C&C Group: ‘Near term outlook for the on-trade sector remains challenging and uncertain’
However, the Bulmers and Magners maker says it ‘fundamentally believes in the medium and long term outlook for the on-trade channel’; while it has seen a rise in off-trade sales.
Over the six months ending August 31, 2020, the Dublin-headquartered company saw net revenue decline 55.4% to €386.7m ($458.7m) resulting in an operating loss of €11.7m ($13.9m).
While the company was hit by lockdowns, the gradual reopening of the on-trade in its core markets saw the business return to profit generation in July through to September.
However, C&C Group will now have to deal with new restrictions in the on-trade (Ireland has just moved to the highest level of restrictions; while the UK has been tightening rules by region), while it warns that the key Christmas trading period is likely to be impacted by continuing restrictions across the hospitality industry.
The off trade channel, however, is performing strongly: ‘continuing to benefit from a temporary shift in consumption dynamics’. The company saw revenue growth of 15.6% in off-trade in H1 compared to the same period the prior year, with Tennent’s, Bulmers and Magners brands enjoying market share volume gains in the off-trade.
Steward Gilliland, C&C Group Interim Executive Chairman, said: “It is encouraging to see the business return to profit alongside the reopening of the on-trade in July. Our core local brands, Bulmers, Magners and Tennent’s, have demonstrated the inherent strength of their customer appeal, winning market share in the off-trade channel over the past six months. However, the outlook for the on-trade sector remains challenging with limited near-term visibility.
“We expect to see reduced volumes in the on-trade continue for the near term partially offset by increases in the off-trade. We are adapting to this temporary change in consumption dynamics and whilst it will invariably reduce short term profitability, we fundamentally believe in the medium and long term outlook for the on-trade channel. The scale, reach and customer focus of the Group’s brand-led distribution model should, in time, enable us to translate any improvement within this channel into superior profitability.”
C&C Group notes that in the COVID-19 pandemic larger brands have performed well, while own label and niche brands have suffered.