Wednesday 21 February 2018

You don't need a weatherman to know what way wind is blowing

Peter Flanagan

Peter Flanagan

THERE is an old adage in Irish business: don't invest in companies based here that blame poor weather for bad results.

Yet this is precisely what C&C did yesterday. Speaking to reporters, chief financial officer Kenny Neison pointed to the wet weather that "continued into June" as one of the reasons for C&C's net revenue sliding 2pc to €263.4m, and operating profit before exceptionals dipping 2.7pc to €65.6m.

It's hard to believe the cider company could be surprised that it was wet in Britain and Ireland. Cider may be more reliant on the summer months than beer or stout, but we do have a well-earned reputation for wind and rain after all.


The numbers instead point to what has become a structural weakness in the Irish and UK drinks sector. Britvic, Diageo and C&C are all seeing the same trend and it has been going on for five years now: people are spending less in the pub and what drink they are buying is purchased in off licences and consumed at home.

Worryingly, Magners and the Gaymers cider brands lost market share in the UK and the cider market there shrank for the first time in a decade. Magners volumes alone plunged 17pc.

Those numbers make the rationale for the €234m Vermont Hard Cider Company (VHCC) acquisition clear. C&C is betting on a US market that is tiny overall, but is growing rapidly.

At about 20 times EBITDA, VHCC is not cheap, and much more expensive than the Hornsbys acquisition a year ago, but there is a big upside potential.

Will it be enough to offset the problems at home though? C&C shares surged more than 8pc on the euphoria of the deal, but fell back to finish only 0.7pc up on the day. It is clear the market is still out on this one.

Irish Independent

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