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Fizz goes out of Irish soft drinks sector for Britvic
Britvic chief executive Paul Moody must rue the day he agreed to pay CC a fizzy €249 million to buy its Irish soft drinks business, which includes Club and Ballygowan.
The pumped-up Irish economy went flat not long afterwards, leaving Britvic with an overpriced and underperforming asset.
With Club and Ballygowan having little resonance outside Ireland, the acquisition was always a straight bet on the Irish economy, making the hefty price tag all the more curious.
Figures published yesterday show that Britvic’s sales in the three months to the end of December 2009 fell by 10 per cent in Ireland, continuing a trend of the past couple of years.
In November, post the release of its annual results, Moody said it was “unlikely” that the Irish soft drinks market would “recover in the near term”.
Britvic has improved its market share here but this will be little comfort in a sector that has declined steeply.
The performance here also contrasts with Britvic’s experience in the UK, where sales rose by 20 per cent in carbonates and 9.6 per cent in stills in the 12 weeks leading up to Christmas.
Sales of Pepsi, Robinsons and J20 have led the way for Britvic in the UK, where the soft drinks market has returned to growth.
Club and Ballygowan are undoubtedly brand leaders here but cash-strapped Irish customers just want cheap pop right now and they’re not fussed about the name on the label.
The only good news for Britvic is that its plan to achieve “synergies” of €27 million in Ireland by 2011 is on track.
So, whenever the economy returns to growth, the British drinks company should at least be well placed to benefit.
Black hole at Red Cow
If you are a hotelier or guest house owner in the west or south, yesterday’s figures from Dublin Port could have given you reason to suspect that the Red Cow roundabout is really a black hole.
Tourist numbers showed a healthy increase, with cars up 24 per cent at 183,000 and ferry passengers up 18 per cent at 1.5 million. It was Dublin Port Company’s best year for ferry tourism since it was incorporated in 1997.
Just where they all ended up is anybody’s guess, as visitor numbers for the State as a whole were down around one million according the latest official predictions, while tourists from Britain, with which we have direct ferry links, were 20 per cent down during the peak season.
The figures could indicate that there’s still a healthy market among people who want to bring their cars, which presumably transport their families, golf clubs, fishing rods, surf boards etc. That would turn in give grounds for believing that selling the State as an activity destination is working, and that by extension, Dublin is playing a key role in feeding them through to their final destinations.
Or it might fuel theories that Dublin is getting a disproportionately large share of a shrinking market, principally at the cost of the industry’s traditional strongholds in the west and south.
The fact is, nobody really knows until we know where these people went, and assuming that somebody is going to establish that, it should give those charged with developing our tourism product plenty of food for thought.Transparency would help
Transparency would help
Irish policymakers can draw some comfort from the US congressional committee hearings on the AIG rescue. Like them, some in the US administration are firmly of the view that it is far too early to share the full details of the bank bailout with the taxpayers who are footing the bill.
There are also striking parallels between the defence being mounted by Tim Geithener and the Taoiseach for what – with hindsight – look like excessively bank-friendly policy responses to the unfolding crisis in late 2008.
In Geithener’s case, it was the decision to buy up mortgage-backed bonds (or collateralised debt obligations) on which AIG had written credit insurance it could not honour. The main beneficiaries of the decision were the big US and international banks that had invested in or manufactured these weapons of mass destruction. Because the NY Federal Reserve paid the full price for the bonds, the banks did not have to take a write down. The US taxpayer will take the hit, which will run into the billions.
In Cowen’s case it was the decision to offer a blanket guarantee for all the banks in September instead of letting Anglo Irish Bank go under. The true costs of this only became apparent when Anglo finally collapsed and the Government found itself unable to shut it down. The bill to keep it alive will be north of €10 billion.
On both cases the explanation seems to be that, when faced with a crisis that could have brought about the collapse of the entire banking system, policymakers had to act quickly and pragmatically. The solutions were not perfect – as we now know – but they achieved their objective. Some transparency would make this easier to accept on both sides of the Atlantic.
TODAY
The World Economic Forum, meeting of world leaders and business people, continues in Davos, Switzerland, while at home Ulster Bank will publish its latest review of the Irish economy.
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