Can C&C Group investments reverse US cider woes?

By Rachel Arthur

- Last updated on GMT

C&C Group cider Woodchuck

Related tags Cider

C&C Group believes the opening of a new cidery in August, product innovations and better sales execution will help boost performance of Woodchuck, its main US hard apple cider brand. 

In May 2014 the group admitted that – despite sitting in a growing sector – the brand had ‘gone backwards.’

C&C Group’s US volume went down 16.2% between September 1 and November 30 – an improvement on the first half but ‘still some way from a return to growth.’ But the drinks manufacturer appears to remain upbeat on the prospects of the US market.

Weaker than expected’ trading performance

For its third quarter trading, C&C Group reported ‘weaker than expected trading conditions,’ and a revised operating profit for the year of €115m ($133m) euros. C&C shares fell around 10% following the announcement.

In Ireland volume was down 3.4% in the quarter (excluding Gleesons); in Scotland it was down 2.4% (without Wallaces). The English and Wales cider volume was down 9.8% with net revenue down 18.2%.

C&C Group’s main US hard apple cider brand Woodchuck struggled with falling sales in 2013/14 following the entry of AB InBev into the category with Jonny Appleseed.

Phil Carroll, analyst, Shore Capital, branded the group’s overall performance ‘disappointing’ but agrees the US cider market still holds potential for the group.

“One element is the cider category itself: does that have legs? I would suggest there is a growth story in the cider category. It generally has appeal, a sweeter taste profile, ingredients we can appreciate easily. Cider’s got growth potential; it’s extremely small but growing rapidly,” ​he said.

“The issue you’ve got is the competition.

“I can see why they’re optimistic, the market has potential. The trick from here is for them to get hold of that potential.”

He warns that the company is unlikely to report improving trends from the US business until Q2 FY 2016 at the earliest.

Scottish stronghold shaken?

Beyond FY15, C&C Group says it anticipates its core markets of Ireland and Scotland to remain resilient thanks to multi-beverage operating models.

However, volume (excluding Wallaces) in the period was down 2.4%. (Despite this, Tennent’s export market fared well, up 62.1%).

“The performance in what has so far been the more resilient Scottish and Irish markets has been subdued in both the third quarter and Christmas season,”​ said Carroll.

He added that Scotland’s change in drink-driving alcohol limits (which, from December, made the legal drink-drive limit lower than elsewhere in the UK) is likely to hit future results as well.

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