Focusing on Brand-Market Combination
Our business model seeks growth
through our brand-market combination,
combining brand investment with a
focus on local markets. In a challenging
economic environment in ROI and the
UK, the Group’s results for the year
demonstrate the resilience of this
model. On a constant currency basis,
revenues of our continuing businesses
declined by 4.8% but Group operating
profit increased by 9.0% to €111.2m.
Bulmers revenues and operating profit
in ROI remained under pressure but
an increased contribution from beer
offset the decline. The Tennent’s brand
performed well, and the overall operating
profit in Scotland increased. The Magners
brand in GB finished the year in positive
revenue growth for the first time in
five years. On the supply side we had
some good contract packaging wins.
Strategic Model and Key Objectives
Our strategic model is anchored on four fundamentals:
1. Hold Magners Share in Great Britain
The cider category continued to grow
by about 5% in GB, the world’s largest
cider market. Market data show that
consumers are trading up to premium
brands. The considerable investment
behind the Magners brand’s premium
quality and image has positioned it
well to take advantage of this trend.
2. Hold Earnings in ROI
In another difficult year in the Irish
market, our objective was once again
to hold earnings. Consumers were
increasingly looking for value, and price
deflation and the shift from the ontrade
to the off-trade affected overall
revenue. Bulmers cider brand volumes
and revenues declined but a meaningful
contribution from our beer portfolio
enabled us to achieve stable operating
profits from the Irish business.
ROI’s economic conditions remain unpredictable. The deflationary environment will continue to put pressure on our business, but consumption across the Irish drinks sector is broadly stable, which must be viewed positively as ROI remains a highly attractive and profitable market.
3. Maintain Momentum in International Markets
Globally it is estimated that over 17
million hectolitres of cider were produced
last year (Canadean). In excess of 40%
of global cider consumption occurs in
markets outside of Ireland and the UK.
In these markets the category typically
represents less than 2% of LAD volumes
but volumes are growing steadily.
4. Achieve operating profit and margin growth from Tennent’s
Tennent’s is a very positive story for
Our innovation stream continues to flow,
and the year saw the launch of Magners
and Bulmers Specials and Magners
Selections overseas, Caledonia Best and
Caledonia Smooth. These have been
covered under the different markets
above. We are committed to innovation
as new products invigorate our brands
and consumer interest, and maintain
and build presence in our markets.
Our philosophy is that local brands appeal
to local customers and consumers who
are looking for authentic, quality brands
with a strong heritage. Our marketing
efforts and brand strategies, therefore,
are tailored to reach consumers in each
of our core markets. As such, we are
investing heavily in our key brand assets
to maintain a premium price position
for the brands in the UK and ROI.
The management team of the Group has
evolved during the year. John Dunsmore
stepped down from his position as Group
CEO after a highly productive three years
that helped to establish the Group’s success
and direction. The strategy of the business
has not changed and we remain committed
to the long term objectives of the Group.
As discussed in our Corporate Responsibility report, we have appointed a Director of Corporate Affairs to spearhead our Corporate Responsibility agenda. We have taken an active role in our trade bodies the National Association of Cider Makers and the British Beer & Pub Association and directly with government. We have voiced our support for minimum alcohol pricing as long as it is fair, proportionate and reasonably implemented, and is part of an overall programme to reduce the abuse of alcohol. Alongside other industry players we have pledged a reduction of 30 million units of alcohol in the period to 2015 from the Group’s products. Our businesses make a substantial contribution to rural economies in ROI and the UK. We have long term purchase contracts with apple growers in the west country and are offering long term barley contracts to farmers in Scotland.
The Group continues to develop and
we are pleased with the progress that
has been achieved during the year. Our
investment case focuses on our long
term ambition to be a leading player
in the growing global cider category.
To achieve such a goal we need a solid
business base – Bulmers, Magners
and Tennent’s give us that foundation.
THE CIDER CATEGORY
GROUP CHIEF EXECUTIVE OFFICER’S REVIEW