Tuesday 25 October 2016

C&C's Glancey rules out buying assets in mega beer merger, as Orange Capital ups its stake once again

Sarah McCabe and Harry Leech

Published 01/11/2015 | 02:30

Stephen Glancey, chief executive of C&C
Stephen Glancey, chief executive of C&C

Bulmers owner C&C has ruled out buying any major assets that come up for grabs as part of the merger of the world's two largest brewers.

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Anheuser-Busch In-Bev has bid to buy industry number two SABMiller, in a deal that would ­create a company responsible for one in three beers produced globally. Several assets are expected to be up for sale as a result.

However, C&C chief executive Stephen Glancey said his company already has an agreement to sell key AB In-Bev brands like Stella, Becks and Corona in its home markets and that is enough for now.

"The last big industry consolidation saw us buy Tennants and the 20-year rights to sell AB In-Bev's brands in Scotland and Ireland.

"We are only in year five or six. That is a long time," he said.

The chief executive explicitly ruled out the purchase of Boddingtons, a secondary AB In-Bev English brand which some analysts had suggested C&C might be interested in buying.

C&C's priorities are investment in existing brands, Glancey said. This includes new brand fonts and glasses for Bulmers and Tennants.

But the company "retains the capability for acquisitions" he said, while conceding they would be on the smaller side.

Glancey's comments follow a decision by the company to spend €100m buying back shares in the group, on top of €30m already spent on recent share buybacks.

He denied it was an attempt to soothe dissatisfied investors such as Orange Capital.

Earlier this month New York-based Orange Capital called on C&C to sell its US operations, cut back in England, and focus resources on its core Scottish and Irish markets.

A 2012 push into North America, buying ­Vermont Hard Cider Company for €235m, has so far proved costly.

In the UK, last year, C&C lost out in bidding to buy pub chain operator Spirit Pubs, which was eventually sold to bigger rival Greene King for £774m (€1bn).

Orange increased its stake in the company from below 3pc to 5.2pc last week via a transaction handled by Morgan Stanley.

Orange has varied its stake in C&C many times in the past six months, bringing it below 3pc and then above 5pc at least four times since April 1, based on stock exchange filings.

Results released last week showed C&C's operating profit for the six-month period to the end of August fell by 9.5pc to €62.6m, while revenues for the period were down 2.6 per cent to €358.6m.

The company said many of the factors ­contributing to the fall-off in earnings were "one-off or transitional", including poor weather, the transition to a brand-led wholesale model and legislative change in Scotland.

However, Heineken-owned cider Orchard Thieves is thought to have had more of an impact on the cider maker's fall in volume this summer than C&C revealed, particularly among the 18-24 age-group.

The direct rival to Bulmers was launched by Heineken five months ago.

Liam Igoe, food and beverage analyst at ­Goodbody Stockbrokers, said Orchard Thieves has had an impact on C&C's market share since it was launched in May.

"There definitely is an element of competition coming into play - but it is hard to quantify. There was a 2pc slippage in the on-trade share of the cider market, and some of it could be craft ciders of course, but the majority of it is probably Orchard Thieves," he said.

It is believed Orchard Thieves has also absorbed a larger proportion of the off-trade cider market that expected.

The Irish reception to the product has ­delighted Heineken. Fiona Curtin, senior innovation ­manager at Heineken Ireland, described the brand's first five months as "incredible".

"We feel this success is down to the emphasis we placed on ensuring the product was specifically crafted for the Irish consumers' taste buds," she said. "And 2015 has seen a significant shift in the Irish cider category, with the introduction of a second premium mainstream offering, alongside a number of craft cider brewers."

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