After buying Vermont Hard Cider Company for $305m, C&C Group said the firm offered it strong growth prospects due to low US cider penetration, while the deal also snagged it 20% of a Chinese start-up brand.
Stephen Glancey, CEO of London and Dublin-based C&C, said that the transaction would transform his firm’s international cider business and accelerate its growth prospects, while the firm intended to invest in Vermont-based VTHCC, whose main cider brand is Woodchuck.
C&C has exported its Magners cider brand to the US for over a decade, and acquired west coast brand Hornsby’s in 2011; it said the new buy would boost its presence in the growing cider category .
“Despite accelerating growth in the US cider category, cider’s share of the long alcoholic drinks (LAD) market is very low at approximately 0.2%,” the firm said.
“This compares with an approximate 10% and 15% cider share of total LAD in Ireland and the UK respectively, where the cider category is well developed.”
Chinese cider start-up
In addition to snaring a 400,000 hectoliter production facility in Vermont and US-wide sales force and distribution network, the firm also bought a 20% stake in Chinese cider brand Gold Hard Cider.
Brett Williams, president and CEO of VTHCC, added: “We believe that C&C is the natural partner for our business. We share heritage, values and culture and are both strong believers in the future growth of cider.
“Our decision to continue to lead the business and become shareholders in C&C, as part of this transaction, reflects this belief.”
C&C pointed to strong growth in the US cider category from 2005 to 2011 that had only accelerated in the last two years, with category growth of 20% in 2011, and 56% growth in H1 2012.
‘Natural’ long alcohol alternative
Factors underpinning this growth included (1) changing consumer preference from mainstream beer to cider and craft beer (2) growing global awareness of cider and increased investment by global brewers, the firm said.
Thirdly, C&C cited a consumer preference for cider as a ‘natural’ alternative to other long alcohol drinks, where it is fruit-based and gluten free.
VTHCC itself posted 23% cider volume growth and 29% net revenue growth, on average, over the past three years, and C&C said it expected these figures to be 26% and 28% for FY 2012.
C&C said it expected to complete the VTHCC transaction by the end of its financial year.