The smoking ban and last year's wet summer contributed to an eight per cent fall in UK headline profits at Newcastle Brown brewer Scottish & Newcastle.
And rising costs mean that drinkers face increases in the price of a pint.
The company, whose brands include Hereford cidermaker Bulmer's, said in its annual results statement yesterday that the fall in operating profits to £213 million reflected a 3.9 per cent decline in the overall UK beer market during a challenging year for the industry.
S&N, which also brews John Smith's, Kronenbourg and Foster's is in the process of being taken over by rivals Heineken and Carlsberg in a £7.8 billion agreed deal, which means that yesterday's statement will probably be its last as an independent company.
The Edinburgh-based group said higher growth markets in Russia and India offset falls elsewhere and ensured that at £444 million its pre-tax profit last year were in line with its 2006 results.
BBH, the eastern European brewing operating in which S&N and Carlsberg have 50 per cent stakes, recorded a 42.6 per cent rise in operating profit to £211 million last year.
BBH is the market leader in Russia, the Baltic countries and Kazakhstan and is third in the Ukraine.
S&N said yesterday that it sees scope for further gains in Russia and well as strong profit potential. Other markets could also yield strong growth.
Revenues rose by 7.9 per cent to £4.15 billion from £3.84 billion the previous year.
The bright spot in the UK came from the cider market, with the company's portfolio - including Bulmer's Strongbow - seeing volume growth of 15.1 per cent last year.
Scottish & Newcastle said it expected markets in western Europe to improve this year, although it also forecast a rise of 8.5 per cent in input costs.
It will mitigate the increase through "substantial" price rises, combined with ongoing cost reduction plans. It is thought that average price rises for the company's wholly-owned brands will be in the region of two to three per cent.
Cost saving measures have included the proposed closure of S&N's Reading brewery with the loss of 350 jobs. S&N has also shut breweries at Newcastle and Fountainbridge in Edinburgh during recent years to cut costs.
The closure of the 58-acre Reading site will leave S&N with about 3,000 UK employees. Brewing and packaging work will be transferred to the company's other sites, which include Tadcaster in North Yorkshire, the Royal Brewery in Manchester and Dunston, Gateshead.
Heineken and Carlsberg, whose fourth approach for S&N was finally agreed by the group's board last month, plan to break up the company when the 800p per share deal is completed, with the UK business falling into Heineken's hands.
The deal is currently awaiting clearance from European Union regulatory authorities.
Chief executive John Dunsmore said S&N will publish a Scheme Document for shareholders ahead of its extraordinary general meeting at the end of March and expects the deal to be completed toward the end of the second quarter of this year.
S&N has decided not to issue a final dividend in light of the takeover.
Chairman Sir Brian Stewart said: "We retain leadership in four of the most important beer markets in the world, being number one in the high-value UK and French markets and in the high-growth Russian and Indian markets through our joint venture partnerships.
"With recovery likely across western Europe, and clear outperformance in BBH, the S&N business model remains in robust good health."