LAD volumes drop 4% in on-trade here as C&C acquires US cider company

C&C’s cider sales volumes in Ireland fell 6.6 per cent in the first six months to 31st August 2012 which together with price-mix drove a 14.3 per cent fall in net revenue here in H1 according to the company’s H1 financial results.

Volume accounted for 6.6 per cent of the decline and price/mix a further 7.7 per cent. Throughout the period unseasonable weather depressed cider consumption across both channels but more markedly in the on-trade, leading C&C’s net revenue for the six-month period down 12.3 per cent.

This was primarily driven by a combination of declining volume and increased promotional activity in the off-trade channel. This price deflation, coupled with a growing proportion of lower value beer sales, resulted in a price/mix decline of 9.1% and overall volume declined 3.2 per cent, primarily due to lower on-trade consumption of cider.    

The decline in volume of higher margin cider was replaced in part by an increase in lower margin beer portfolio volume.
Operating profits were down too by nearly 20 per cent to just under €22 million from €27.3 million over the same period last year.

According to C&C, “In the six month period to the end of August, retail volumes of Long Alcoholic Drinks in ROI declined by one per cent. The ongoing volume shift from on-trade to off-trade continued with Nielsen reporting positive growth of two per cent in LAD off-trade volume and a decline of approximately four per cent in on-trade volume. This represented a slowing of the relative growth of the off-trade (five per cent growth in the prior year period) bringing additional pressure on the channel to increase promotional levels and offset sluggish sales. Off-trade LAD pricing fell by four per cent with cider down six per cent.
“Pricing in the on-trade remained steady but cider volume was lower than LAD with the seasonal nature of the cider category affected more by the poor Summer weather. Parts of RoI experienced the wettest summer in over 50 years.”

However home consumption of C&C product now accounts for 44.5 per cent of total consumption, up from 43 per cent in the prior financial year.

The Group’s beer portfolio continued its strong performance here, reports the company, with volume growing 20 per cent in a beer market that declined by one per cent in the period. Volumes of C&C ‘owned’ brands Tennent’s Lager and Caledonia Smooth grew 40.5 per cent versus the comparable prior period, reports the company.

C&C Group net revenue fell 2 per cent to €263.4 million in the half-year to 31st August 2012 resulting in a pre-tax profit of €63.7 million, up from the previous period’s €59.7 million figure and the Group has just conditionally agreed to acquire Vermont Hard Cider Company LLC in the US for $305 million (€233 million). The VHCC business owns and operates:

−    trademarks for the Woodchuck cider brand and the Wyder’s cider brand
−    a 400,000 hectolitre cidery and warehouse facilities in Vermont, USA, with an option on a new freehold site to expand the cidery and add a visitor centre
−    a US national sales force and distribution capability and
−    a 20 per cent shareholding in start-up Chinese cider brand, Gold Hard Cider.

At 31 December 2011, the VHCC had gross assets of $21 million, net assets of $18 million and profit before tax of $10 million.
Over the past three years, the Woodchuck brand has delivered cider volume and net revenue growth in excess of 23 per cent and 29 per cent respectively per annum. The business being acquired is forecast to deliver volume and net revenue growth of 26 per cent and 28 per cent respectively in the 12 months to 31 December 2012.

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