Sales and Profits Fall at C&C Group
C&C Group, the Irish and UK drinks business, has reported a 3.1% decline in net revenue to €662.6 million and a 10.3% fall in operating profit to €103.2 million for the 12 months to 29 February 2016. On a constant currency basis, net revenue decreased by 8.9% and operating profit by 13.2%.
C&C Group undertook significant restructuring during the year as it moved towards a leaner operating platform in order to improve competitiveness, incurring costs of €38.4 million. The group is on track to deliver €15 million of cost savings, the initial benefits of which will start to flow through in it 2017 financial year. The cost reduction will provide scope for increasing marketing investment to drive top-line growth while protecting group operating margins. Despite the short term pressure on earnings, C&C Group increased marketing investment by 5.5% to €34.6 million during its 2016 financial year.
C&C Group manufactures Bulmers, the leading Irish cider brand, Magners, the premium international cider brand, Gaymers cider and the Shepton Mallet Cider Mill range of English ciders and the Tennent’s beer brand. C&C Group also owns Woodchuck and Hornsby’s, two of the leading craft cider brands in the United States. The group’s Irish wholesaling subsidiary, Gleeson Group, owns and manufactures Tipperary Water and Finches soft drinks. C&C Group also distributes a number of beer brands in Scotland, Ireland and Northern Ireland, primarily for Anheuser-Busch Inbev, and owns Wallaces Express, a Scottish drinks wholesaler.
C&C Group’s domestic businesses in Ireland and Scotland faced a range of challenges during the year including poor weather, increased competition and the impact in Scotland of the changes to drink driving regulations. The integration of the Gleeson’s and Wallace’s operations has now been completed, providing a stronger customer focused platform with competitive advantage as C&C Group continues to build on the relative strengths of its Bulmers and Tennent’s brands.
In the wider UK market, Magners Original has delivered both volume and share growth. C&C Group expects its new marketing campaign this summer to support this growth. The C&C brands business has also developed a number of speciality beers and ciders. Volume of Menabrea, the group’s Italian beer, has more than trebled and Heverlee, a Belgium Pilsner, grew by 34%.
Stephen Glancey, chief executive of C&C Group.
Stephen Glancey, chief executive of C&C Group, comments: “Cider is now penetrating deeper into international markets as consumers are attracted to the sweet natural taste. Magners is the original premium apple cider and we are pleased to report growth not only in the UK but across our Export business, where cider grew by 15% over the past 12 months and with momentum sustaining into the current year.”
He continues: “While cider exports support jobs and agriculture in Ireland we recognise that the performance of Tennent’s in International markets does the same for Scotland. Our beer business also continues to capitalise on the opportunity in international markets and our Tennent’s brand grew last year by 34% as we opened new territories in Asia and Africa.”
In recent months, C&C Group has finalised a number of new distribution deals that will again sustain growth in the current financial year. Around 9% of own brand volume is now sold internationally, underpinned by growth of 22% per cent in our Export segment in the last year.
In the United States, C&C Group has entered a new relationship with Pabst Brewing Company, providing deeper sales, marketing and distribution capability and a strong authentic beer portfolio to wrap around Woodchuck and Magners.
“The US is the home of Craft and in the longer term we believe the quality and authenticity of our hand crafted real ciders combined with Pabst will prove to be compelling for consumers and distributors,” he says.
Stephen Glancey continues: “We retain a strong balance sheet and our commitment is to deploy capital where we believe it will drive greatest value for shareholders. We returned €115 million to shareholders in FY2016 and our intention is to increase this to over €130 million by mid calendar 2016 under our current share buyback plan. We have also increased our dividend for FY2016 in line with our progressive dividend policy, providing certainty of value for shareholders. While we have returned substantial capital to shareholders during the year, leverage on our balance sheet remains conservative providing financial flexibility within the business. We are positioned to deliver earnings growth and strong cash generation in FY2017.”
