BREWERY CONTROL

Evening Post, Volume CXL, Issue 62, 11 September 1945, Page 9

BREWERY CONTROL

BENEFITS CLAIMED

MAINTAINING STANDARDS

Surveying the history of Dominion Breweries, Limited, before the Royal Commission on Licensing yesterday afternoon, Mr. Leonard James Stevens, solicitor, and chairman of directors of the company, defended the policy of brewing companies controlling licensed hotels. He considered the public benefited.

The nominal capital of the company was originally £75,000 in June, 1930, which was increased to £250,000 after July, 1931, he said. The paid-up capital at March, 1938, was £108.519, with £9688 still uncalled. A further issue was made of 41,793 ordinary shares in September, 1936,' and in February, 1937, 40,000 ordinary shares were issued, bringing the paid capital to £188,771. The remaining portion of the nominal capital was issued by March, 1938. In July that year the nominal capital was doubled. Since March, 1940, the issued and paid capital was £350,000. There were now 1185 ■shareholders, with an average holding of 295 shares. The company controlled four hotels by the end of its first year, said the witness. This number had increased to 12 by 1935. The company considered that under its control of hotels by licensee managers the public received the best of service, and control and observation-of the law was more rigidly enforced than was the case with hotels under lessee licensees. The suggestion that licensee managers more or less held their positions on the basis of illicit trading to secure large profits for their employers was not warranted.

At present the company owned 17 freehold hotels and 23 were held under lease, said witness. Capital in freehold was at present £626,162, of which £283,521 was fixed loan capital. Furniture, fittings, and improvements to hotels and stock-in-trade represented £127.369.

BREWERY OWNERSHIPS

"This company joins issue on the question whether the ownership and control of licensed hotels is a fit and proper function for companies engaged in brewing," said Mr. Stevens. "Our opinion is that no organisations are better placed to give the attention as property owners and to implement the correct policy of development as are the organisations already interested in the business. It is confidently predicted that the advantages of brewery ownership will come to be looked on as a guarantee of a high standard of comfort and service, both in dispensing of beer and other drinks and the provision of meals and beds.

"For some years progress has been retarded by material obstacles outside the control of the licensed trade. Obstacles of another kind might take some time to surmount. Principal among these is the fact that the general public are not prepared to pay hotel tariffs warranted by the excellent service given by hotels in the provision of good meals and bedrooms equipped with modern amenities. Until the general conception of New Zealand patrons catches up with world ideas of the value of good accommodation and they are prepared to pay for service it will be difficult to provide at a profit the standard of accommodation at which a progressive organisation would aim."

In the company's opinion ,the general standard of hotel accommodation in New Zealand was higher than, say, the accommodation available in English provincial cities.

The capacity of the company's brewery in 1930 at a capital cost for land, buildings, and plant of. about £13,000, was between 250,000 and 300,000 gallons a year. The present capacity, at a cost less depreciation of £276,144, was 4,500,000 gallons. The brewery provided a minimum wage of £7 15s per 40-hour week for all male employees. A staff provident fund guaranteed to general male contributings members £4 a week for life on retirement at 60.

Over the last four years production costs had increased substantially: malt by 27 per cent., hops 9 per cent., wages 35 per cent., freights 10 per cent., and repairs and maintenance fully 100 per cent. Such increases had been carried by the company on the basis of expanding turnover. Any marked decline in turnovers would cause such a contraction of profits that price increases to consumers would be inevitable, or, alternatively, tax remissions would have to be allowed manufacturers.

Cross-examined by Mr. J. D. Willis, counsel assisting ,/the Commission, Mr. Stevens said he would not say his company's policy of acquiring hotels had started a "brewers' war," but there had been "keen competition." He would not agree that this had caused freeholds and leases to be excessively costly. The company had, for instance, bought the Huntly Hotel and the new Taihape Hotel for £45,000 altogether, the Royal (Auckland) for £38,500, and the Cecil for £65,000. They had bought a hotel in Hastings for what he considered an excessive price, but it was bought for its competitive factor.

The purchase of another Auckland hotel for £31,000 when the Government valuation was £9000 had been a very satisfactory purchase, he said. New Zealand Breweries, Limited, had acquired the Astor Hotel (Auckland) when the Dominion Brewery lease expired and the witness's company had been outbid. That had encouraged the company to pursue the purchasing policy.