Southwold brewery and pubs business Adnams slumped to a £1.2m operating loss in 2022 as world and UK events led to swingeing rises in its costs.

The company had to absorb an eye-watering £4.9m rise in its costs base due to soaring inflation following the invasion of Ukraine and political turbulence at home, the company explained in its annual report.

At the same time, instability caused by the autumn mini-budget, rising interest rates and industrial unrest brought consumer confidence to its lowest level for decades, said chairman Jonathan Adnams.

"It is no overstatement to suggest that, for the company and the wider brewing and hospitality sector, the business environment has been at least as challenging as during the Covid-19 pandemic," he said.

"In the final nine months of 2022, the business has had to absorb a £4.9m increase to its costs base driven by rising prices."

But the group enjoyed a turnover of about £64m - up from £57m the previous year - and worked "extremely hard" to mitigate the effects, he said.

Most of the added costs had to be passed on to customers. It also had to catch up on its property maintenance following the pandemic which has meant its borrowing rose by £2.9m to £13.9m as it invested in the future, he said.

All hospitality businesses were already hard-hit by the pandemic when inflation hit last year. Adnams was no different and slumped to a £3.7m operating loss in 2020, followed by a £0.9m operating loss in 2021.

In the early part of 2022, it looked as though the beer market was recovering following a 55% slump in the previous two years across the industry - but it was not to last.

"As we moved from summer to autumn, the mood began to change as the nation mourned the passing of the Queen and the mini-budget hit consumer confidence hard," said Mr Adnams.

But despite the setbacks, its low and no alcohol beer offering continued to put on sales - with Ghost Ship 0.5% beer beoming the best-selling Lo/No Ale in the on-trade sector.

Among the year's highlights for the business were its celebration of its 150th anniversary in the autumn and in December scooped a third Queen’s Award for Sustainable Development.

Chief executive Andy Wood said despite the challenges, the company remained committed to doing things the right way.

East Anglian Daily Times:

Fortunately, the business was hedged against some of the worst effects of energy inflation because of the contracts it had in place - meaning its costs were slower to rise, he said.

But they would also be slower to fall as prices stabilise, he added.

"Our principal concern and that of the whole sector has been how much of this inflation can be passed directly through to the consumer without severely impacting demand, particularly in pubs the length and breadth of the country," he said.

"We remain fundamentally committed to the principle that a drink or a meal in a pub should remain affordable for customers who are finding it hard to support local pubs at a time when the country and local communities need to come together." 

The company said it was not recommending a dividend this year. Adnams - which released its final results for the 12 months ending December 31, 2022 on June 7 - is due to hold its annual general meeting at Snape Maltings on Friday, June 30.