the proposed hefty hikes in water charges would make the firm think twice about the future viability of large- scale brewing in Edinburgh.

The brewer publicly stated that large industrial users such as itself were being forced to shoulder the burden for new sewage plants.

In 2001, Tom Ward, Scottish Courage's then brewing director, said the then East of Scotland Water authority had been striving to foist increases of up to 1000% on industrial customers since November 2000. He said: "Each area starts to spend money on improving sewage treatment, then starts working out how to pay for it."

If the cost of water was a key factor in Scottish Courage's decision to close down the plant, industry observers believe that Enterprise Minister Jim Wallace ought to be stepping in to ensure that large industrial users such as S&N are not penalised.

However, the Scottish Courage spokesman said high water charges were one factor amongst many which hastened the decision to shut down the plant, a move which is being fiercely resisted by the Transport & General Workers' Union.

The spokesman said: "First and foremost this decision was based on capacity rather than cost. The site is operating at only 50% capacity."

"There are a whole host of complex factors feeding into this, the biggest of which is overcapacity in our business."

S&N cannot have ignored the fact that the eight-acre site of the Fountain Brewery sits between the city's fast-growing financial exchange district and the prime residential area of Bruntsfield, and that it has attractive frontage on to the Union Canal.

Observers say it would take an remarkable degree of commitment to ignore the siren call of property developers offering to take the site off the company's hands for (pounds) 50 million or more.

That will provide no comfort to the 170 workers at Fountainbridge who have consistently beaten production targets.

The lager that is churned out by Fountain Brewery - mainly Foster's, Miller and McEwan's - will in future be predominantly made at Scottish Courage's Manchester Royal Brewery, with its Berkshire and Tadcaster breweries also taking a share.

The McEwan's ale brands, 60, 70 and 80 shilling, will in future be madeat the Caledonian Brewery in Gorgie under a complex arrangement described by some as a "marriage of convenience".