Distribution strategy error sees brewery profits fall

Want to read more?

We value our content and our journalists, so to get full access to all your local news updated 7-days-a-week – PLUS an e-edition of the Arran Banner – subscribe today for as little as 48 pence per week.

Already a subscriber?


Subscribe Now

Arran Brewery has admitted it got its distribution strategy wrong as losses widened at the craft beer producer last year.

The brewer reported a trading loss of £108,162 despite turnover growing by 45 per cent to nearly £1.4 million, although its most recent accounting period was extended by three months. That meant the sales increase recorded by the brewery was 36 per cent. The company had made a loss of £69,077 before tax in its previous financial year.

While its most recent accounts showed a big increase in revenue, managing director Gerald Michaluk said the brewer has had to take urgent action to improve its distribution arrangements and curb bad debts.

Mr Michaluk said: ‘We had to write of bad debts of some £52,462 and increased distribution costs of £58,975 over what we would have expected based upon the volume of business volume increase.

‘Clearly we have got our distribution strategy wrong and need to address this urgently. Other bad debts related to trade customers going into administration and poor risk assessment and lack of trade account credit limits being set as we had moved to a new accounting package.

‘To correct the situation we transferred our brewery manager into a logistics role, she is currently completing a part-time MSc in production and logistics management via Liverpool University.

‘While we are addressing the credit control issue by ensuring credit is only given were necessary to win the business and personal as well as company guarantees are provided or the balance sheet justifies the risk. The brewery’s balance sheet remains strong despite the loss.

‘I anticipate  a similar scale drop in sale volume in 2017 as we pull back from accounts were we cannot make a decent margin from or the distribution cost are too high to get the beer to.  What this has shown us is there is demand for our products throughout the UK but we need to crack getting it there at a sensible price so we, as well as our customer, can make a sensible profit.’

Managing director Gerald Michaluk. NO_B02brewery01