Of Coopers beer with humble pie

Since fighting off Lion Nathan, Coopers Brewery has proven the naysayers wrong with a sharply higher share price and a stronger brand than ever.

In November 2005, when Lion Nathan was trying to take over Coopers Brewery, I wrote a column for The Age and The Sydney Morning Herald that started like this:
 
“It's hard not to feel that you'd rather be a prisoner at Guantanamo Bay, with daily beatings and forced marches in ankle chains, than a shareholder in Coopers Brewery at the mercy of Bill Cooper, his immediate kin and his accounting firm, KPMG.”
 
The column described how Lion Nathan was bidding $260 a share, but Bill Cooper had been buying shares from his relatives at $45 a share, thanks to a valuation by KPMG, and it ended like this: “All of this is an affront to decency and common sense.”
 
Well, the Cooper family, all 120 of them, eventually stuck together and fought off the Japanese-controlled Lion Nathan. With the sale of Foster’s to SAB Miller in 2011 their company became the largest Australian owned brewer.
 
So I knew that at some point in this family business series I would have to gird the loins, munch some humble pie, and return to the Coopers family for the first time in eight years. What has happened since the Battle of Regency Park, when the plucky Aussie brewing family defeated the Japanese?
 
With some trepidation I picked up the phone to Glenn Cooper, chairman of Coopers and fifth generation descendant of the founder, Thomas Cooper, but he was charm and courtesy itself. He did not mention the war column, even though – I’m sure – it would have been sitting on his desk in front of him as we spoke.
 
Note, though, that it was Glenn who spoke to me, not Tim, the chief executive and son of Bill, whom I had so richly traduced back in 2005. Glenn represents the other branch of Cooper family, and the two sides more or less take it in turns to be chairman and CEO.
 
Before we get into the post-2005 era at Coopers, it’s worth dwelling on this. Coopers Brewery has a unique ownership structure, which is to say there’s absolutely nothing else like it.
 
Thomas Cooper was a Jack-of-all-trades from Yorkshire until one day he brewed some beer as a tonic for his sick wife, Ann, who was a publican’s daughter. He used his father-in-law’s recipe, which turned out to be quite different to the usual beers being produced in Adelaide at the time: it didn’t use added sugar and fermented the beer in the bottle.
 
Ann no doubt guzzled valiantly but couldn’t drink it all so he handed it around the neighbourhood. Everybody loved it, so he made some more and thus a great family business was born.
 
Ann died in 1872 and two years later Tom married again, this time to Sarah. When Tom eventually died in 1897 he had had 19 children, 11 by Ann and eight by Sarah; nine had survived.
 
Tom left the business to his four eldest sons, John, Christopher and Samuel (their mother was Ann) and Stanley (whose mother was Sarah). Frederic and Charles, who both worked at the brewery all their lives, got none of it, although along with their sisters, they got some cash and other property.
 
Tom had decreed in his Will that it be a partnership called Thos Cooper and Sons, and when Christopher and Samuel each died in later years a new partnership agreement had to be struck. Eventually, in 1923, the surviving brothers, John and Stanley, decided to make it a company, and created two classes of shares – “A” and “B” – with 15,953 each to the two half-brothers. Another 7,092 “C” shares went to the estate of Samuel’s widow and one share each to Frank and Wilfred Cooper. There's also a "D" class, a special class of shares dating back to 1962, when SA Brewing and Coopers swapped shares as part of a defensive strategy. These shares were sold back to Coopers in 1995. Total share capital: 39,000.
 
All the classes of shares had the same rights, except that John and Stanley, wishing to keep their separate mothers’ blood-lines separate, also wrote into the constitution that the As and Bs could only be sold to other holders of the same class, that is, other member members of the same family line.
 
And so it has remained – almost. According to the 2012 accounts filed with ASIC, there are 15,553 A shares, and 15,953 B shares. Glenn Cooper told me there are now 3000 of each class. There are also now 1 million C shares according to the accounts. With A, B, C and D shares, the board controls 36 per cent of the company.
 
Glenn, the chairman as well as marketing director, represents the A, or Ann Laycock, line and Dr Tim Cooper, the MD, represents the B, or Sarah Louisa, line. Also on the board are Dr James Cooper (A shares) and Melanie Cooper (B shares) as well as Cameron Pearce, Maxwell Cooper’s son-in-law (the D share line) and Jim Hazel as the (required) independent director.
 
How does the governance work between Glenn and Tim? “Well,” says Glenn, “on day-to-day operational matters, I report to Tim. In the boardroom, I’m chairman.” Sounds complicated, but apparently it works, and the business has been going from strength to strength.
 
Which brings us to what’s been happening since 2005. Well, as we know, the beer market is fragmenting into tiny pieces, with the big players – Japanese-owned Lion and South African owned Foster’s – under attack from hundreds of small, craft brewers, a bit like the wine industry. In a way, Coopers has emerged as the daddy of the craft brewers.
 
Coopers now has 4.5 per cent of the national market compared with 3 per cent in 2005 and Glenn says the company is worth a lot more than the $310 a share that Lion Nathan finally offered that year. How much more? He wouldn’t say.
 
But the most recent accounts provide the following information: the last buyback price was $289 a share; the last dividend reinvestment plan price was $302 a share; Coopers made a consolidated net profit of $27.16 million in the year to June 2012, or $23.50 per share; and it paid dividends of $5 a share, or $11.56 million in total.
 
Foster’s was sold for about 13 times earnings. If that multiple were applied to Coopers 2012 result, the shares would be worth $353 each. So, yes, that’s a higher value than Lion Nathan’s $310. But of course, that $318 in 2005 invested at, say, 5 per cent a year, would now be worth $447.
 
Anyway, let’s not quibble. The Cooper family, all 190 of them now, are happy and doing fine on their dividends. Their company is an Australian icon, is growing solidly as a national brand, not just South Australian, and is now exporting – mainly DIY brewing packs to the United States. Only two per cent of the beer is exported, but that’s growing too.
 
Glenn’s daughter Rachel is in the business and there are other sixth generation Coopers looking to enter as well. There is a strict policy of family members not being considered for employment until they are around 30 years old and they must clearly qualify for the job.
 
So the future of Australia’s largest Australian-owned brewer looks good, the beer is still delicious and everyone’s happy. No daily beatings or forced marches in ankle chains.

For more family business commentary click here.

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