Derek Pain: Roll out the barrel, all the way to the bar

The beerage is now a pale shadow of its once formidable self. A decade or so ago it represented more than 6 per cent of the stock market's capitalisation; today it accounts for nearer 0.5 per cent. The once imperious Big Six of the industry have been reduced to one, Scottish & Newcastle. Four of the others sold their breweries to overseas brewers; S&N swallowed the fifth, Courage. And many of the once impressive array of smaller independents have disappeared, either being taken over or abandoning the "mash tun".

If the Wolverhampton & Dudley Breweries surrenders to the predatory Pubmaster group, then Fuller Smith & Turner, only a few years ago a veritable tiddler, could, in quoted terms, rank as the nation's third biggest brewer behind S&N (capitalised at £3.5bn) and Greene King (£466m). Fuller's A shares are valued at £86m; the more powerful B shares, through which the company is controlled, are unquoted.

Declining beer sales, the old Tory government's controversial Beer Orders and persistent Westminster interference have transformed the industry. It all looks rather depressing. Another traditional British industry in the doldrums. Yet the remaining beer shares have been quite strong this year and the results rolled out in the past few weeks by some of the independent brewers suggest it is not all doom and gloom.

Belhaven, Scotland's biggest independent, Fuller and London brewer, Young & Co, have produced encouraging figures, recording higher beer sales and profits. Young, as well as Fuller, has a two-tier voting structure which is inclined to reduce investment appeal. But Belhaven has no such protection. Yet its shares, despite recent strength, look cheap. Fuller and Young, if investors are prepared to overlook the drawbacks presented by family control and lopsided share capitals, also have undoubted attractions.

The no pain, no gain portfolio features one brewer ­ S&N. The shares have been a rewarding investment. Like many smaller groups it should be scoring from the uncertainty surrounding the former Bass breweries, following their takeover by Belgian giant Interbrew, of Stella Artois fame.

The Belgians are at loggerheads with the Government over their £2.3bn Bass acquisition which followed a £400m takeover of the Whitbread breweries. Westminster blocked the deals. But following Interbrew's landmark legal success, attempts are being made to resolve the imbroglio that has developed. It seems certain that in the end the Stella Artois group will still be forced to dispose of at least a significant part of its British brewing operations.

Allied Domecq, one of the original Big Six, is also a profitable constituent of the no pain, no gain portfolio. It got out of brewing 10 years ago, selling control of its joint operation, Carlsberg Tetley, to its Danish partner, Carlsberg. I alighted on Allied before the epic battle for its pubs estate between Whitbread and unquoted Punch Taverns.

The portfolio embraces another former member of the beerage ­ Burtonwood Brewery. It is now largely a pubs chain but retains a 40 per cent interest in its old brewing operation. On Monday the group announced impressive year's profits, up 14 per cent to £7.2m. The shares of most of the remaining quoted breweries have made heady progress this year. But they remain well below their peak levels, achieved a few years ago.

The protracted battle for Wolves, which has at last realised a full-scale takeover bid, has again thrown the spotlight on the assets the industry embraces. But the Pubmaster pubs chain is not interested in the group's four breweries. If it wins the day it intends to sell them although, with the exception of the Burton upon Trent plant where the famed Pedigree bitter is produced, there is unlikely to be much buying interest.

Pubmaster's decision to stick to retailing and get rid of the Wolves breweries is further evidence of the divide which has opened between pub companies and the brewers. But the remaining brewers, particularly the smaller ones, happily combine brewing beer and running pubs, a tradition which the Beer Orders eroded.

It will not be long, I suspect, before the saloon-bar clock is turned back and one of the new breed of pub companies, possibly one in the Nomura stable, decides to embrace both bar and mash tun.