The first stock market outing of C&C Group’s new chief executive, Roger White, in March had an all-too-familiar feel to it.
Less than two months in the job, White presided over a warning in a trading update that the cider and beer maker’s earnings for the year to the end of February were going to be “modestly below” target. He also dropped the company’s goal of reaching a €100 million operating profit in its 2027 financial year, saying it would be hit in the “medium term”
The overreaction by the stock market – with C&C’s shares sliding almost 20 per cent in London – suggested a slump in confidence in a company that already lost almost 60 per cent its value over the previous five years amid a series of missteps, executive changes and disappointments.
C&C has been buffeted over this period by Covid lockdowns and the need for a £151 million (€179.5 million) share sale; defeat in the US market as it accepted $20 million (€17.6 million) to get rid of a problem cider business that cost $305 million a decade earlier; inflation; and the botched initial implementation of a new warehousing software system at its UK wholesale unit.
Then, last June, it faced the ignominy of having to restate three years of accounts, resulting in a net charge of €5 million, after finding errors spanning inventory issues in its Bulmers facility in Clonmel to the accounting treatment of glassware.
[ C&C shares plunge in March Opens in new window ]
White, C&C’s fifth chief executive in as many years, did not hold back this week when he unveiled its full-year results where operating profit rebounded 17 per cent to €77.1 million – about €3 million short of what the company had been guiding before the alert in March.
While he said that the brand portfolio – including Bulmers, Tennents and Magners – had “significant development and growth potential”, some areas had “been neglected”.
“Innovation has been somewhat absent and insight somewhat lacking,” White, who previously served for 22 years as chief executive of FTSE 250 drinks company AG Barr, told analysts on a call on Wednesday.
“Many of the historic issues experienced by C&C have been self-inflicted. Complex operating models, poor systems, and a lack of execution focus have dogged the business. We are determined to bring simplicity and executional focus to the business.”
It is easy, of course, for a newcomer to pillory the past. Rebooting a group – which also includes a drinks supply business to hospitality sectors on both sides of the Irish Sea – that had lost its way is another thing.
So, what are White’s big ideas?
For Tennents, Scotland’s No 1 beer brand and C&C’s biggest seller, he sees “immediate opportunities” for zero- and low-alcohol versions that are being redeveloped. Its current offering has had mixed reviews.
Bulmers, whose €63.5 million of sales last year was about half that of Tennents, will also be given a light makeover to “revitalise the look and feel of the brand” – and a hard push in the 0.0 alcohol space.
But White sees a big opportunity in Magners cider, a brand that carried the investment case when C&C was a market darling two decades ago. Magners is now a shadow of its heyday in the hot summer of 2006, when icy pints fuelled England fans as the three lions made it to the World Cup quarter-finals.
C&C took back the sale and marketing of Magners in England and Wales in January – under chairman and caretaker chief executive Ralph Findlay – after eight years in the hands of Anheuser-Busch InBev.
“It’s undoubtedly been a tough few years for the Magners brand,” said White. “However, we now have a real opportunity to reinvigorate this brand, to bring it back to what it used to be. It’s now back in our full control, both from a marketing perspective and from a sales execution perspective.”
He cautioned, however, that “the reinvigoration of Magners will take time and continued investment”.
The Matthew Clark Bibendum (MCB) UK beer, wine, spirits and soft drinks distribution business – which C&C picked up at a deeply discounted price in a distressed sale in 2018 – has been through the wringer, losing customers as a result of a badly managed roll-out of a complex new warehousing software system a few years ago. White has first-hand experience of the problems, as AG Barr is a supplier to MCB.
While MCB saw a recovery in customer numbers last year as it restored service levels, White says there is still work to do to improve the proposition for customers – including further technology investment.
Shares in C&C have rallied by a third since the profit warning in March – including a gain of about 6 per cent posted this week alone. It leaves the stock trading broadly in line with the wider European beverages sector, relative to earnings forecasts, according to Goodbody Stockbrokers analyst Patrick Higgins.
[ Solid year for C&C as drinks group remains resilientOpens in new window ]
White certainly made the right noises this week. But some observers reckon investors will now hold out for delivery.
Analysts, from Barclays to Shore Capital, now reckon it will be C&C’s 2029 financial year before it reaches its €100 million operating profit target.
Nothing added but time?
