The consumer-sapping rain lashing Ireland and Britain over the past week has poured even more gloom over investor sentiment towards C&C Group, fresh from yet another grim trading update.
Analysts have been busy with their pens since the owner of the Bulmers and Magners cider and Tennents beer brands warned last Friday that its earnings would fall as much as 9 per cent in its financial year to the end of February – and that next year would be no better.
It’s hardly how drinks industry veteran Roger White, C&C’s fifth chief executive since early 2020, wanted to celebrate the first anniversary of a tenure that – above all else – needs to re-establish investor trust in the business.
Because the London-listed Irish group has been through the apple mill.
Over the past six years it has gone through a £151 million (€174 million) cash call to shareholders to get through Covid lockdowns, a $20 million (€16.8 million) US sale of a problem cider business that cost $305 million a decade earlier, soaring inflation and a bungled initial roll-out of a software system at its UK wholesale unit.
To reset expectations, White last year did away with a company goal of reaching a €100 million operating profit in its 2027 financial year, saying it would be hit in the “medium term”.
Following his warning that profit for the almost-complete year will fall between €70 million and €73 million and that next year’s outcome will be similar, investment houses have started to write off any chance of the target being hit before 2030.
Unless, that is, White pulls off a surprise when he outlines C&C’s “future strategic direction” alongside annual results that will be published in May.
[ Trading at group behind Bulmers cider ‘below board expectations’Opens in new window ]
Shares in the group have slumped 36 per cent in the past six months and are down by two-thirds over six years, leaving them wallowing around £1.10 apiece, a level last seen 17 years ago.
The driver of last week’s alert – unlike some others in recent years – was out of C&C’s control. The group blamed weak consumer confidence stemming from the UK budget in November affecting the hospitality sector which is supplied by its drinks distribution business Matthew Clark Bibendum.
The UK accounts for about 80 per cent of C&C’s revenues. Most of those sales come from the low-margin and – even at the best of times – low growth distribution business.
C&C also pointed to what it called an “adverse product mix”. Those consumers still happy to go out are moving away from wine and spirits (where Matthew Clark Bibendum is particularly strong or, in the jargon of analysts, “over-indexes”) in favour of beer.
While Christmas trading was “in line with expectations”, the early weeks of January saw “continued softness of consumer demand”, it said. The subsequent downpours across these islands – and implementation this weekend of a controversial UK government alcohol duty hike of 3.66 per cent – will not have helped as C&C enters the final weeks of its financial year.
C&C’s own core brands – Bulmers, the top-selling cider in the Republic, and Tennents, the No 1 beer in Scotland – both performed well over the festive period. This has been helped by White’s focus on innovation, such as the relaunch of the zero-alcohol version of Bulmers last autumn.
Following the transfer of control of Magners UK back to C&C 12 months ago – after eight years of sales and marketing in the hands of Anheuser-Busch InBev – the group has also been working to reboot a brand that had its heyday in Britain two decades ago.
The remarkable resilience of the core brands may add to the case for White to be bold and go after another strong brand. Indeed, it may prove vital in maintaining the group’s long-term independence.
RBC Capital Markets analyst Tania Maciver argued in a deep-dive report on C&C last autumn that the group faces limited sales growth over the medium term if it does not carry out mergers and acquisitions to boost its stable of brands.
A “leading premium or craft” drink brand deal, priced in the order of £200 million, would make more sense than targeting an expensive “leading key brand” in the UK, she said.
C&C has an existing portfolio of niche premium and craft brands, including Orchard Pig cider, Five Lamps Irish lager and Menabrea Italian beer, that between them made up only €27 million, or 9 per cent, of its branded products net revenues last year.
Maciver argued that a large and more diverse brand portfolio, similar to C&C’s much bigger, global peers, is key to higher long-term growth potential.
A transaction of the size she suggests would equate to almost half of C&C’s current market value. But the group is highly cash generative – underlined by its ongoing €150 million shareholder distributions programme, started in 2024 and set to run out to 2027. Net debt excluding leases at the end of August stood at €91.5 million.
“It has long been argued that the UK alcohol wholesale industry would benefit from consolidation,” said Deutsche Numis analyst Damian McNeela in a note to clients as the market absorbed the latest profit warning.
“It is too early to say whether the current challenging environment will prove to be the catalyst for action. What role C&C is likely to play is not clear.”
White’s strategic vision in May should provide some answers.