C&C Group admits its main US hard apple cider brand Woodchuck bucked the overall industry growth trend with falling sales in 2013/14 as big beer player AB InBev enters the category with Jonny Appleseed, but insists it has a plan to get back on track.
But Joris Brahms, MD, C&C Group, international division, told investors and analysts at the company’s full-year 2013 results presentation yesterday that the firm’s US team - C&C is a major US cider player - was “fired up” and ready to fight back.
Ireland and UK-based C&C reported net revenue up 30% to €620.2m ($848m) for fiscal year 2014 with adjusted operating profit up 10.6% to €126.7m; international pre-tax earnings rose 68.4% to €16m, but US cider volumes slumped.
Brahms told his audience: “The market is still obviously showing spectacular growth, close to 100% in the latest period…driven by the new market leader.” IRI US mult-outlet data ending February 16 2014 shows that Angry Orchard remains the US No.1.
“If you take away that market leader then the market would be up around 20-30% year-on-year. We have not participated in that growth, our main brand, Woodchuck, has gone backwards, 2% on shipments and on depletions a bit more, minus 6%,” Brahms said, while west coast US brand Hornsby’s fell circa. 30%.
'How can you reassure us the US cider market won't go the same way as the UK?': Analyst
Andrew Holland, an analyst at Societie Generale, asked Brahms if there was any sign of an improvement in performance after “huge disruption last year” as C&C struggled to integrate $305m purchase Vermont Hard Cider Company (with top brand Woodchuck) from late 2012, build a wholesale network and a new cidery.
“Can you give us any reassurance that underlying, your cider business in the US is showing improvement?” Holland asked.
C&C's pre-tax UK cider earnings fell 29.1% to €20.7m in 2013/14, with slowing growth particularly problematic for the company - a first mover credited with sparking the nation's cider renaissance with its Magners brand over the past decade - that now faces competition from the likes of Carlsberg (Somersby) and AB InBev (Stella Cidre) in a "commoditized and challenging" British market.
“How can you reassure us that it’s not going to go the same way as the UK cider market, where as you observe [in the US] all the big guys have got in, and you’re now facing Jonny Appleseed?” Holland added.
Jonny (Appleseed) come lately, but ABI has distribution and marketing muscle
Jonny Appleseed Hard Cider is an AB InBev brand launched on April 7 (see picture below) that Brahms classifies as a ‘commercial cider’ – where he told analysts he sees the US cider market segmenting naturally into such offerings, craft ciders (produced by the likes of C&C Group) and small-batch orchard ciders.
Despite poor performance for its US craft cider portfolio, Brahms said C&C was “positive and optimistic” due to its preparations for new marketplace execution from June, after extensive work done on packaging, network, route to market – C&C uses ABI and Miller Coors as its distributors – and messaging.
“That’s all finished now, so we’re positive because we’re now executing it. A big drive is around new packaging…hand crafted by a Vermont artist, so we’re really chosen the path of authentic and local, with Vermont playing a good role.
C&C had not lost further chain business in recent reporting periods, Brahms said, while trade feedback to its plans was positive.
'We'll defend cider made in a real cidery' - Joris Brahms, C&C Group
“If we can transform this positivism into sales…we’re confident that from a broad cider pool now – the cider that you quoted [Jonny Appleseed] has immediate and large distribution – we will be able to step up and play the card of the craft cider, attaching our strategy more to a craft beer portfolio,” he said.
That’s where we see true value – completely linked to where our raw materials come from, the apple orchards of Vermont…the sophistication of our liquids and innovation. We’ve also developed fantastic new ciders – about 11% of volumes come from products that didn’t exist last year,” Brahms said.
He also predicts that the taste profile of American consumers will also change, and see them trading-up to a “drier, more sophisticated” ciders – with C&C well-placed to prosper given its access to bitter-sweet apples.
There was more good news in the shape of “sky high” cider margins for C&C, he added, while pressure on the shelf showed the category was here to stay and expanding.
“Most retailers and distributors are now convinced that the category is here to stay and deserves more space. Within that space we’ll define a new category…we’ll defend cider made in a real cidery,” Brahms said.