C&C Group, the manufacturer, marketer and distributor of branded cider, beer, wine and soft drinks this week issued an Interim Management Statement covering the 3 months from 1 September 2014 to 30 November.
The failure of C&C’s bid for Spirit pub group removes a major distraction, leaving the management to focus fully on the problems within the core business, which has flagged up lower profit expectations for the year.
Outlook
Following weaker than expected trading conditions in the third quarter, conditions that continued during the Christmas period, C&C is updating its operating profit guidance for FY15. Operating profit in the region of €115 million is now anticipated.
Looking beyond FY15, the Group expects the core markets of Ireland and Scotland to continue delivering resilient performance through strong, brand-led multi-beverage operating models. In the US, the significant investments and focussed activity in FY15 should begin to have a positive impact on performance in FY16.
In England and Wales, C&C is advancing plans to significantly reduce costs which will return the cider business to acceptable levels of profitability, expand margins and increase investment behind the brand portfolio.
Three Months to 30 November, 2014
Trading conditions in the third quarter were below C&C’s expectations.
In Ireland, following solid performance in the first six months of the year, volume (excluding Gleesons) was down 3.4% in the quarter. The market was slow in the period with October and November proving to be particularly quiet months. In Scotland, a similar trading profile was evident and volume (excluding Wallaces) in the period was down 2.4%. The Group’s core markets, however, are expected to continue to provide resilient levels of profitability and cash flow.
In England and Wales, pressure on pricing increased in the off trade channel, reflecting intensifying competition at both retail and brand owner points in the supply chain. Cider volume in the quarter was down 9.8% with net revenue down 18.2%.
In the US, volume declined 16.2% in the period representing an improvement on the first half but still some way from a return to growth. However, the disruptive impact of new entrants to the market has receded. Retail data for the multi-outlet and convenience retail (‘MULC’) channel since July 2014 highlights that Woodchuck is performing broadly in line with the month-on-month movement in the category. The underlying performance trends of the second half provide increased confidence in the brand’s prospects for FY16.
Excluding the US, underlying performance in other export markets was strong. Volume in Europe increased 18.6% in the quarter with Magners up 7.1% and Tennent’s up 62.1%. Distribution issues in Australia depressed overall volume in the segment for the quarter but those issues are now resolved.
Trading since 1 December, 2014
Trading over the Christmas period was again below C&C’s expectations in the domestic markets and volume trends are broadly consistent with the third quarter performance.