Trading at C&C Group, the drinks company behind Bulmers and Tennent’s, is below the board’s expectations, it said in a trading update on Friday, blaming weak consumer confidence following the UK budget in November.
The group said its business performance was driven primarily by “softer than anticipated demand” in hospitality, alongside adverse product mix, as consumers “continue to move away” from the consumption of wine and spirits, in favour of beer.
C&C flagship brands are Tennent’s, Scotland’s number-one beer brand, and cider brands Bulmers and Magners. It also has a number of craft brands, including Orchard Pig cider, Five Lamps Irish lager, and Menabrea Italian beer.
The group said trading across the Christmas fortnight was “in line with expectations”.
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However, in January to date, it has seen “continued softness” in consumer demand in the market, and it anticipates this will continue for the balance of the current financial year. It reports full year results in May.
C&C said it made “strong progress” on objectives such as improving customer service and marketing, but these actions were “not sufficient” to offset the drag on trading.
It pointed to a combination of “subdued market volumes, unfavourable category mix, and competitive pricing dynamics” across the market.
As a result of these factors, the group now expects adjusted operating profit to be in the range of €70 million to €73 million, reflecting the lower operating profits in its distribution business.
“Within our overall performance, our brands continue to deliver well,” it said. “Tennent’s and Bulmers performed strongly across the festive period and have delivered well against our new innovation objectives.
“The business continues to be cash generative, and we anticipate continued solid underlying cash generation for the year. The business remains financially robust with a strong balance sheet, significant liquidity and covenant headroom.
“The board remains committed to its capital return plans of returning a total of €150 million over the previously announced timescale with €92 million already returned as reported in our interim results.”
In terms of outlook, the board expects a continuation of the current macroeconomic and consumer headwinds into next year but “remains confident” in the group’s ability to create value for shareholders in the medium to long term.
However, it said it is currently anticipated that full year 2027 profits will be similar to the current year. It said this reflects the impact of planned reductions in volumes through its distribution channel as less profitable business is exited.
It added the lag between “revenue decrease” and cost reduction initiatives is expected to lead to “some degree” of short-term profit dilution.
The group has been more concerned with divesting assets in the past number of years, including: Vermont Cider Company in the US (for less than 7 per cent of its $305 million purchase price in 2012); and its stake in UK pub chain Admiral Taverns.
C&C’s fifth chief executive in as many years, Roger White, who took charge last year, has set his sights on boosting innovation across the three main brands, which had been partly neglected in recent times, to grow sales and earnings.
The company said on Friday it will continue to prioritise “operational simplification and cost discipline”, as well as “margin rebuild” in the distribution business through “disciplined pricing and revenue management”.
Furthermore, it plans to strengthen “brand equity and innovation in core categories”, and attempt to deliver “accelerated efficiency programmes to support medium term profit recovery”.
