C&C chief aims to put the fizz back into the cider company
Stephen Glancey believes C&C’s new deal with Pabst will help it move on from its difficulties in the US
C&C chief executive Stephen Glancey in the company’s Dublin warehouse. Photograph: Dara Mac Dónaill
Some business people love one-to-one interviews. They usually show up overly prepared, radiating enthusiasm and willing to talk about anything, as long as they get to talk plenty.
Then there is Stephen Glancey’s sort. The Scottish chief executive of the Bulmers/Magners cidermaker C&C doesn’t care much for that sort of attention. Not unreasonably, he prefers to keep the focus on the business.
The receptionist hasn’t yet informed him of my arrival, but he is already on his way from the boardroom on the floor above, footslogging down the wooden stairs like a man on his way to a dental extraction.
“I knew you were here. I saw your taxi come in through the wrong gate,” he says, deadpan. His eyes twinkle as a faint smiles flickers. Although generally warm and erudite, Glancey also has a wry-humoured, droll way about him. Then again, it’s quite hard to tell through that gravelly Glasgow burr. And even when there’s a glint in his eye and he is smiling, he has this way of peering to make you wonder if you still might be in trouble.
Perhaps to take some of the focus off himself, he invites Kenny Neison, the group’s chief financial officer, to sit in. He jokes he needs to “borrow Kenny’s brain”.
C&C will be associated forever in the public mind with the verdant surroundings of the orchards near its main Clonmel production plant. Its modest corporate headquarters, however, are to be found behind a pet shop on a residential road in working-class Drimnagh.
As well as Bulmers, its bulging portfolio also includes Tennents, Woodchuck and Hornsby in the United States as well as Ye Olde English cider.
While Glancey has spearheaded this dramatic expansion of its suite of brands since taking the top job in 2012, C&C has had a mercurial few years on the stock market. Its ambitious $305 million foray into the US cider market three years ago has bogged down amid strong competition from bigger rivals with better distribution networks. Last week, however, it concluded a US distribution deal with the giant Pabst Brewing Company that provides C&C with a pathway to a potential exit, albeit at a heavily written down price, with the timing of the buyout in the gift of Pabst.
“We deployed capital in the US but it hasn’t worked,” says Glancey. “But you look at all your deals over several years and it is like being an investment manager. Some deals work and some don’t.”
He argues that his predictions at the time of the US deal about what would happen to the cider market there “weren’t wrong”. “It exploded. But it exploded too quickly and then everybody else piled in.”
C&C has recently grappled with some headwinds in its core Scottish and Irish markets, while the rest of Britain is proving stubbornly difficult to crack.
Its failed bid earlier this year to buy the London-centric Spirit pubs group for close to €1 billion went down particularly badly with the markets, which were spooked by this apparent pivoting of strategy.
Activist shareholders, such as the US- based Orange Capital, have recently started to emerge on its share register.
Glancey, though, remains fairly unrepentant and is sanguine about its long-term prospects. And why shouldn’t he be? C&C has weathered bigger storms before this. And while C&C’s share price isn’t as fizzy as its main product, it is still miles ahead of where it was when Glancey first joined the company.
“C&C has always been a nice little business, if a bit subscale in the world of drinks,” he says.
“We see the stock as undervalued, although we understand why. But there is great potential in our export business and there will be plenty of opportunities to grow by acquisition in coming years.”
The company also is Ireland’s only listed indigenous drinks company, employing 1,200 people here, most of them in much-needed areas outside of the capital.
In Bulmers/Magners it also owns one of the country’s major home-grown success stories in the realm of consumer exports. Yet the share price is partially propped up by a €100 million share buyback scheme, while many observers think an undervalued C&C could yet become a takeover target itself. Might it even sell its top brand?
“What, you mean Tennents?” says Glancey with a laugh.
That’s clearly a dig at some of the company’s past critics, who sniffed when he and Neison helped drive the purchase of the slightly unfashionable Scottish lager brand from AB Inbev in 2009. Tennents, dismissed by naysayers as an unusual bedfellow for the more respectably positioned Bulmers/Magners, has since turned into a serious money-spinner for C&C.
“Look, somebody might eventually approach us. If it was a phenomenal price, of course you’d look at it. Magners is an attractive brand too. We’re not emotionally attached to anything. We could also partner with someone. Our Irish tax residency is quite interesting.”
An inversion is what normally happens to your stomach when you drink too much cider. Glancey, however, is clearly hinting at it from a tax and corporate domicile perspective. Perhaps he believes one of the US giants might buy C&C to cut its tax bill. If Pfizer can do an Irish tax inversion, then why not a US brewer?
After some initial reluctance, Glancey obliges with a quick lowdown on his background and how a Scot ended up selling cider from Drimnagh.
He was born in Glasgow and, along with Neison, he is a Celtic football nut. His father, and his Irish grandfather before that, were bookmakers. Glancey studied English at university and originally thought about becoming a journalist.
Then, he says, he decided to try and get into a postgraduate law degree.
“But I had broken my leg playing football. I hobbled to the bus to get to Glasgow Uni, but it took me so long that when I got there all the law places were gone. So I did accountancy instead.”
Glancey supported himself with jobs in bars in Glasgow and he also did a stint in New York, where he worked at the famed celebrity haunt Maxwell’s Plum.
He trained with Ernst & Young as an accountant and worked for the brewer and pubs company Whitbread, as well as in consulting for EY in Luxembourg.
Glancey was on the defence team battling the approach, where he worked closely with two other senior executives he already knew well – Neison and John Dunsmore. “We made a decision after S&N was taken over to make a few quid by doing something together,” says Glancey.
At the time, C&C was in trouble after its peak boom-time conquest of the UK’s respectable cider market was usurped by bigger competitors. The economic crash was in the post, and all of a sudden C&C was vulnerable.
Glancey says he, Neison and Dunsmore tried, along with some of its shareholders, to take C&C private, but they couldn’t get debt to finance it. Later, the suitors – dubbed the three wise men in the press – were invited to take control of the management of the struggling company after the regime of Maurice Pratt, the one-time Quinnsworth chief, crumbled.
They steadied the ship and devised a strategy to grow the company internationally and build up a stable of profitable brands. The AB Inbev portfolio that included Tennents was their first big deal. After Dunsmore’s unexpected departure in late 2011, Glancey took over the top job as the trio was trimmed to a pair.
Their expansionary strategy, which also included snapping up US brands such as Hornsby’s and the Irish distributor Gleeson, climaxed in the attempt to crack the US with the purchase of the Vermont Hard Cider Company.
The company’s critics said that deal was overvalued, and its share price has since lost fizz as sales in the US failed to take off.
Last week’s Pabst deal will see the giant Colt 45 brewer take over responsibility in March for distributing its portfolio of brands there, led by Woodchuck. It also has an option to buy the unit, with an apparent floor price of $150 million.
Eugene Kashper, who took control of Pabst a year ago, also controls Magners’ distributor in Russia, which helped smooth the path to a deal. “It’s a long-term option for Pabst. They might exercise it within 12 months or they might wait longer. It works for them and for us. The US is boxed off for us now, and the deal underpins the valuation of that business.”
Glancey is phlegmatic about recent competition in Bulmers’ home market from the Dutch brewer Heineken’s Orchard Thieves, although analysts say the new arrival is having an impact. “We’ve always had competition. It’s not like we don’t compete with lagers and other drinks. When people launch stuff against you, it makes you sharpen up. We’re launching craft ciders in Ireland and we have had a real success with Clonmel 1650.”
The brightest spot within the company in its half-yearly results in October was its international exporting division, which, while small, grew strongly with revenue up a fifth to €13.2 million for the six months as it pushes Magners globally. Group revenue was down 2.6 per cent to €360 million for the six months to the end of August, while group earnings were off by nearly a tenth. It still has a strong balance sheet, however, and throws off plenty of cash.
“The exporting division is the bit of the business that people miss, an opportunity for us to drive some growth” says Glancey. “Yes it is small, but we’re building the brand for the long term. Seventy countries? Not many brands have that level of penetration.”
International growth model
Magners has always looked to grow abroad. But Glancey says its international growth model has learned from the previous era’s. “We’re not trying to convert entire nations to cider. We let the heavy lifting be done by the likes of Heineken with Strongbow. The category gets established and then we follow in, or else we’re already there.”
Orange, whose share of C&C this week dipped back below 3 per cent, said in October C&C should forget about cracking England and the US. It called on it to stick instead to Scotland and Ireland, and lever its assets to return cash to shareholders.
Glancey indicates C&C is unlikely to try a repeat of the Spirit bid, which he says was a “unique opportunity”. Buying distribution in England is no longer “top of the list of things we would do right now”.
But it will consider buying more brands if they “add value”, although it envisages remaining a niche player. C&C won’t just sit on its hands, Glancey insists, adding it is focused on finding growth: “That’s what most of our shareholders want us to do.”
It is open to partnerships with craft brands seeking distribution in C&C’s core markets of Scotland and Ireland.
Private-equity players are likely to be among bidders for drinks brands that become available as part of the upcoming merger of industry big beasts InBev and SAB Miller, who must satisfy competition regulators. Glancey indicates C&C may sit out this phase but might offer its infrastructure and expertise to the private-equity buyers. “They’ll need trucks and sheds, and we can provide that.”
It is unlikely to deploy its own capital on acquisitions until a later phase of divestments by the big beasts arrives, when they sell assets for operational reasons after the merger settles down.
Back on home turf, Glancey supports the Irish and Scottish governments’ intentions to introduce minimum alcohol pricing, while its rivals strongly object.
“The big international drinks companies have no manoeuvrability on this topic. The local guys get told by their head office in. . . wherever. . . that opposition to minimum pricing is the policy. It doesn’t matter to them if it is the right thing for Ireland or Scotland, where communities have a terrible problem with low-priced alcohol.
As a higher-priced cider, Bulmers/ Magners is unlikely to be affected while the proposals would harm its cheaper rivals. This has led to accusations from some quarters of opportunism and cynicism. Then again, is there much wrong with enlightened self-interest?
“Politicians promised minimum pricing, and people voted for them. Whether you like it or not, it is the democratic will of the people. There’s an inevitability about it. C&C has to survive in the same community as everybody else.”
CV Name: Stephen Glancey
Position: chief executive of C&C
Home: Glasgow Family: three children
First job: barman
Something about him we might expect: As a Glaswegian with Irish roots, he is a committed Glasgow Celtic football fan
Something that might surprise: When he was a Scottish & Newcastle executive he hosted corporate hospitality at Ibrox, the home of Rangers (then sponsored by S&N’s McEwan’s)