C&C Group chairman Brian Stewart conceded to shareholders on Thursday that the alcoholic drinks company's foray into the American cider market in 2012 "didn't work", as the board came under sustained criticism over the venture at its annual general meeting in Dublin.
“There’s no doubt, unequivocally, that the US has been a major disappointment to us and we’re very conscious of that,” Mr Stewart told the meeting. “But our track record elsewhere is certainly reasonable. It’s a very tough market in a consolidating industry.”
C&C revealed in May that it swung into a net loss for the year to February as it wrote down the value of its US business by €129 million and as it grappled with sterling weakness as a result of Brexit.
Its North American revenues slumped by a third during the year to €24.5 million in a difficult US cider market and as the company dealt with "disruption" as it entered a deal with Pabst Brewery Company, the largest privately held brewer in the US, to sell its cider brands in that market.
Writedown
The €129 million charge marked a second time C&C had been forced to book a large writedown of assets in the US, a market it entered in 2012 with the €235 million purchase of Vermont Hard Cider. In May 2015 the company took a €150 million impairment charge against the assets. Following the latest writedown, the carrying value of the Vermont business is just €45 million.
Before the shareholder meeting on Thursday, C&C issued a trading statement in which it expects full-year profits to be hit if the value of sterling, currently 15 per cent off against the euro since last year’s Brexit vote, remains at the same level.
The group said trading to date across core markets for the period from March 1st to the present was “satisfactory and in line with our expectations”.
The drinks group said overall trade in Ireland has been subdued, with Bulmers losing more draught distribution, as it comes up against increased competition from Heineken’s Orchard Thieves brand. Its premium and craft portfolio grew strongly over the reporting period, with Heverlee and 5 Lamps standout performers.
Response
The company, which recently launched a new Dowd’s Lane range of ciders and beers in Ireland, said that, although it was early days, it was pleased with the response to new livery and a heavyweight media campaign for Bulmers.
The group’s Scottish business benefited from multi-year investment in both customers and brands, C&C said, with Tennent’s in particular gaining market share in what is a flat market.
It added that its premium and smaller brands, which include Menabrea, Heverlee and Drygate, performed strongly.
Last December C&C signed a deal giving Belgian-based InBev, the world's largest brewer, responsibility for the sale and trade marketing in England and Wales of its cider portfolio, including Magners, Chaplin & Corks, and Blackthorn.
The group said on Thursday that cider volumes are tracking slightly behind target across the British market but it is anticipated they will normalise through the key summer trading months.
