Performance of Magners key to success

C&C’s cider for the UK regained lost ground last year, growing revenues for the first time in five years

C&C IS in a good place. Having faltered for a number of years as its Magners’ brand failed to capitalise on its early success in the UK, the Irish drinks company appears to be back on track.

Its 2012 results published yesterday, though well within market expectations, are solid in light of the tough consumer and retail environment. Key to this is the performance of its Magners brand, still a central part of the C&C story. Having fallen prey to the vicissitudes of the British drinks market, Magners regained lost ground last year, growing revenues for the first time in five years in the UK.

Far from affecting sales, the arrival of rivals such as Stella Cidre into the market, has in fact “premiumised” the cider category in the UK, chief executive Stephen Glancey said yesterday.

Though this has affected C&C’s more low-brow brands, such as Blackthorn and Gaymers, it has been good news for its flagship Magners as the cider consumer scales up.

In Ireland, the company’s performance has stabilised, as Bulmers tries to adjust to a sluggish market and a switch in Irish drinking habits from pub to home consumption.

“People aren’t drinking less; they’re just drinking in a different way,” Mr Glancey said yesterday. Home consumption now accounts for 44 per cent of sales in Ireland, compared to 36 per cent in 2008 and 2009.

C&C also has a strong export story, investing strongly in the marketing of Magners and Tennents in markets such as Australia and North America. Though still small in terms of revenues, investment in these high-growth areas has paid off, with the volume of Magners sold in export markets up 28 per cent on the year.

C&C also started exporting Tennents to overseas markets such as Australia, Italy, North America and Russia last year.

But as well as its operating performance, it was C&C’s balance sheet which caught the eye of analysts. Net cash was better than expected at €68 million and the company has strong cash-flow.

While some analysts interpreted the generous dividend pay-out as a sign that acquisitions are not imminent, C&C management yesterday noted that the company had €500 million in finance capability available if needed.

Unsurprisingly, the company declined to comment on reports that two drinks companies were circling C&C with Glancey noting that similar stories surface each year around results time.

While coy about the impact of this summer’s sporting events and diamond jubilee in the UK on sales, there is an expectation that they will generate some uplift for the company. For any company in the current tough consumer climate, this has to be good news.